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Wednesday, December 20, 2017

Daily update 12/20 Rates a rising and may some day bite into TINA

More selling of the news.

The market gapped up on news of the passing of the tax cuts.  The sellers started in right at the open.  However, the intense selling only lasted a little over an hour.  The rest of the day was filled with little ups and downs.  The breadth was dead even.  New highs were stable at 155.  New lows were also stable at 36.  I was a little surprised how fast the market sold off led down by QQQ.  The tech stocks are supposed to get the least benefit from tax cuts as many of those companies have low effective tax rates.  Some may end up paying more taxes.  It does make sense to see some selling there.

The futures did not quite make it down to the 20 SMA.  However, getting this close usually ends up with a hit.  The lower channel line is still a possibility if the dip buyers don't rush in too fast.

The green count slipped a bit more today, but remains above the red line. 

There has been some selling the news on the tax cuts, but so far it has been mild.  It is still looking like Monday might have been an exhaustion gap.  It makes a lot of sense with SPX so extended from the 200 DMA.  Dip buyers might be looking for a bit more downside before rushing in.  It is still over 70 points just to get down to the 50 DMA.  Despite strong seasonality it is not hard to imagine the gains for Dec. might have already been had.

Short term rates have been rising considerably of late.

TINA (there is no alternative) has not been talked about much lately because speculation has returned to the markets big time and they are now rising just because they are rising.  How many times have we heard high stock valuations are not a problem because rates are low.  Now the 2 year yield has risen above the dividend yield for the first time in this bull market.  I expect the FED will continue raising rates.  At some point next year there may be an alternative to high priced stocks.


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