The Averages (DJIA 26656, S&P 2930) had a big up day. Volume was up and breadth was strong. To say that they are strong technically is an understatement. My assumption is that they will challenge the upper boundaries of their long term uptrends (29807, 3065).
The VIX was actually up on the day, continuing its confusing, atypical non-inverse relationship with stocks. I am not sure what to make of the VIX pin action over the last couple of weeks; but added to the rumblings in the bond market and a sudden downturn in the dollar, it seems to me that investors may be re-gearing their economic/Market models. We need more follow through; but we also need to be aware that big changes may be in the works.
The long bond was up slightly on continuing big volume, but still finished below both moving averages and within its newly reset long term trading range. More downside seems to be in the works. I continue to think the break of TLT’s long term uptrend is a significant event from both a technical and fundamental standpoint.
The dollar was down markedly on volume, closing below the second lower high that I have been referring to but more importantly below its 100 DMA (now support; if it remains there through the close on Monday, it will revert to resistance). This is the first kink in its recent strong technical performance. As I noted above, with a number of confusing or technically negative price movements now taking place, I am not sure what is occurring with investor economic/Market models---if in fact anything is happening other than an excess of noise.
GLD was up again, but is still the ugliest chart on the block---though it does seem to be trying to build a base.
Bottom line: the indices remain technically strong. I continue to believe that they will challenge the upper boundaries of their long term uptrends. Remember that today is a quad expiration which could have effected this week’s and/or today’s price performance.
The pin action in the long bond, the dollar, the VIX and gold are all acting somewhat atypical. That doesn’t necessarily mean something negative is occurring. It is just that a change seems to be in the air; and I think we need to be alert to it.
Yesterday in the charts,
Yesterday’s economic stats were weighed to the upside: weekly jobless claims and the Philly Fed manufacturing index were better than expected; however, August existing homes sales (primary indicator) were slightly below estimates, as were August leading indicators (primary indicator) though the July number was revised up making the two a wash.
Bottom line: ignoring the ongoing political circus, yesterday’s news was the Market. I am not going to repeat the above.
Though I will repeat a portion of yesterday’s bottom line: ‘I believe that (1) fiscal policy is digging the country into such a deep debt hole and (2) the Fed has so crippled price discovery that sooner or later the securities’ markets will be penalized.’
***overnight, the Bank of Japan trimmed its bond purchase program. This is the second time it has done so but says it just reflects a new policy of being more flexible. We will see (medium):
News on Stocks in Our Portfolios
This Week’s Data
The September EU composite PMI came in at 54.2 versus expectations of 54.3; the manufacturing PMI was 53.2 versus 54.2; the services PMI was 54.7 versus 54.5.
The latest stats on household debt (medium):
What I am reading today
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