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Wednesday, September 5, 2018

Daily update 9/5 Haywire currency markets

More rotation.

SPX is clearly back in the channel now.  This type of pattern often leads to a move below the lower channel line.  Breadth was -53%.  New highs were 86 and new lows were 87.  Volume picked up a lot today.  With little movement it signals more rotation.  XLU led the way on the upside at +1.4%.  QQQ was -1.29%.  This looks like a defensive rotation.  Maybe the market is getting a bit worried about what is going on globally.

The futures tested the downside this morning, but found support above the 50 SMA.  They ended the day still inside the channel.  They still have not confirmed a break of the 20 SMA.  That often means a bounce with this many bars below the 20 and no confirmation.  Sometimes that bounce does not go much further then the 20 SMA before rolling over though.

The green count slipped a bit further, but remains above the red line.

Both Asia and Europe were down considerably overnight.  That put a damper on the U.S. market and was probably why QQQ sold off so hard.  With the market becoming defensive we could be in for that mid term election pullback after all.  The storm that is brewing outside the U.S. may be getting a bit stronger.  I have commented a number of times how this rally looks like a retest rally destined to fail.  I think the odds of that happening are increasing.  A failure will leave us with a classic bull market topping pattern.  A mid term election year is an odd year to have a bull market top.  But then again this is already the longest bull market in history.  It has to end sometime.  Maybe this will be the year.  That might depend on what happens overseas.  ECRI is still saying their long lead indexes have not turned up.  They also say the global economy is in a window of vulnerability meaning a shock could put it into a recession.  The U.S. is not in a window like that at the moment due to stronger growth.  However, ECRI says the U.S. leading indicators are also heading lower.  So we have a pattern that could be a bull market top and a possible reason why that pattern is forming.  I am monitoring ECRI as I expect they would announce if their long lead indicators turn up.  Until that happens the global economy is vulnerable.  So are markets.

I mentioned that some currency markets were going haywire around the world.  The number of currencies in trouble is much longer then I realized.

Don't be surprised if you start hearing more talk of contagion in the months ahead.  That is one of the side effects of the modern global economy.  No longer can a country remain detached if things go south globally.


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