The Morning Call
2/24/20
The
Market
Technical
The S&P had a
couple of bad days at the end of the week.
However, it managed to hold the former high (3337). At first glance, I would call this a normal
correction. The problem is what is going
on in the other markets I follow.
TLT, GLD and UUP
are all toying with making new highs. To
be sure, they haven’t done it yet; but as I have been pointing out all week,
investors in these groups are sending a strong message that they believe that all
is not right with the global economy. I
not going to claim that I even know what they are worried about though a more
devastating impact of the coronavirus or loss of faith in the central bank QE
policies come to mind. Whatever it is,
investors are piling into three renown safety trades.
That
said, it is too soon to be calling the beginning of the end. All three of the aforementioned indicators
could stall at critical levels and back off while the equity markets resume what
has been a relentless move to the upside.
In short, we have to watch 148.89 on the dollar, 148.89 on the long bond
and 155.22 on gold as well the multiple boundaries and DMA’s of the S&P as signals
that pessimism is growing. On the other
hand, if TLT, UUP and GLD fail at resistance and the S&P resumes its upside
momentum, this dichotomy in performance will have been nothing but a head
fake. As a final note, in a circumstance
like this, don’t watch the news flow, watch the price action.
On Friday, the
long bond (148.04) finished above the upper boundary of its long term uptrend and
is about to challenge the upper boundary of its very short term trading range
(148.89). If that is successful, it will
make a 25 year price high (low yield). The next resistance would be at the upper
boundary of its intermediate term uptrend (163.3).
The dollar (26.83)
successfully challenged its short term downtrend this week, resetting to a
trading range. As you can see, the new
upper boundary of the short term trading (27.19) is less than a point
away. More importantly, that boundary is
also the upper boundary of UUP’s long term trading range, a breach of which
would push the dollar into uncharted territory, with the next resistance level
at the upper boundary of its intermediate term uptrend (29.64)
GLD (154.7) spiked
hard on Friday on decent volume. It now has
the challenge of busting through the upper boundaries of both its very short
term and short term uptrends (155.22).
That should take some work/time.
Plus, it made a gap up open on Friday that needs to be filled. However, if it successfully overcomes those
two boundaries, the next visible resistance level is the upper boundary of its
long term trading range (185.55).
As you might
expect, the VIX was up on Friday. However,
the distinguishing aspect of this chart is that while stocks were recording new
highs, the VIX didn’t make a new low.
Indeed, it couldn’t even successfully challenge its 100 DMA.
Fundamental
Headlines
Latest on the coronavirus
from around the globe.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
January Chicago Fed national activity index was reported at -.25 versus
forecasts of -92.
International
The
February German business climate index came in at 96.1 versus estimates of 95.3
Other
What
I am reading today
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