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Tuesday, March 13, 2018

Daily update 3/13

More tariff talk knocked the market down.

After a gap up SPY hit into the 280 strike where a lot of calls reside.  Those calls provided the initial resistance.  The afternoon saw more tough talk on trade with China that added to the selling.  Breadth was -58%.  New highs contracted considerably to 82.  New lows picked up a bit to 37.  SPX may be headed down to test the downtrend line from above.  As long as it holds the rally could resume.  Volume was rather heavy which is not a particularly good thing.  Technically this was a key reversal day near the same level as the key reversal on 2/27.  I think it is important for bulls that we don't get downside follow through here.  If SPX fails to go higher there is the possibility of a double top lower high developing.  Those can be very bearish.

The futures gapped up again today, but failed to stay there.  They ended the day back in the channel.  They never got escape velocity to get into accelerated up move.   It is not clear yet whether we are starting down again or not.  The 20 SMA is a bit lower and could provide support.  Breaking that would not be good.

The green count fell below 50, but is still above the red line.  This is marginally positive now.  The bulls need to show up to continue the rally or it is in jeopardy of failing.

The COMPX and R2000 also had key reversal days.  It is becoming quite clear the market does not like any tariff talk.  It is also quite clear that DT intends to make good on his campaign promise to adjust the trade deals.  That may be one thing that could derail the market.  SPX is in a bit of a precarious position with the 2/27 high.  The bulls need to clear it convincingly to get a retest of the Jan. high.  With all the trade talk going on I think it might be difficult for the market to continue very much further if we get back to that high.  This is something the market is going to have to deal with because this situation is not going to be quickly resolved.  These trade deals will take quite some time to negotiate.  It is also important to see how things develop.  The U.S. has the most free trade in the world.  I have yet to hear anybody argue it is fair.  DT is going to work to change that.  If the adjustments are too rapid or too broad there could be considerable negative consequences for the global economy and markets.  It took decades for this situation to develop.  It cannot be easily corrected in a few years. 


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.