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Inversion, Slow Down or “The Report”? March 23, 2019

Posted by Tom in Thoughts.
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March 22, 2019 – Was the sudden sell off Friday due to the interest rate inversion, the FED’s report of a slowing economy or advance notice of the Muller Report ?  Likely (IMHO) a combination of all three.  Thursday was a big up day, so these news items did cause a sudden down day.  The 2 year yield is now slightly above the 10 year yield and prophecies hold that a recession is due in 19 to 24 months . . . . OK, but that’s a ways away.  The FED came out with an estimate of 2% growth this year and 1.9% next year . . . . the “sugar high” of tax cuts are now behind us (so much for long lasting growth of +3%).  And the long awaited Muller Report was sent to the AG on Friday at about 5pm.  Funny, because the markets sold off hard in the last 15 minutes of trading on Friday . . . . did someone know something ahead of time?

But to put things in perspective, the close on Friday just put us back to around the close of the week before.  What I call attention to is the volume on Friday (red arrow).  It was about average, nothing big.  Some might call Friday a “key reversal day”, but I think not; not with just average volume, there was no big move to the exits.

This market was getting toppy with Sentiment bearish, Money Flow bearish and Price Strength weakening.  And so we’re back to the 7643 level, the last significant bar break out of resistance.  Let’s see how the stocks in the broad S&P 1500 Index are doing:

Price Strength –

Stocks in Accumulation / Distribution –

Price Strength shows significant weakness as does stocks in Distribution; more red.  My thoughts are that we’ll be in a congestion phase for the next couple of weeks as the markets digest the news on the economy and the Muller Report.  There is always the “Sell in May and Go Away” idea that could arrive early this year.  I have a feeling that we’ll see a continued sell off Monday morning as fear overrides logic, then some buying of “the dips”.  The key will be watching the volume on Up & Down bars for an indication of how strong the selling and buying are.

Just about every sector got hammered except precious metals, so I won’t belabor that topic.  This market is jittery and it’s reaction to any news items shows that.  If weakness continues into Monday afternoon it may be prudent to hedge by buying a bear fund.  Honor stops and monitor weakness is the call of the week, but don’t overreact.

Take Care and have a good week, it should be interesting and perhaps historic as well.      …………..  Tom  ……………

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

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