The Morning Call
3/19/18
The
Market
Technical
The
S&P is building a pennant formation, consisting of lower highs (just
barely) and higher lows. The direction it
breaks from this pattern usually continues.
Given, the strong support from its moving averages and uptrends, my
assumption is that the pennant gets resolve to the upside. Further supporting that notion is the move
down in the VIX (see below).
The
long Treasury sold off on Friday, though on a very short term basis it is in a
trading range. Longer term, the momentum
is still down as it remains in a short term downtrend and below its 100 and 200
day moving averages. However, on the
fundamental side, the narrative among investors on the
economy/inflation/interest rates is shifting from a stronger economy/higher interest
rates and inflation being a given to concern that the economy may not be as
healthy as assumed a month ago. That is
showing up in TLT’s pin action.
And:
While
the dollar is trying to stabilize, the momentum remains to the downside. UUP price action is not reflecting the
economic uncertainty as TLT (if TLT is rising, UUP would normally be declining).
Perhaps, the Kudlow ‘king dollar’ remark
is having an impact.
On
Friday, GLD closed below the lower boundary of its short term uptrend; if it remains
there through the close tomorrow, it will reset to a trading range. It still has minor support just below its
current price as well as from its 100 and 200 day moving averages. Like the dollar, it is out of sync with TLT
(if rates are declining, GLD usually rises); but also like UUP it may be reacting,
at least short term, from the Kudlow ‘buy the dollar, sell gold’ statement.
The
VIX continues to lose steam, despite a lot of intraday volatility. As you can see, it traded out of a pennant
formation to the downside which historically has meant lower values. That leaves it in a very short term
downtrend, a short term trading range but above its 100 and 200 day moving
averages. This chart suggests a lower
VIX and that, in turn, generally means higher stock prices.
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