What a GREAT day it was for my account! New highs, and new record close. I’m still bullish, but with caution.
A couple good things to note from today. 1) Volume was kind of weak until the end. It wasn’t horrible, but it wasn’t great either. It did pick up and ended up closing with about average volume. That’s a good thing. Low volume plus the record close would maybe be a bad thing. 2) The RSI divergence I wrote about yesterday is pretty much gone now after today. That is also a good thing.
Now, a couple of bad things to note from today. 1) The market is just one negative tweet, or one negative trade war news story from sending it down. That is enough to make me proceed with caution. I am still bullish, of course, but I’m cautiously bullish. 2) Jerome Powell (the Fed) speaks on Wednesday afternoon. He has moved the markets before, and he could move the markets again. If the market is looking for a 50 BP cut, and we only get a 25 BP cut, that could be bad. Or, even worse, if there is no cut at all that would be VERY bad for the markets. Everyone wants a cut, regardless if it’s a good thing or not.
Keep your eyes peeled and stay vigilant. Being at these all-time highs, a lot could go wrong. But, a lot could go good also. We will just have to wait and see what the near-term future holds for us.
My guess… and this is just MY guess alone… is that we move up and play in the $315 to $325 area for SPY. If negative news comes out, or if Jerome Powell dissapoints, forget about it! We would then probably fall well back into the $290’s.
What a GREAT day to be long the markets! My bank account is LOVING this. Will it last?
That depends on a few things:
Keep in mind, the trade war is not over. Heck, the trade talks aren’t even over yet… they end this afternoon. I don’t let my guard down when it comes to the US/China trade war.
There is still signs of a slowing economy. But, I think most of it relates back to… you guessed it… the US/China trade war. Certain numbers (i.e. durable goods) are faltering. Business sentiment is also faltering.
Lots of institutions have been pulling out of the market and moving their clients into bonds. This is a sign that they’re uncertain in regards to the future. However, most from what I have read, do not think a recession is imminent.
On the bright side, the economy is also showing that it’s still in good shape (if not great shape):
Unemployment is at crazy-low levels. It’s pretty much at full employment.
Business are still hiring at a nice clip. When you factor in being at full-employment (basically), that’s a good sign. I mean, jobs are still being created, even tho there’s not as many people to fill them… think about it.
Earnings seasons have been slowing, but are not dead. Third quarter earnings season kicks off this month… it will give us more information about the economy and its direction.
Here is a DIA (Dow Jones ETF) chart I made this morning. From a technical standpoint, things are looking good as well.
But remember through this earnings season, that many companies are claiming the trade war is what’s hurting them. If that is true, and if the trade war makes progress this week (i.e. cuts back or eliminates tariffs) those businesses numbers should start to climb again. Just in time for 4th quarter and year-end results.
Either way, enjoy today longs! If you did your homework, did proper analysis, and stuck to your trading plan, you are making money today.
This post was my opinion, and my opinion ONLY. Do not base your investment decisions off of this post. This post was NOT a recommendation to buy or sell any investment. Consult a professional financial or investment adviser.
Yesterday, SPY gapped up and made a doji to close out the day. Today, that doji was followed by a bearish engulfing candle. By itself, a doji usually means reversal. The bearish engulfing candlestick that followed the doji, in my mind, is confirmation of a reversal.
I am bullish the US markets. But I think they are in for a pull back … more so, a profit taking round.
After breaking through the consolidation that lasted about a month (the green dashed line), SPY has been on a rip. This week it made new highs, but failed to close above the all-time high set in July of 302.23. I think this is a point where investors may want to take some profits.
See the long up-trend line I drew? That started from the low of last year on 12/26/2018. Up until July 26 that line held very well … then all hell broke loose, and SPY plummeted to 281.72. It then entered a period of consolidation that lasted until September 5, when SPY finally broke out of it with a pin bar gap. Fast forward a little more than a week, and here we sit at the all-time highs again.
But, notice how after we bounced off 281.72 it tried to get back above that long-term trend line and just couldn’t do it? And then tried a couple more times but failed … Then finally on the 5th of this month it busted through with conviction. That’s why I’m bullish overall from a technical standpoint.
However, I believe we are going to see some profit taking before the Fed speaks next Wednesday 9/18/2019. I think the doji yesterday, and the bearish engulfing today, shows that we are going to pull back from this level. Not too mention, profit taking is not uncommon at all-time highs. I think the pullback takes us to around 295 area (green dashed line). From there, fundamentals will determine if we bounce off and retest the all-time highs … or more ominous … continue down through the green line and confirm a double top pattern.
TRADE WAR!!! Need I say more? It’s all about the US/China trade war. Jerome Powell and the Fed have nothing on the trade war. The market wants an end to it, and they want it now. Unfortunately for us (the market), it’s not going to happen now … well, I don’t think so anyways.
The reason SPY broke through the consolidation was because the US and China agreed to continue talks in October – the markets went berserk on the good news! But I remained skeptical; do you know why? Because when did the US/China talks ever stop? They’ve been going on for a year and a half. You gotta use logic here, but the markets don’t like logic. They like the news.
Logic tells me that nothing has changed on the trade war front. The talks have never truly “stopped” and this is nothing more than another round of them. October will go one of two ways: 1) A deal is made or 2) A deal is not made. That’s it! Don’t expect anything else. Well, the many other rounds of talks had the same two options.
When there’s talk of negations, the markets move up. When the talk turns to negative (i.e. nothing happened in the talks), the markets move down. That’s the pattern we are in, and that’s the pattern I believe we will stay in until a trade deal is made.
Donald Trump wants to get re-elected, so I think a trade deal will be made before then. But the elections are more than a year away; that’s a long time for this thing to be drawn out.
Bringing it all together
I think technically SPY is very bullish. I think fundamentally SPY is at the mercy of the trade war. Bringing those two together, I am basically trading on the news rallies or declines.
ALWAYS DO YOUR OWN RESEARCH BEFORE MAKING ANY INVESTMENT DECISION. SEEK PROFESSIONAL GUIDANCE IF YOU ARE UNSURE.