Here it comes: another test of all-time-highs in SPX and a break-out, melt-up, whatever you want to call the market sentiment of “higher”.
Under the surface there are risks. Always. ‘Todays’ happen to revolve around these…
Top 15 Market Risks
- Global Economic Slowdown,
- Fed Rate Cutting Cycle,
- Trade War Escalation Uncertainty,
- Tariff Earnings Impact,
- China Deleveraging/Currency Manipulation,
- Record Debt/Deficits,
- Negative Interest Rates,
- Repo Madness/Cash Hoarding,
- Private Equity/Valuations,
- Unfunded Pension Liabilities,
- WorldWide Riots/Income Inequality,
- 2020 Election/Dem POTUS/Risk to Stock Buybacks,
- Liquidity Concerns.
Since the high in January 2018, market has been lurching sideways. There continue to be divergences under the surface of a seemingly bullish SPX. Here they are:
NYSE has price above a Bearish 50/100W crossover (red circle) and hitting a trend-line of resistance (yellow arrow) at a point that is a “lower high” should it reverse here. MACD is finely balanced between bullish/bearish >< 0.
NYSE Advance-Decline is bumping up against the top of that channel (purple arrow, main panel, red trend-line). Having said that, SPX continues to push above the dotted red trend-line (purple arrow top panel) so although it would appear breadth is strong, SPX has been unable to break out for Five Months.
Volatility is at a nice trend-reversal buy point according to my read of my Stock-Bond-Volatility analysis:
Gold couldn’t be any more suspenseful…
Commodities have bounced past few weeks – oil, copper, agriculture – but conviction for more than a bounce comes in when the red trend-lines no longer serve as resistance but support. Maybe the yellow arrow in the bottom panels is hopeful, but that’s what I’m spying right now. Keep in mind: this chart is a Monthly time-frame…
Commodities, looked at from another way, is bullish as TIP:TLT ratio is moving higher off a double-bottom pattern that has broken up and proven to be bullish commodities in the past as this ratio moving higher is an inflation bet with commodities. Also, higher rates beget higher commodities prices.
Momentum into Value (or Growth into Value) plays have been in rotation since September and soon approaching a strong area of support at the red trend-line (yellow arrow). It will be very curious to see how this reacts. Bounce and then break or just bounce?
Big Picture, there is a growing probability for Value to bounce for a good while…the divergence (as I like to track using RSP:SPY) is YUGE.
Funny (not really), how the growth/value divergence started in earnest with Trump’s election and may end with his Impeachment.
Transports are the best looking sector for bottom fishing value plays breaking out relative to SPX (along with with select Retail, Energy, Metals/Mining stocks).
Retail continues to perform well, relatively…
Metals and Mining need a wee push:
Energy needs some:
Crude has moved higher off trend-line support but still not above its 200D at $57.08. Bullish the Oil&Gas companies above, bearish below the apex of the wedge.
Small Caps continue to trade in a very tight range. Until they don’t.
Inflection Points don’t seem to resolve gently. As with most moves of significance, they happen slowly than all at once.
Don’t forget to hedge!