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Wednesday, March 21, 2018

Daily update 3/21 Money manager worries plus SPY option data

There was a good bit more intraday volatility then we have seen after recent rate hikes.  I found Powell's press conference to be straight forward.  He directly answered questions rather then spew a bunch of economic gobbledy gook like we have seen from the last three chairs.  Refreshing.

After the FED announcement SPX rallied up over the downtrend line, but turned back down.  Was that the infamous kiss good-bye?  Breadth was +54%.  New highs were up slightly to 64.  New lows were down slightly to 134.  Still quite elevated.

The futures rallied above the last six price bars, but turned down and ended right at the 200 EMA. Last ditch support is trying to hold.  Tomorrow might be an important day.

The red count turned back up and recrossed the 50.  A sign the down move may be ready to continue.

The market gyrated up and down quite a bit after the FED announcement.  At the end of the day it settled near the bottom end of the day's range.  SPX closed at a slight new low for the current pullback.  The last two days still look more like a pause to go lower rather then a bottom.  Tomorrow will probably be the key.

I think the market was so preoccupied with the FED it did not notice this headline from Bloomberg today.

President Donald Trump plans to announce about $50 billion of tariffs against China as soon as Thursday over intellectual-property violations, according to people familiar with the matter.

I don't know if that will actually happen or not.  Based on the data shown below the market might not like that much.  I find it interesting that everybody says China cheats, but they have absolutely no guts to do anything about it.  A trade war with China will probably hurt the economy.  I am hopeful Europe will get some guts and join in.  People seem to forget that China is a totalitarian government.  People that run afoul of the government do not get a trial they simply disappear from the face of the earth.  China is spending a lot of money building up its military.  They already do not play fair with the rest of the world.  Can we rely on them getting a conscience some day and becoming a force for good in the world?  I seriously doubt it.  I may sound harsh, but in my lifetime China has never done anything to make me trust them.  At the same time, they have done many things that indicate they cannot be trusted.  I have long thought the movement by western countries to move manufacturing to China would come back to haunt them.  The longer this goes on the stronger China gets and the larger the threat becomes.  I do not understand why there is so much focus on Russia and not China.  They are getting closer and closer together.  Russia is busy building pipelines to send oil and gas to China.  I think they will eventually sell enough to China they will no longer need to supply Europe.  Russia and China working together to hurt the west is a serious threat.

There are a lot of puts at 260, 261, 265, 270, and 275.  Strikes with a lot of calls are 275, 278, and 280.  We are already well below the 275 strike.  The puts at 270 could be supporting the market here.  These strikes with a large numbers of puts can be either support or acceleration points when broken.  Getting below 269.5 or so could accelerate down.  Should we bounce strongly the calls at 275 could be resistance.

Take a look at these survey results.

Trade war, inflation, and a slowdown in global growth top the list.  That certainly explains why the market gets jumpy on tariff talk. 


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