Yesterday, Thursday, 1/2/20, the first day of trading for the year, the bulls came to play throwing a wild party promising nothing but joyous upside fun ahead. The SPX prints a new all-time high at 3258.14 and new all-time closing high at 3257.85 on 1/2/20. Overnight, however, the story changes. The United States assassinates Iran General Soleimani in a drone strike near the Baghdad Airport in Iraq. Drone assassinations are here to stay; you could see them coming.
Today, Friday, 1/3/20, the futures markets tank. Oil jumps nearly +5% on the turmoil. Copper sinks lower. Safe havens are bid higher such as the yen (dollar/yen printed a 107-handle) and US Treasuries. Utilities are up a smidgeon while consumer staples are down only a smidgeon. Gold and silver jump higher.
US trading is underway for the Friday session. The SPX is down 23 points, -0.7%, to 3235 modest losses retracing much of yesterday's rally. The VIX is at 14.17 so the bears got nothing today. The critical 200-day MA for the VIX is at 15.03 and serves as a short-term bull-bear market dividing line. The bulls are not concerned about the selloff in stocks at all unless the VIX moves above 15.03.
The rising wedge pattern is ominous since the collapses from these formations can be quite spectacular and dramatic. The red lines show universal negative divergence across all indicators as price made the new record high yesterday. The neggie d wants to see a spankdown and it occurs this morning. The 2-hour chart was set up with neggie d as well.
The RSI, stochastics and money flow are overbot agreeable to a pullback. Price touched the upper band so the middle band, also the 20-day MA, at 3194, is in play and the lower band at 3111.666. Comically, considering all the drama this morning, the S&P 500 is still nowhere near its 20-day MA support (and won't be unless the VIX shoots above 15). The Godot Top may have arrived but as stated above, bears got nothing unless the VIX moves above 15.03. Simply watch VIX 15.03 and it tells you everything you need to know. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 9:58 AM EST: The SPX is down 20 points, -0.6%, to 3238. The bulls are laughing in the bears faces since the VIX is down to 14.02 and dropping. Look at that, the VIX prints a 13-handle at 13.99, now 13.93. The bulls are fine. The bears are in retreat unless they can drive volatility higher. That is a tall order since the Fed maintains its jackboots on the throat of volatility to pump stocks higher and reward the wealthy class.
Note Added 10:02 AM EST: The economic data is unimpressive. The ISM is significantly weaker. VIX 14.22. The SPX is down 26 points, -0.8%, to 3232. Watch the VIX 15.03 level.
Note Added 1:37 PM EST: News reports say 2,800 more US soldiers are headed to the Middle East to join the 750 already deployed for a total of 3,550 troops. Trump's campaign promise was to end wars and bring troops home but now he is sending more over. The 82nd Airborne is on its way so the United States means business. President Trump is flexing his flabby muscles willing to act against any retaliation from Iraq, or Iran. A couple hundred or more of those US fighters are elite paratroopers. Boooiiinnngggg. The VIX catapults straight vertical on the troop news. Traders fear the Middle East situation may deteriorate considering the heated rhetoric from both sides. Secretary of State Pompeo says that Soleimani planned an imminent attack against US soldiers, which was the reason for the drone assassination, so it would be useful to hear those details (which would justify the US action). The VIX pops above 14 to 14.10. The SPX is down 19 points, -0.6%, to 3239. The beat goes on.
Note Added 1:50 PM EST: Markets remain steady after digesting the troop news. VIX 13.62. SPX 3241.
Note Added 2:45 PM EST: SPX 3240. VIX 13.68. The bears are unable to bounce volatility so stocks remain buoyant. The sixth and last 65-minute trading segment begins at 2:55 PM EST, only minutes away, so if a pivot wants to occur to send stocks in a firm direction, up or down, it may manifest itself over the following 15 minutes. If the bears want to growl, now would be the time since it would kick in big blocks of selling. Otherwise, bulls and bears may agree to a truce and simply take markets out sideways to resume the battle on Monday morning. Lots more information will be coming out about the Soleimani killing tonight and this weekend. Perhaps a couple days are needed for the smoke to clear. Any important news will likely drop in 2 to 4 hours (on Friday evening) after the market closes since everyone is either at happy hour or home with the wife/husband and kids already celebrating the weekend and not paying attention to markets. Okay, bears, whatcha got?
Note Added 4:15 PM EST: The VIX bottoms at 13.45 at 3 PM-ish and then moves higher into the closing bell to 14.10. The SPX finishes down 23 points, -0.7%, to 3235. HOD 3246. LOD 3222. President Trump finishes a round of golf at his Florida resort and then provides a somber few-minute speech on the Iran situation at 3:15 PM EST. Trump says Soleimani was planning an imminent threat to US personnel so he was killed. The president will need to provide some proof of the imminent terrorist plot, even if it is just to representatives and senators behind closed doors, to verify the judgement to assassinate via drone. Considering that Donny is the Fibber and Embellisher-in-Chief, America cannot take his word for it that Soleimani was an imminent threat; it would be wise to see the documentation or hear the recordings that proves the rationale for the killing. The media outlets still do not get why today is such a big deal. The planet Earth now sanctions the killing of world leaders, political figures, diplomats, or anyone for that matter, via armed drones. The world has changed over the last day. Perhaps in a few decades, all humans will have to live underground to avoid the drones patrolling overhead. Assassination by drone is a Brave New World. UTIL finishes the week at 867 below the 876.46 level identified by Keybot the Quant as a key bull-bear line in the sand for all of next week. This is bad news for the stock market bulls. The stock market will be expected to be weak on Monday and next week. The only thing that can save the day is if the utilities catapult higher out of the gate when the regular US trading session begins on Monday morning. If the utes begin trending lower, this is a warning that bad things will be happening to stocks going forward. If the utilities moderate and recover next week, unwilling to drop, the stock market may have a few more weeks of life remaining. Bears need VIX above 14.32 or they got buptkis. VIX finishes the week at 14.10.
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