Monday, November 13, 2017

Monday Morning Chartology

The Morning Call

11/13/17

The Market
         
    Technical

            Despite Friday’s moonshot in the VIX and the plunge in the long Treasury, the S&P merely drifted lower on higher volume.  There is nothing in the current performance in equities that points at any disruption in the relentless move higher. 



            The long Treasury got hammered on volume on Friday, reversing much of the positive technical work TLT accomplished over the past week.  It voided a newly developing very short term uptrend, closed below its 100 day moving average (now support; if it remains there through the close on Tuesday, it will revert to resistance), though it still finished above its 200 day moving average and the lower boundaries of its short term trading range and long term uptrend.   So in a day, TLT went from one trend change to its opposite.  What has changed bond investors’ minds?



            The dollar had a calm day on Friday, trading down pennies and remaining caught between the its 100 day moving average and the upper boundary of its short term downtrend (resistance) and its 200 day moving average and the lower boundary of its very short term uptrend (support).  I was a little surprised that TLT’s pin action didn’t have a bigger effect on UUP.



            Friday was a bit rough on GLD, though it wasn’t dinged as hard as TLT.  It reversed itself around its 100 day moving average for the third time in the week, though it remains above its 200 day moving average and the lower boundary of its short term uptrend.  It continues to struggle in a narrow price range, suggesting investor uncertainty/confusion.



            The VIX surged over 20% on Thursday and Friday on a less than 200 point (0.1%) decline in the Dow.  Of course, volatility is the VIX; but that kind of divergence suggests real nervousness in ‘short volatility’ pit.  As you can see, it closed above its 100 day moving average (now resistance; if it remains there through the close on Tuesday, it will revert to support), above its 200 day moving average (now resistance; if it remains there through the close on Wednesday, it will revert to support) and above the lower boundary of its long term trading range.  The July bottom held.




            As I noted in the Closing Bell, the pin action in the VIX and TLT could be just noise.  But clearly, it warrants attention.  We will know more by week’s end.

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