Although oil prices and Treasury yields have been falling in anticipation of a widely advertised economic slowdown in Europe and China, U.S. stocks are rising as though boom times lie ahead. What is going on?? It would appear that bulls simply cannot control themselves when there is talk of Fed easing. The prospect of QE3 has been in the news lately, driving a short-covering rally that has pushed the Dow Industrials up by more than 700 points in the last two days. The move lost a little power on Wednesday, but it is unlikely to fade much more with the weekend approaching. If DaBoyz can sustain altitude on Thursday, odds are good they will be able to break a six-week losing streak in the broad averages.
Sure, the rally stinks to high heaven and begs to be shorted. However, we need to keep reminding ourselves that its very purpose is to chasten bears who think that merely being right is an easy ticket to profits. Indeed, the more skeptical we grow of the rally, the more steeply it will rise. Can it possibly reach a purely technical S&P 500 target at 3095 given here earlier that lies nearly 10% above current levels? I remain skeptical, but that doesn’t mean I am willing to fight buyers every inch of the way. For now, we hold no position, having cashed out a profitable ‘counterintuitive’ long in the E-Mini S&Ps entered on Tuesday.
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The recent INDU/SP ‘spring’ on 05292019 says it all, it was a broken ‘buy signal’ moving then towards lower pricing.
Its not the pricing that is important but the fact such ‘buy signals’ (buy that DIP) are breaking lower suggesting that the recent April is an important area in price level longer term than most suggest today.
Today, and the last few days are price moves base upon pricing that was created by extreme over sold ‘breaks’ in the market. Such moves are about 3-4% counter trend over all, such as the recent 12/10/2018 counter trend breaking of ‘springs’ or buy signals at that low points.
More important is the ‘switch hitting’ going on like wild fire over the recent weeks, as toward breaking major yield support levels, while DXY/EC having created over a 60-70 trading period of ‘much effort’ with ‘little results’ to sustain any type of higher (DXY) and lower (EC FX) forgoing trend.
The CL INDU/SP analog is in place, it will continue as CL looks now and suggest a major high is in place recently. A 3-5 year low is target.
Baseball Bat to the head time, GET ready America!
Have a great weekend Rick.