| Sunday Evening/Monday Morning 16/17 April 2017 Financial Freedom HQ
Hi Folks...
It's early morning Monday and I'm up doing what I often do when I can't sleep... scanning markets...
I see a couple of interesting things, so I thought I would share... Take it with a grain of salt and, of course, do your own analysis.
First, the broader equity markets themselves appear to have softened... |
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| SPX still looks capable of reversing and firing to the upside out of this bullish chart pattern. If price breaks through the horizontal support line though things get a bit dicey. |
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| QQQ looks the strongest of the US equity indices. Support is pretty far away and even the price weakness feels tepid at best. |
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| MDY is holding on to its up trend for dear life. The real story will be told by price's reaction to the first level of support which is very close at just above $300. |
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| DJIA is still structured positively and can turn back to the upside at any time, but if the recent weakness continues, we should challenge the horizontal support line at the 20,000 level in short order. |
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As you can see, none of the major indices have completely broken the back of their strong, long running uptrends, but even the casual observer can see that price is struggling not only to go higher, but also to hold on to current levels.
Second, a look at some external data provides a bit more guidance about what's going on inside the indices.
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| CSFB Fear Index is a proprietary index owned by CSFB that the market watches for hints about where traders are stacking their bets... Like the VIX, it uses option activity to determine what bets are being made... Here, traders are buying puts (like the skew guide below suggests) to protect themselves from downside risk. |
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| S&P 500 50 Simple Moving Average [SMA] is a simple (you know I love that) metric that traders watch to gauge the strength of current prices. Here price has crossed and closed below the SMA suggesting the potential for lower prices in the near term. |
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| S&P 500 1 Month Option Skew suggests put buying is outstripping call buying. This says investors are more worried about downside than anticipating more potential upside. |
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Gold continues to find support... This is generally negative for equity markets.
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Finally, the number of so called market headwinds can't be ignored...
- North Korea saber rattling
- The Syrian conundrum
- The upcoming French election
- Potential fallout from Brexit
- The potential failure and maybe even outright reversal of the so called Trump Rally if the market decides Trump will be unable to deliver on promised infrastructure spending, regulatory and tax changes.
Again, nothing fails like predicting market direction, so keep that in mind... And my only real suggestion here is to keep your stops in place... which is something you should be doing religiously anyway.
Stay simple.
KIS,
The Trader
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