The risk rally faltered a little bit overnight. I know I know, stocks in Europe and the US were still higher but at 2,571 as I write (10.43 pm Wednesday New York, 2.43pm Thursday in One Mile) the S&P futures are off about 25 points from the high during Wednesday’s session in US trade.
That high was associated with the release of the fed’s very dovish minutes and after the very dovish action of the various Fed speakers overnight – the very ones I suggested yesterday would likely be “a dovishly supportive crowd of speakers”.
With Chairman Powell and vice-chair Clarida among the Fed speakers on the Husting’s Thursday we’re likely to see more supportive comments.
But the reason we might like to wonder if the rally in stocks, and thus risk assets, is getting near an inflection point is that prices for the S&P 500, using it as the bellwether, are right in the zone. If I can put it that way.
In your weekend Platinum pack I noted with regard the weekly and daily S&P setups,
“Weekly: JimmyR indicator (15 and 30 ema crossover) turned bearish for the first
time since April 2016 when the S&P was around 2,000/2,010 during December that turns the overall trend lower on this time frame. Price then exceeded my Dec 22 target of 2,500/2,523 and the subsequent further target 125 point below with the Christmas eve collapse. Subsequent recovery looks to have legs toward 2600 previous support and perhaps the 15 ema at 2,650.
Daily: Bullish engulfing Friday after some small falls in Asia gave way to a solid NFP and Fed induced rally. Target on break of the week’s high on a 138.2% basis is around 2,600. Support 2,489″.
Now, I’m not telling you what I told you to blow my trumpet – though last weekend’s Platinum pack did nail so many moves from stocks, to bonds, and currencies (please tell your friends, I’d like a few more clients). I don’t do it to blow my trumpet because at some point – this week, next week, today maybe – I’m going to get it wrong.
Rather I raise this to highlight that US stocks – again using the S&P as the bellwether – are back at important and significant resistance levels. And they’ve satisfied my initial targets of what still is a counter trend rally. So for me that’s a place to take some money, some risk, off the table – but that is just me, I’m a cautious trader.
The Russell 2000 is at a similarly important juncture.
So far though – on the daily charts – other than hitting resistance and a little fall from last night’s highs on US stocks right now there is no reason to abandon the rally. But it’s largely hit the initial targets and the weeklies are still showing downtrends.
But, your money management is up to you and we could get that blow of toward 2,650 in the S&P first.
One market where the Fed’s dovishness isn’t fully priced in and where it is really starting to resonate is with the US dollar. I’m a longer term USD bull. But for the moment the bears have it and it is pointed down. I’ve covered my thoughts in the morning Newsletter which you can read here.
But, despite some pretty poor inflation data this morning in China (PPI 0.9% versus 1.6% expected and CPI 1.9% versus 2.1% expected) , despite appalling German trade data Wednesday (yes the surplus was okay but the underlying import and export numbers were awful) the USD is under pressure again in Asia.
Here’s USDCNH with an arrow pointing at the target I’ve been banging on about for week’s as Platinum and months in my own study.
So the greenback is offered and while USDCNH/Y may not get to the 38.2% retracement in a hurry. If it is anything like the USDSGD or the daily USDCAD then it will grind there eventually.
Just like the moves in US stocks drive many other markets so too do moves in the USD drive assets and markets – including commodities.
So we need to watch this space.
Daily Chart Scan
- You can see the volatility in the MACD of this table of assets and prices…from risk off last week to risk on this week. Sustainable or ephemeral – that for me is the big questions. Only changes in the MACD today gold pointing higher again (but still needs to break Friday’s high to kick), USDJPY, which is pointing lower again, and EURGBP.
- At the moment I’m still treating this rally in stocks and risk as counter trend. But the reality is that It’s usually worth riding the MACD turn to see how far it runs. Just look at oil and gold recently.
- So you may be forgiven for thinking the the market is schizophrenic. Which is exactly what it is right now. As noted this week, the question is whether the emergence of the Powell Put stabilises the outlook for a period long enough to retest highs.
- Times like these, when traders are uncertain it it is an inflection, transition, or continuation, are always fraught. It is why I trade with smaller size and take money off the table relatively quickly.
And to UPDATE from this mornings Newsletter here’s the
Macro Positioning Thoughts that flow from my analysis of the Platinum Scan and the daily iterations
These are the core views impacting markets and suggesting positioning.
- The Fed has blinked – we can almost ignore good US data, should it come – with this backdrop. This provides a constructive backdrop for risk.
- China is stimulating – tis is positive too though their data is awful.
- Global growth is slowing.
- The USD is under pressure – it has further to fall (but the Euro is like one of Cinderella’s siblings)
- There was a rush to the exit for stocks in December and they are having a counter trend rally at the moment.
- Bonds are likely rise further in rate.
- Gold and Silver are seeing their rally stall as stocks go bid – but the USD is keeping prices more elevated than I thought. Inside days a warning of the next move.
- Oil has broken important resistance and is pointing higher.
This will evolve folks and besides the chart scan it will be different each day. It wasn’t part of my original plans but I think it an important communication method for my inner sanctum of subscribers.
FEEDBACK IS ALWAYS WELCOME
Have a great day
@gregorymckenna on Twitter
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