Trends back to mixed signals... perhaps? Tech stands alone.
So Earnings that came in yesterday were small companies (in terms of small on the S&P) did decent, the two larger (JP Morgan and Morgan Stanley) did awful.
What appears to have happened, is people dropped their money out of Financial Companies (Biggest sector loss of the day) and tossed it into Tech (Biggest gain of the day). Tech carried that recovery, much like it did earlier. Basically they just moved money around. This is consolidation, and doesn't point to any real price action. The other sector, and only sector that is doing well this year for the most part, is Energy. The smaller areas doing well are Consumer Staples (Think things you buy at Walmart) and Utilities (like how we get that energy sector to consumers).
I know it goes without saying for most, but remember that the Price point of the S&P is based on the stocks of other companies, and not the Supply and Demand of the S&P itself, if that makes sense.
So, if you break it down, and look at the larger Market Cap sectors (Tech is the biggest, at least currently), you can get a sense of what is happening in the market. Look for things to disrupt confidence in energy or tech if you are looking for things to drop. If inflation persists and our unemployment goes up, and we head for a recession, historically Tech is going to suffer, as will consumer staples. However, it does appear that so far this year, Tech is the "safe zone" this time around, especially with treasury yields out the window. That hasn't proven to be true in the past, but people have seen that sector recover decently. The issue is the valuation for most of those stocks, are overpriced (I guess depending on how you look at them).
The other issue, is if Tech basically continues to be the heavy weight, it's going to constantly turn it into an overbought market, and no one is going to want to buy when it appears overbought, so people will start to hold cash. I think the first tech company Earnings I saw was IBM on the 18th. So I'd keep an eye there, or on another if you spot one. Usually a bad sign in the first companies, sets the mood going into that sector earnings season. I had cautioned on that over finance and JP Morgan and Morgan Stanley, and we had a -2% drop in Finance after they blew Earnings forecasts.
We basically have three options for today, as far as I see it.
Tech carries an overall downtrend, and we have another whipsaw day.
Tech faulters, and we go negative on the day as S&P
The risk on sentiment of buying the dip rallies with yesterdays failure to move lower, and we go up because people buy the dip of other sectors, believing an overall rally is coming.
__________________________
Anyways, back to trends. The trends are still mostly lower. Certainly I have some regret over not selling at the low point yesterday as I could have capitalized on that and decided to buy back in. However, I'm looking at the 1-Hour Uptrend as a potential reversal signal to join the 4-Hour Downtrend (again). I may not hold my trade going into the open if it comes back near 3810, as I could see a revisit if it goes higher to the 3-Hour or 2-Hour downtrend marks, but overall, we have basically managed to acquire and maintain one new long downtrend signal a day. I'd like to see if we can get to, and maintain, near 3720 around 13:00 EST so we can get a 12-Hour downtrend signal.
Expect a possible pull back to the 6-Hour line if that happens based on the current market mood, but be ready to jump if things continue.
That's just my opinion anyways, and this isn't official financial or investment advice.
What appears to have happened, is people dropped their money out of Financial Companies (Biggest sector loss of the day) and tossed it into Tech (Biggest gain of the day). Tech carried that recovery, much like it did earlier. Basically they just moved money around. This is consolidation, and doesn't point to any real price action. The other sector, and only sector that is doing well this year for the most part, is Energy. The smaller areas doing well are Consumer Staples (Think things you buy at Walmart) and Utilities (like how we get that energy sector to consumers).
I know it goes without saying for most, but remember that the Price point of the S&P is based on the stocks of other companies, and not the Supply and Demand of the S&P itself, if that makes sense.
So, if you break it down, and look at the larger Market Cap sectors (Tech is the biggest, at least currently), you can get a sense of what is happening in the market. Look for things to disrupt confidence in energy or tech if you are looking for things to drop. If inflation persists and our unemployment goes up, and we head for a recession, historically Tech is going to suffer, as will consumer staples. However, it does appear that so far this year, Tech is the "safe zone" this time around, especially with treasury yields out the window. That hasn't proven to be true in the past, but people have seen that sector recover decently. The issue is the valuation for most of those stocks, are overpriced (I guess depending on how you look at them).
The other issue, is if Tech basically continues to be the heavy weight, it's going to constantly turn it into an overbought market, and no one is going to want to buy when it appears overbought, so people will start to hold cash. I think the first tech company Earnings I saw was IBM on the 18th. So I'd keep an eye there, or on another if you spot one. Usually a bad sign in the first companies, sets the mood going into that sector earnings season. I had cautioned on that over finance and JP Morgan and Morgan Stanley, and we had a -2% drop in Finance after they blew Earnings forecasts.
We basically have three options for today, as far as I see it.
Tech carries an overall downtrend, and we have another whipsaw day.
Tech faulters, and we go negative on the day as S&P
The risk on sentiment of buying the dip rallies with yesterdays failure to move lower, and we go up because people buy the dip of other sectors, believing an overall rally is coming.
