A week ago it appeared markets would stare down the abyss and not jump. They didn’t as there were several redeeming qualities. The best was sequence I showed you in the S&P 500 where a weaker market never would’ve dented a sequence like that. As a review here’s what I showed you last week.
I’m not concerned about a seasonal tendency like a Santa rally. I’m concerned for the aftermath. In normal years there is a holiday euphoria that went missing for the most part this year. While the week directly after Christmas is usually bullish it can be diminished as the euphoria has passed but as I said there wasn’t much euphoria to speak of this year.
Last week was one of the more interesting and bizarre weeks I’ve seen in a long time. There were two highlights. First was the ISM number, which came in at 48.6 for manufacturing. Anything below 50 means contraction. Economists were expecting 50.5. The very next day Fed Chair Janet Yellen said it was a very different cycle. No kidding? This is the nightmare scenario I’ve been concerned about for at least a year.
It certainly isn’t easy coming here week after week warning people the market can hit a wall at any time while seeing it go up day after day. While I haven’t urged you to be short, I have basically told people to trade this market with one eye in the back of the head.
If I am concerned about anything it is the U.S. dollar, which is threatening to fall apart. As you can see on the chart below, recent action shows an inability to get above that recent gigantic red power bar in the leg off the 616 hour low. It failed, came to the inflection line you see which is the beginning of the real candle body for the red bar. It came down to it, held support and started breaking down. It's not terminal yet but if they bounce it and it fails at that line it will be see ya in the next lifetime.