Imagine oversleeping on Friday morning and waking up to find the Nasdaq down 100 and the Dow up nearly 50. You probably would’ve thought you were dreaming. Perhaps you’d roll over and go back to sleep. In this new era of strange trading days, Friday had to rank right up there with the strangest of them.
The big story of last week appeared to Macy’s. They had a bad earnings report and gapped down. Here’s my question. They topped last November, why worry about it now? Normally, this is the kind of bad news that would create a wash out low. But how could we have a wash out low on bad news when the VIX is so close to record euphoria?
Even though Macron’s lead in the first round of the French elections has buoyed markets, traders are buying USD currency pairs. Prior to the initial round of the elections, 69% of FXTM’s traders were selling the Euro with an Average Weighted Price of 1.06466.
For a period, when the Fed was considering tapering its asset purchases, it seemed like every day was either a "risk on" day, where stocks, higher-yielding currencies and commodities rallied in sync, or a "risk off" day, where bonds, gold, the dollar and the Japanese yen led the way.
So what about these charts? We have an interesting divergence working. The Nasdaq hit a new high after the Fed while the Dow and S&P 500 did not. The Nasdaq made a new high by 82 cents. But as you can see, the SPX is responding to 620 hours of this move off the November low. This is also the 89-90-day window off that November low and it’s on the front end of the seasonal change point. It’s very possible a change has already started. If the stock market does not correct given these important cycle points clustered with the Investors Intelligence report we are really dealing with a runaway train.