Monday, February 24, 2020

Monday Morning Chartology

The Morning Call


The Market

            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.



            Latest on the coronavirus from around the globe.

    News on Stocks in Our Portfolios


   This Week’s Data


            The January Chicago Fed national activity index was reported at -.25 versus forecasts of -92.


            The February German business climate index came in at 96.1 versus estimates of 95.3


What I am reading today


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