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Wednesday, March 20, 2019

Daily update 3/20

The FED was even more dovish than expected and yet the market did not rally.

Two days of increasing volume smells like distribution.  The breadth was -54%.  New highs dipped to 88 while new lows doubled to 39.  Is the market starting to roll over?

The futures tested the 20 SMA, but held above it at the close.  They are currently trading right at it.

The green count dropped below 50 and is barely above the red line.  A negative cross would be easy now.

The market was expecting the FED to lower their so called dot plot to one more rate increase this year.  They lowered it to 0 hikes the rest of the year.  The lowered GDP estimates for this year and next.  They also announced a plan to start winding down QT in May and terminate it by Sept.  The FED was more dovish than people expected and a surge of buying came in.  After everybody piled in over the next hour the sellers came out again.  Earlier in the day Trump said the tariffs on China could be on for a long time.  I think the belief by investors has been a trade deal would be done shortly and the tariffs would be ended.  I have argued against that being the result in this blog.  I do not see a quick deal.  What I heard today is that even if a deal is signed the tariffs may remain in place until it can be determined that China is living up to the deal.  I don't think the market is going to like that idea one bit.  The reaction was likely muted today because of the FED.  I am not so sure that will be the case tomorrow.

A close by SPX back below 2815 would indicate a probable break out failure.  A close below 2800 would confirm that idea.  I would expect a lot of selling should that occur. 

I heard Powell talk about weakness in Europe, but said he does not see a recession there.  That got me to thinking that a central banker has not and never will see a recession until after just about everyone else has already figured it out.  Imagine what would happen if they pointed that out before the market knew it.  My point is not to be comforted when central bankers say they see no recession at this time.  The truth is Europe is weak enough the risk of recession is the highest it has been since the global recession ended in 2009.  Time will tell if they avoid a recession or not.


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