Market Analysis


What a day and week. I’ll do a more detailed run down on everything this weekend, but for now I’ll throw some basic charts your way to give you a basic damage assessment. If you’ve been following my public updates you’re familiar with some of these charts, it’s the evolution of them that’s key to watch.
The big surprise of course today was the China counter tariff announcement and then the response from Donald Trump on twitter sending markets into a tail spin.

As irony would have it I was just tuned in live on Fox Business as the tweets hit and I didn’t even get to see them, but clearly they represented an escalation of note and in context of the larger global malaise in growth one has to wonder if this brings the world closer to recession as confidence is taking a big hit.

Anyways, in case you missed here’s the clip:

On to charts and just some quick impressions in no particular order.

$VIX and $SPX have formed flags, a potential bull flag on $VIX and a potential bear flag on $SPX. This leaves potential for further volatility. Multiple gaps were filled on $SPX and $VIX today.

The 2019 trend remains broken and this week’s effort to recapture the trend line and the weekly 5 EMA have again failed:

$SPX saved the close on the most recent trend line formed. Break it and immediate risk is into the 200MA, although the size of the above mentioned flag suggests downside risk beyond that on a break:

On the daily charts of key indices we remain in a consolidation range. $DJIA saved its 200MA into close. Break lower of the consolidation range could target the lower megaphone trend line.

$RUT again fails at its 200MA and is back to critical support.

Banks failed to stay above support and have broken it again. Shows also potential for a small double bottom:

Transports back to the lows, also potential for a small double bottom:

All of these latter charts remain ugly and unconvincing. We are in a very headline driven market obviously, but uncertainty has once again increased and there appears, at the moment, no clear path for resolution of the trade war, rather plenty of paths of escalation. The Chinese have shown backbone today and have put Mr. Trump on the defensive. His initial reaction appears driven by anger and emotion.

This makes the environment even more difficult in terms of visibility and I would expect corporations to further hold back on investment decisions.

We are short term oversold and bounces will always be part of the picture, and none of the daily charts are broken, but the 2019 trend remains broken.

I’ll add more color this weekend.

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Categories: Market Analysis

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