Markets haven’t been behaving well with Thursday/Friday being the latest example. I’m not even sure it was the weak jobs number which came in at 103,000 despite expectations of 182,000. Supposedly, the Ides of March always augur in bad weather which leads to a "less than" haul. We’ll see soon enough in 30 days whether the weather caused an outlier.
But here’s my two cents. Since March 20, the markets had a chance to go up or down. Mostly they are down. Since that time there have been several interesting square outs that would’ve held in a good market. That’s how I decipher how a market behaves. Last Monday the Dow decided to find a low at 23344 in 44 trading days. For those of you who are new to this sort of thing, that’s no coincidence, numbers don’t match for the fun of it. The Dow came up to its gap down day right after the Fed meeting. Tech came right down near last Monday’s low and the SPX wasn’t too far away. Wednesday was a good day but by Thursday many stocks formed pivots with good readings well short of projected resistance areas.
If you want to judge whether we are in a bull or bear, the best thing to do is discern the behavior of a particular leg. Overall, in a bull the market would’ve held the line coming out of the Fed meeting. Okay, so we found a decent low last Monday and by the middle of the week that held by a very slim margin. Then there was a combination of short covering and panic buying because there are still lots of folks out there who are programmed by years of a bull to buy every dip. Old habits die hard. With my calculation last Monday, I was willing to give bounce the benefit of the doubt at least up to the balance line in the Dow we’ve discussed any number of times in this space. Yet, there it was on Thursday night; any number of stock were much closer to the low than anything else gave off bearish readings along with the beginning of a reaction. Google is a great learning example. It put in a bear belt on the hourly chart with a 35% retracement in roughly 35 hours up against a secondary high. Did I tell you the move up was 62 points against that secondary high of 1162?
What’s wrong with that, you ask? Nothing, if you were bearish. What happened was we got a really nice bearish vibration so early in the move it was hardly expected. I’ve seen halfway decent bear vibrations during 2017 but the bull would negate them very easily. This one responded as you know markets got crushed again on Friday. But true to form they’ve started well today. On another note, the crowd feared the trade situation with China and the jobs number on Friday, so they were already in a sour mood. Then, new Fed Chief Powell made a speech where he made a point not to forget to remind folks they still intend to raise rates this year. I guess we forgot because he only told us he’d raise rates 3x in 2019 just a couple of weeks ago.
So, I think I got Powell pegged. This guy wants to sink the market, I'm certain of it. Not that he can do it, but he’s trying. It’s not for the reason conspiracy theory people think. He’s not messing with Trump, rather he already fears the economy overheating due to the Trump growth agenda. The only problem is they aren’t overheating anytime soon given we’ve just come out of the worst eight years of economic performance since WWII. Did you see the soybeans chart last week? I think they need to be more concerned about the farmers in Iowa and fly over the country than inflation at this point.
We’ve been controversy-free the past few weeks. I’m only the messenger. This week Zuckerberg goes before Congress to explain how Facebook has sold our private data when years ago he said they never would. Trump’s new economic adviser Larry Kudlow was asked by Chris Wallace from FOX Business what action the administration would take concerning Facebook. The answer was the President will be watching with the rest of us and put the ball in the hands of Congress for starters. Trump seems more interesting in Bezos anyway. We need to be concerned because these two stocks, Amazon and Facebook have been responsible for holding up the market for so many months.
Crude oil has been lower for the most part given the reaction since we talked about the 66/166 vibrations. I was hoping for a low at 66 units (hours or 180m chart) but instead, it came in at 61.81 (right there at 618). It has a shot at a low right here but there is a lot of overhead resistance.
I haven’t talked about this at all but apparently, we are a couple of weeks into the latest Mercury retrograde period. That would explain the choppiness in the markets. Choppiness at these levels is still not a good thing if you are a bull. As far as sentiment is concerned, there are still more questions than answers. It seems the bulls get their days with spasmodic type buying but what we’ve seen are days where the surprise comes to the downside where the gains are given back. Everywhere I look, I see a potential problem.
I will give the bulls one point. They don’t give up and bears are not powerful enough to put together two big days in a row. It keeps us stuck in a quicksand type market where both sides are frustrated but if you are an intraday player, there is something for everyone. Overall, it doesn’t look like the kind of environment where a rally like 2017 could sustain. At the very least Mr. Powell will remind us again. In a developing bear phase, there are sequences where not much happens in the bigger picture as the crowd gets lulled to sleep. Unfortunately, the buy the dip mentality only gets extinguished when it becomes obvious during the devastation phase of the correction. We are still light years from that phase.