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Tuesday, May 15, 2018

Daily update 5/15

Pullback from the upper channel line started.

SPX tested below the 100 SMA and traded down to around the downtrend line.  A big bounce in the last 15 minutes got SPX back above the 100.  Breadth was -62%.  New highs dropped down to 66.  New lows jumped up to 99.  Bonds were hit pretty hard today so some of those new lows were probably bond funds. 

The futures held support at the 20 SMA.  Will they break or launch from that line?

The green count dropped considerably, but remains above 50.

Both the bulls and bears took turns today.  There were some sharp moves in both directions.  The bulls just happen to get the last laugh into the close.  I can't say the selling was exhausted since the bears did not get a chance to respond before the market closed.  I guess we will find out tomorrow.  Inflation worries surfaced again today as the 10 year yield closed solidly over 3% at a new recent high.  This is the third attempt to cross 3%.  It might stay there for a while this time.  The dollar was also strong and closed at a new high for the year.  The VIX was up over 13% which seems excessive for the amount SPX was down.  Will a rising dollar and rising rates derail this bounce?  I don't know, but it seems like some people might be getting a little nervous.  A lot of traders were talking about that today.  A close below today's low might be problematical for bulls.  The bulls need to absorb the selling without too much price damage or the flood gates might be opened. 

Rising rates should not come as a surprise.  In Daily update 2/1 Has the interest rate environment changed?   I showed a monthly chart of the 5 year rate with the 50 MA crossing above the 100 MA that had not happened since crossing below back in the 80s.  I said that might be signaling a major change in the interest rate backdrop we have been experiencing for decades.  So far that appears to be playing out.  With stock valuations high that could be trouble.


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