Market Update: Markets Are Testing Central Banks
What a difference 48 hours can make on Wall Street. In Tuesday’s pre-market update, I highlighted that Central Banks were in focus and the market sold off hard Tuesday afternoon and again on Wednesday. Remember, easy money from global central banks were the primary driver of this entire 9-year bull market. So, if the market doesn’t like Central Bank policy, or views it as too hawkish, that could spell trouble for stocks. Powell is back on the Hill again today. Let’s see how markets react.
Near-Term Support Is Breached
In Tuesday’s update, I also said “if we see another round of violent selling that will clearly change the dynamic. Near term support to watch is the 50 DMA line for the major indices and near term resistance are the 2018 highs.” All the major indices broke and closed below their respective 50 DMA lines expect for the tech heavy Nasdaq/Nasdaq 100. On a weekly chart, this is on track to turn into a big negative reversal to the downside and a big failure at the 50 DMA line. That is a bearish sign, especially because the 50 DMA line was support for the last two years, and is now becoming resistance. If we close below the 50 DMA line on Friday, that would suggest we will re-test (and most likely take out Feb’s low). Now that the 50 DMA line is breached, the next important level to watch are Feb’s low for the Dow, S&P 500 and Russell 2000. The Nasdaq/Nasdaq 100 are a bit stronger and the levels to watch there are the 50 DMA line, then Feb’s low. For now, the bulls really need to show up and repair some of this damage otherwise lower prices will likely follow.
Tops Take Time To Form:
Eventually, the market will top out and we will enter another bear market, it is just a matter of when, not if. At the very least, we are way over due for a protracted correction and some sloppy sideways action (think 2011, 2014-2015, etc). It is important to keep in mind that tops take time to form and do not happen over night. If this eventually turns into THE top (doubtful), then we will have a lot more time and price for that to happen. The good news is that fundamentally, earnings are strong and the economy is growing. So there is still a strong case for stocks to rally in 2018 and beyond, any short term corrections aside. Just remember, the market has ripped higher since 2016 and is way overdue to just “sit” for a while ( at the very least) to consolidate the recent gains. However, this plays out, we are way ahead of the game and sitting on very lofty gains. Back to the near term action— As always, I want to see where the market closes tomorrow and will have a full report for you this weekend.
FLS Portfolio:
We are comfortable with our current exposure and our latest buys are not working well—that tells us the market is not acting well. Here is a snapshot of Wednesday’s close:
Positions:
The service owns:
ADBE +88.25%,CAT +44.27%, ISRG +35.26%,
RMD +22.61%, MELI +41.31%,
BLK -1.21%, V -0.49%, FAST -2.23%
The service will exit:
ADBE @ 165.47, CAT @ 133.71, ISRG @ 359.64,
RMD @ 87.07, MELI @ 310.94,
BLK @ 538.41, V @ 119.46, FAST @ 53.86
Working Orders:
There are no new working orders today.
Disclaimer:
This analysis contains information from resources believed to be reliable but are not guaranteed as to accuracy or wholeness as of the date of this publication. Past performance is not necessarily indicative of future results. There is always a risk of loss in trading and investing. Opinions articulated are subject to change without notice. This analysis and any opinions expressed are intended for educational purposes only and should NOT BE interpreted as a call for engagement in any transaction involving the purchase or sale of any security or investment product or service. The risk of loss in investing and or trading can be substantial, and traders/investors should carefully consider the inherent risks of such an investment in light of their financial condition. The author, firm, associates, or the firm’s clients may have a position in any of the investments mentioned and their positions are subject to change without notice. Any reproduction or retransmission of any portion of this report without the express written consent of 50 Park Investments is strictly prohibited.