__________________________
Anyways, back to trends. The trends are still mostly lower. Certainly I have some regret over not selling at the low point yesterday as I could have capitalized on that and decided to buy back in. However, I'm looking at the 1-Hour Uptrend as a potential reversal signal to join the 4-Hour Downtrend (again). I may not hold my trade going into the open if it comes back near 3810, as I could see a revisit if it goes higher to the 3-Hour or 2-Hour downtrend marks, but overall, we have basically managed to acquire and maintain one new long downtrend signal a day. I'd like to see if we can get to, and maintain, near 3720 around 13:00 EST so we can get a 12-Hour downtrend signal.
Expect a possible pull back to the 6-Hour line if that happens based on the current market mood, but be ready to jump if things continue.
That's just my opinion anyways, and this isn't official financial or investment advice.
Comment:
The Michigan Surveys come out at 10:00 EST today. Expect that to cause some ruckus in the market. If the survey info is also higher than expected... it REALLY opens that 100 bps door. Although, honestly, I'm not sure the current main investors are paying much attention to what makes sense, and the lower volume in the market, in my opinion, shows that major investment firms have basically been sitting out.
Comment:
2-Hour turned Uptrend at 3827. Either that is a buy in to the 6-Hour downtrend, or we are flipping our longer trends... yet... again.....
Comment:
Consumer surveys in... this really starts putting 100 bps on the table. Fed Speakers had even mentioned they'd consider higher rate hikes if this report and the retail sales came out strong.
Careful of a pump up initially today, and then a downtrend as more experienced investors come in and make moves. Unless they are so experienced that they know how younger traders might act, and ride the "this must be good data" response.
Careful of a pump up initially today, and then a downtrend as more experienced investors come in and make moves. Unless they are so experienced that they know how younger traders might act, and ride the "this must be good data" response.
Comment:
While I'm tempted to just eat a loss on this trade... I'm going to hold it a little longer. I'm almost curious to see if it begins to break the very long standing downtrend line we've been.
Either this is a very, very long drawn out version of that end of May to mid June sideways movements to consolidate before heading down, or this is the beginning of the bullish market coming back in, and this is nothing more down a brief downturn, the Fed has truly engineered a soft landing, and we can all go back to expecting big profits with no risk and keep all the valuation dumped in during the pandemic.
While the latter option makes absolutely zero sense, I suppose it's possible, but I still have my doubts.
Additionally, I feel that you can see it in the indicators that I do use as guides. RSI on the daily is again, nearly matched to the point of both last upward movements, yet we are still lower overall.
On RSI
At 48.13 our price action was 3915
Then at 51.03 our price action was 3905
Now we are at about 49, and our price action is 3860
On MFI on the daily we saw an upward push get us to 4200 before dropping. Then we got our push up to 3905 and MFI is currently in a downward trajectory.
I suppose tech earnings next week will really tell us what we need to know, as all eyes will be on the major tech companies that have been anchoring the stall for the last couple weeks.
I don't expect the market to act overly logical, but this has to be the longest duration of complete directionless movement I can remember with every aspect of the market I can analyze saying that we should be having some risk adverse appetite until October.
Either this is a very, very long drawn out version of that end of May to mid June sideways movements to consolidate before heading down, or this is the beginning of the bullish market coming back in, and this is nothing more down a brief downturn, the Fed has truly engineered a soft landing, and we can all go back to expecting big profits with no risk and keep all the valuation dumped in during the pandemic.
While the latter option makes absolutely zero sense, I suppose it's possible, but I still have my doubts.
Additionally, I feel that you can see it in the indicators that I do use as guides. RSI on the daily is again, nearly matched to the point of both last upward movements, yet we are still lower overall.
On RSI
At 48.13 our price action was 3915
Then at 51.03 our price action was 3905
Now we are at about 49, and our price action is 3860
On MFI on the daily we saw an upward push get us to 4200 before dropping. Then we got our push up to 3905 and MFI is currently in a downward trajectory.
I suppose tech earnings next week will really tell us what we need to know, as all eyes will be on the major tech companies that have been anchoring the stall for the last couple weeks.
I don't expect the market to act overly logical, but this has to be the longest duration of complete directionless movement I can remember with every aspect of the market I can analyze saying that we should be having some risk adverse appetite until October.
Interestingly enough the New York SMI is waaay higher than expected. That measures the "state of the economy in New York" which is supposed to show a possible indicator for the economy overall in the country.
These two things combined... I could see the Fed beginning to consider a 100 bps hike. I'd watch news sources and see if that becomes a more popular topic. If the Market prices it in, the Fed may go for it, much like they did with the increase to 75 bps last month. Better to smack the economy when things are appearing good, than kicking them when their down. However, FOMC is rarely known for moving ahead of the curve. This inflation really needs to get handled though, and they will have some political pressure for that, regardless of their neutral status.