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Tuesday, June 19, 2018

Daily update 6/19 John Mauldin - The Pension Train Has No Seat Belts

Yet anther big gap down.

Just like the last two days the dip buyer buyers showed up to snap up the bargains.  Breadth was -55%.  New highs dropped way down to 56.  New lows picked up a bit more to 86.  SPX pierced the 20 SMA and the uptrend line this morning, but didn't collapse and rallied in the afternoon.  The 50 SMA crossed above the 100 SMA today.  Some people might look at that as a buy signal.  The 100 could provide some support if tested.

Escalation of trade war headlines sent the futures spiraling lower overnight.  They confirmed a break of the 20 SMA.  That means the market has extra work to do to get back in rally mode. 

The red count crossed the green line, but is still below 50.  Another down day could take care of that.

Money is clearly rotating away from companies more affected by tariffs.  The market has found its low early on the last three days then chugged somewhat higher the rest of the day.  The guys on TV find that action bullish, but that may not be the case.  People are selling the big cap heavily traded stocks first thing then putting that money to work in less liquid smaller caps.  The net effect keeps the market from tanking, but that is not the same thing as the market being bullish.  We will have to see what happens when there is no negative trade headlines.  Some people that did not want to sell into the down gaps might do so on a market rally.

SPX had a key reversal day from near the same level as a prior reversal back in March.  Now it has confirmed the reversal with a close below that day's low.  The rally that has been going on since back in May is now in question whether it will continue or not. 
They paraded a lot of people on CNBC today expecting a resolution to the trade dispute relatively soon.  I did not happen to catch a single guest claiming things could get ugly.  China is used to everybody else being afraid to challenge them.  President Xi has been elected for life.  He has to be thinking he can outlast Trump.  On this side of the pond Trump does not back down.  The tax cuts are stimulating the economy.  If there was ever a time to do something with the trade situation I am sure Trump is thinking it is now.  I just don't see him backing down.  I think he cares little what happens in the short run.  He is convinced adjusting the trade deals will benefit the country in the long run.  Unless China agrees to remove tariffs and stop stealing our intellectual property there will be no agreement soon.  I don't see that happening.  Can somebody explain to me what I am missing?  I don't see a simple and quick resolution coming soon.

Here is Mauldin's next installment.  The Pension Train Has No Seat Belts


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