Weekend Feb 11, 2018
I could be wrong about us being in a bear market, but that is not important because I'm prepared to change my mind as the evidence appears. What is important is that we should consider applying some bearish bias to our analysis -- start approaching the market with the assumption that bear market rules now apply. Yes, our Models are on BUY signals, but they are wind socks. They are mechanical. So, while the wind socks show wind that is steady and straight down the runway, our brains can observe thunder storms near the airport, and can be aware that the wind may soon become dangerously gusty and variable.
Today the market found support on a long-term trend line and the 200EMA, and it appears that the selloff has abated for now. Our short-term indicators are very oversold and support the idea of a short-term bounce; however, intermediate-term indicators are not oversold enough to make me think this leg down is completed.
Carl Swenlin, Decision Point Friday Feb 9, 2018
New Highs New Lows
The candlestick on the far right is a hammer. This appears as a market attempts to 'hammer' out a bottom.
S & P Finds support at 200 day MA
The S & P finds support at the red 200 day MA. And the Rate of Change in the lower panel appears to have bottomed on the daily chart.
S & P Weekly
The weekly chart however is still some 350 pints or so above its weekly 200 bar MA. So the selling may not be over yet.
Interest Rates Are Rising
The low in interest rates from the Bernanke Yellen years is being reversed. The thirty year yield is now ove r3%. I expect the previous highs at 3.2-3.3% to be taken out in short order. The FED may have its plans but the market is already underway to higher rates.
Crude Oil
Crude oil is falling after hitting the 50% re-tracement level right on the nose.And this the move from 25 to 67 was clearly a fourth wave on the from the $140 high in 2008.
One 140 to 35
Two 35 to 110
Three 110 to 25
Four 25 to 67
Wave Five now under way
These waves are rather distinct. This suggests the price of oil will fall below $25 before the fifth wave is compete.
If readers think I am exaggerating this possibility, look at the incredibly weak XES in the same time frame. It is already headed to its prior lows of 12.50.
This is ugly. XES did not have near the bounce that XLE and other energy stocks did. It is already a mere $2.30 above the two extreme lows, the first recorded at DOW 6,900 in 2009. Somehow the market sees these things coming, And the Energy Service Sector is sending an all too clear warning.
Goldman Sachs Commodity Index
Adding to the evidence is the GSCI you see on the CNBC ticker. It has double topped at 460 and turned back down.
So it appears the market is oversold enough for a bounce.
Direxion Industrials Two Hour
RSI rose as did Rate of Change here. This might be a good short term play.
Direxion China 3x Bull
This has much the same look as the Industrials.
US Dollar
The US Dollar could approach the red down trend line. That dollar is pressuring commodity and energy prices.
Bottom Line
Stocks are short term over sold and appear ready for a bounce. Longer term the weekly charts are still quite elevated.
I am giving up on commodity plays for the time being. Let's see how the commodity indexes versus the US Dollar play out the net two weeks.
Social Mood
Congress finally passed a budget bill but it spends too much money. Politics continues to be polarized.
Hungary goes way less democratic. Theresa May stumbles with Brexit. South America is even a worse mess than usual at least in Venezuela, Brazil is actually showing some signs of the rule of law.
Viewings of the Winter Olympics were 12% lower than for the Russian games four years ago. But then how may people engage in curling or the luge?
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