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Wednesday, May 1, 2019

Daily udpate 5/1 UNLOCKED: The Curious Case of Rising Fuel Prices and Shrinking Inflation

Key reversal day?

SPX opened up at new highs and sold off modestly.  It traded to new highs two more times today before selling off into the close.  The close was below yesterday's low making it a key reversal day.  Breadth was -62%.  New highs were 205.  New lows were up again to 37. 

The futures closed below the 20 SMA and just above the 50.  The last bar today was the biggest down bar since 3/22.  Will the 50 hold as support or break?

The red count crossed above green line again.  It is still below 50.  This could be the beginning of a braided pattern that would indicate consolidation.  Alternatively this could be the start of the long awaited pullback.

Not all key reversals are actually key so we will have to see what develops.  This one comes at a bit of a precarious position with SPX testing last year's high.  The fact that other important indexes have not made new highs yet adds to the intrigue.  After the FED announcement SPX traded back up to the highs.  I think the trouble came when Powell did not say the FED would be cutting rates before the year was out.  Apparently investors had priced in a 65% chance of a rate cut by Dec.  I think the only way that would happen is if the stock market and the economy fall apart.  That could happen if the global economy takes a turn for the worse.  I don't believe anybody knows if that will happen though.  It is a possibility, but not a certainty.  Today could be really important, slightly important, or totally irrelevant.  How is that for prognostication.  If this turns out to be a triple top going back to Jan. 2018 then today was really important.  If we get a pullback and resume the move to new highs and beyond then today was slightly important.  If the bulls come right back in the next day or so and it is off to the races then today was irrelevant.  After SPX crossed 2900 the bulls bought several dips below that level to support the market.  If SPX dips below 2900 again it will be important to see if they will still buy there.  A failure should usher in some profit taking.

This is an interesting article about why inflation was so low in Q1 which contributed to making GDP be stronger than expected.    UNLOCKED: The Curious Case of Rising Fuel Prices and Shrinking Inflation


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