Friday January 25 2019
The big picture is that the fall 4,000 point DJIA drop ended December 24. Since then stocks, and oil have rallied together as they fell together.
Stocks attained the half-way point around 24,400. That is half-way between the low of 22,200 and the high around 26,600. Friday morning stocks are up again at 24,615 and oil is trading eleven dollars of its low at $53.03.
For some reason the stock market replicates oil price movements ten years later. Looking back crude oil bottomed on December 24, 2008 closing at $39.39. In an amazing repeat, crude oil closed at $42.53 exactly ten years to the day December 24, 2018. As noted, stocks and oil have rallied since.
I had thought a resolution in the two markets would be more clear by now but both are still in a sort of No Man’s DMZ, off the lows but not taking out previous highs. The Energy ETF XLE and bell weather Apache APA are trading at their 50 day moving averages. Which is to say well below their 200 day Moving Averages. Again I worry that Energy Service XES is failing at its 50 day MA.
Stock indexes were squeezing into a more and more narrow wedge and rally have yet to resolve that pattern. Usually such patters resolve to the downside.
Semi-conductor stocks are a key component of the technology index. Thursday the SOX index of those stocks jumped nicely up 5.73%. That is a big positive.
Looking through the list of ETFs representing the overall economy, we see most well below 200-day Moving averages. The defensive XLU Utilities is the exception, closing over 50 and 200 day moving averages. But that is indeed cautionary as XLU is a defensive area where money flees the riskier ETFs.
The rally from December 24 has gotten ahead of itself resulting in a short-term overbought situation. That suggests a pull back and test of lower support for stocks and energy shares this next week.
Nancy Pelosi only knows she beat down George W. and arl R. by saying no to every overture. And she is doing the same now. Trump had to give up delivering the State of the Union. Last night Judge Napolitano gave the Wall issue clarity. He points out the Wall would be built on private land in Will Hurd’s Texas district. But the land owners all oppose a Wall on their land. So even if Trump got the money he would face years of litigation. So it seems the bet on Shutdown to get a Wall will fail. The lack of resolution is a huge negative regarding market sentiment.
For now we watch for an outcome, hunkered down in the Market DMZ.
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