• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 695 days Americans Still Quitting Jobs At Record Pace
  • 697 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 700 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 703 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 711 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 715 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Has Anything Changed?

The easy part was recognizing that we had an oversold market with extremes in bearish sentiment, which in general is a reliable buy signal. Throw in the fact that you had end of the month mark ups and the July 4th holiday, and just like that or 5 short days later, "everyone" is breathing a sigh of relief (soft patch, what soft patch?) as the equity indices have gone from their 200 day moving averages to the 50 day moving averages. No smarts, no great insight, and some luck. I am still bullish on equities. I have to be as this bearish sentiment thing has yet to play out, but looking around the investing landscape it is clear very little has changed.

Take the Dollar for example. Please! See figure 1, a weekly chart and in fact, the same weekly chart I have been showing for months. Range bound!! The Dollar is trying to put in a bottom and break out, but nothing yet. I would expect this chart to resolve itself in the opposite direction of equities. That is, if the Dollar breaks out, then stock indices break down.

Figure 1. Dollar Index/ weekly
Dollar Index Weekly

As stated above, stocks traveled this past week -- in a bee line -- from the 200 to 50 day moving average. See figure 1 a daily chart of the SP500. A strong move no doubt, but they are now overbought, sitting at down trend resistance, and possibly having little fuel left in the tank as there were not too many shorts in the market when this rally started (personal Rydex asset data). Stocks look like they will ping pong between the 50 and 200. Range bound, to work off the overbought, would be good for a while.

Figure 2. SP500/ daily
S&P500 Weekly

Treasury bonds are mixed. They got shellacked this week wreaking havoc with the technicals; however, my fundamental model remains bullish. So we have a split decision here as well.

Lastly, a monthly chart of West Texas Intermediate crude oil (cash data) shows a market in an up trend; this was the same dynamic observed in equities a couple weeks back. Yes, WTI has been wounded, but being at the lower end of its channel, it isn't dead yet. More on this later.

Figure 3. WTI/ monthly
WTI Monthly

 


If you would like to have TheTechnicalTake delivered to your email in box, please click here: It's free!!!

 

Back to homepage

Leave a comment

Leave a comment