The markets have been a little troublesome of late despite today’s nice rally. Midday the Dow is up 180 and that’s a positive. But the trend is now slightly down and there needs to be some fresh energy brought in to reverse it. Where will that come from? That is a difficult question.
Big banks are saying collectively today that “Winter is Coming as Business Cycle Peaks.” That is a Bloomberg News Headline at least. According to the article, “Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. It all means stock and credit markets are at risk of a painful drop.” For once, the technicals are corroborating that to some extent. You can see on the Light below that the overall indicators have turned down. Not so much as to change the Light to Red – Extreme Caution, but it remains Orange – Cautious and Deteriorating.
On a continuing negative note, there are considerably more sectors in our database with price declines this week than with upward price changes – about 3-to-1.. Base Metals (DBB), Natural Gas Futures (UNG), Silver (SLV), Gold (IAU), and Mexico (EWW) saw the biggest moves up. But Oil & Gas Services (XES), Retail (XRT), Agriculture (COW), Canadian Energy (ENY), and Natural Resources (IGE) suffered the most. It is interesting to note that UNG – natural gas for future delivery – was one of the top performers up 6%, and natural gas for delivery now was one of the poorest performers, down about 5%. At least from the perspective of natural gas, winter may not be upon us but it is getting pretty darn close.
The Technical Tea Leaves see the potential for fall being right around the corner, too. Trend Status has changed to a weak downward trend. This indicates that a downward trend has started that may continue in this direction. This is a moderate bearish signal.
The market closing average has dropped below the 21 day exponentially smoothed average price. At the same time, accumulation is decreasing. In this down trending market, this is taken as a very bearish signal that could be followed by further decreases in price.
As always, we read the market, we don’t predict it. Currently – especially intraday – we still are in good shape. Just bear in mind that no one has repealed the business cycle. And no one has repelled the business cycle. Interest rates, European terrorism, domestic politics, amid other perennial worries are stalking the market. We will see if they converge in downward pressure or not. Don’t seel the farm just yet