May 7, 2019
What Happened To The Stock Market Not Caring?
Yesterday’s trade tension didn’t seem to matter to the market; today is a different story. Seems interesting either way. Perhaps my assessment of yesterday was merely wrong? Agree/disagree; I will put it in the wrong camp. I’m not right all the time. It happens. What is more important is what happens next and what the options are. I do happen to believe today may have been the worst of it. Maybe I can also be wrong 2-days in a row.
Again, I don’t think this a repeat of the fourth quarter. Growth in the US is solid, and growth around the globe has shown signs of improvement. The Fed is also more dovish, as is the ECB. So the backstop is already in place. Can we fall further? Yes. Potential as far as a zone of 2,850 to 2,830. That would take us back to an unfilled gap, and it could be a likely place to end the decline. It would amount to a drop of about 4%. For now, the index appears to be testing an area of support around 2,863, and it has held and bounced, so we can hope that we have seen lows. But if it falls below there tomorrow, be on watch.
Did We Bottom?
But for some reason, I don’t think we will fall any further. In the next chart, you can see the somewhat robotic nature of the recent S&P 500 rally. It has been in increments of 130 and 170 points for the most part, with a typical pullback of 2 to 3ish%. Interestingly at the lows around 2,863, it was a 3% decline, and if you add 170 points to today’s low, it takes you to about 3,030. I had looked for a rise to 3030 last week when the index was trading around 2,900; I was using an increment of 130 points though. Coincidence? Maybe? I could also be crazy and reaching. I guess we can find out together how stupid I am.
Also, the sharp decline has left the RSI on the S&P 500 around 45ish. So we went from overbought to neutral quickly. But the good news is that the trend continues to be higher.
VIX
Another positive is that VIX tested resistance today around 20.50 and at least it didn’t close above it.
Technology ETF (XLK)
If you want to find something good out there, the XLK fell to support at $76.25 and for now, has held.
Amazon (AMZN)
Amazon also continues to hold support at $1900. The trend is still higher.
Facebook (FB)
Facebook is heading in the wrong and direction, and support is around $186.
Boeing (BA)
Boeing fell below support at $357, and I went through a series of the reasons I think the stock may be heading lower in a premium story today. Boeing Is Breaking Down. But $320 seems possible.
Alibaba (BABA)
For now, Alibaba continues to hold support around $179. A break below support sends the shares lower to $166.
Micron (MU)
Micron is also on the cusp of a significant break down that could send the stock to $36.
That’s gonna be it.
Until tomorrow
-Mike
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