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Tuesday, February 27, 2018

Daily update 2/27

Blame it on Powell.

The bulls were in charge early on.  During Powell's q&a he apparently said something that made people think he opened the door to 4 rate hikes this year.  Bonds and stocks sold off and the dollar rallied.  Breadth was -76%.  New highs were 92 while new lows increased to 55.

The futures looked like they were trying to get into accelerated up move mode this morning, but the sell off brought them back into the channel.  That indicates the up move if it continues will probably be at a slower pace.

The green count plunged back below 50, but remains above the red line. 

Today brings to mind the old saying what doesn't kill you makes you stronger.  If today does not kill the rally then it should make it stronger and increase the odds we make a new high.  News induced moves usually have a short life span.  It seems more likely the market retraces the down move rather then rolls over and heads significantly lower.  However, today indicates the market is much more sensitive to what interest rates are doing then it has been.  If rates keep going up it could be a problem for stocks.  I don't know if that is likely or not.  Some people make the case that bonds are extremely oversold and there are a lot of bond shorts.  That can be a recipe for a reversal.  However, sometimes the crowd is right.  Investors got heavily short the dollar last year.  It got oversold and kept on going down.  Bonds may reverse, but they might not. 

Powell will be in front of the senate on Thursday.  I suspect he will adjust what he says.  The FED may even issue something tomorrow saying people misunderstood.  At least that is what the Yellen FED would do.  With new leadership things may be different. 

A close back below the 50 DMA could be a problem.  However, SPX confirmed the upside break of that MA.  The bulls may come out grab the bargains.  The TRIN closed over 2 which gives the bulls another reason to show up. If the bulls get a positive close tomorrow then I would think the market will continue higher.


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