The US-Iran-Iraq Crisis is calming. President Trump spoke yesterday at munch time creating a massive upside stock market rally. The president said Iran has stepped down, however, probably upon hearing that comment, Iran orchestrates rocket attacks on the Green Zone in Baghdad. No one is hurt. Stocks halved their gains in the hump day session but S&P futures are steadily ramping higher overnight now that the all-clear has sounded. America and Iran step back from a deeper military conflict--for now. S&P futures are up +11 with the VIX down to 12.95.
Traders and investors cannot believe their luck at being born in such a time where stocks will never go down again and only go up. What a glorious age we have entered, the land of the permanently-high plateau. The view from this magical elevated plateau is awesome and astounding. You can see the low put/call ratios very clearly that verify the ongoing uber complacency in the stock market. Over there you see the low volatility foothills the VIX with a 12-handle that says all is great with stocks. Wow, look in that direction you see the elevated BPSPX above 79 at levels seen during the January 2018 stock market top. If you turn again and look towards the south, you can see the SPXA150R above 81 at levels that mark prior tops. The Aroon is over there beyond those pine trees verifying the maximum euphoric joy and happiness in the stock market. Yes, it is a remarkable view from the plateau. Market participants set out lawn chairs and blankets to enjoy the permanent view of stock market joy. What's that? It feels like the ground below is starting to shake.
The SPX prints a new all-time record high at 3267.07. Sound the Seven Trumpets! Summon the four central banker horseman of the Apocalypse; the Fed, BOJ, ECB and PBOC. We need those printing presses to keep running 24/7 to keep this easy money party alive! This stuff is a hoot to watch. People have no idea what is coming at them, not only in the near-term but over the next couple years.
The SPX daily chart shows the new all-time record high with the long upper shadow on yesterday's candlestick. That print helps create the red rising wedge an ominous pattern that typically results in carnage. The RSI, stochastics and money flow are overbot and agreeable to a pullback. The red lines show the universal negative divergence across all indicators. Price is out of gas. It is moving higher on fumes so it is interesting to see the S&P futures up almost a dozen points. Price has touched the upper band so the middle band at 3211 is on the table and lower band at 3141.
The only thing that can save the SPX would be happy news although we already know the Fed and PBOC, and BOJ and ECB, for that matter, are all pumping like madmen, the US-China Phase One trade deal is to be signed in six days, and the US-Iran-Iraq Crisis has deescalated. You wonder what additional happy talk and happy news could there be? Rest assured, the crony capitalists will be trying to think of something to keep creating new stock market highs to reward the wealthy class. If happy news does occur and stocks receive a pop higher, the upper band at 3281 would have to be respected and the bulls may try to push the SPX to there.
Keystone's 80/20 Rule says 8's lead to 2's on the way up, so a breach of 3280 will open the door to 3320. The record high is 3267 so watch to see if 3268 is overtaken since that will hint that 3272 is on tap.
The ADX purple box is on the verge of verifying that the rally move is a strong trend higher, however, it is starting to roll over and may not be willing to identify the move higher as a strong trend. The Aroon green line is pegged at one hundo and the red line is at the zero bound both indicators are at maximum euphoric and market joy levels. There is nowhere to go but down now.
The full moon peaks at 2:21 PM EST tomorrow and stocks are typically bullish through the full moon each month so Friday to Monday stocks may be buoyant. The Monthly Jobs Report is released tomorrow (Friday) morning and may cause market gyrations.
The complacency has been off the charts since Thanksgiving mainly due to the Federal Reserve's Q4 QE stimulus (implemented because the long-term monthly charts were rolling over to the downsisde). We are on the plateau. Sentiment is at maximum bullishness, it appears that most of the happy talk is known for now, and the daily chart is set up for a neggie d spankdown. It is a good time to cook some popcorn and then sit down to watch the festivities. 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 5:33 AM EST: Details are slowly leaking out on the US-China trade deal creating confusion. Some of the numbers look like fantasyland. S&P +10. Dow +84. Nasdaq +39. Russell futures +4. VIX 12.98. Oil is up marginally. WTIC oil 59.666. Brent oil 65.47. Gold 1547. Silver slips below 18 to 17.97. Copper is negative down -0.2%. Dollar/yen 109.41. Watch utilities closely. If the utes trend lower, the stock market will be in for longer-term sustainable trouble.
Note Added 6:37 AM EST: JPM economist Jim Glassman appears on Bloomberg TV painting a rosy picture ahead for markets and says bubbles are not in play. He says the stock market highs are explainable with remarkable fundamentals. Glassman says, "..... it is different today ..." to justify the non-stop upside in equities. He downplays the role of the central banks. It's all blue skies and rainbows. Whatever he is smoking he should pass it around to everyone else. S&P +10. Dow +95. Nasdaq +38. Russell +4. VIX 12.99.
Note Added 6:37 AM EST: MS strategist Mike Wilson is next on the Bloomberg parade and he abandons his low SPX target for this year and joins the lofty SPX 3500 camp instead. Wilson says the central banks keep providing stimulus so asset inflation is here to stay. Everyone is capitulating to the bull side. The bears have all left town and never plan to short a stock ever again. The bull party continues day after day without interruption. The Fed keeps filling the punch bowl with easy money booze. There is no reason that this party should ever end, or is there? S&P +9. VIX 13.14. Volatility is trying to sneak higher but the bears have buptkis until they push the VIX above 14.07; that is when the trouble would start in earnest.
Note Added 9:40 AM EST: The bulls came to play today sending the SPX skyward to a new all-time high at 3272.53; the 3268 led to 3272. The 3278 would lead to 3282 and as mentioned above the 3280 level opens the door to 3320. The upper band on the daily chart is at 3282.50. Universal neggie d remains in play in the chart above with the higher high in price which means a spankdown is on tap on the daily basis. There has not been any happy news yet today so stocks are floating higher on the momentum. A lot of the push higher in the stock market the last few days is the shorts getting squeezed out creating the short-covering rallies. The SPX is up 15 points, +0.5%, to 3268. VIX 13.04. Utilities are flat. Traders may park the stock market here and wait for the Jobs Report in the morning.
Note Added Friday Morning, 1/10/20, at 4:30 AM EST: The bulls take stocks joyously higher. Federal Reserve Vice Chairman Clarida says the economy and markets are fine and dandy and promises continued accomodation and easy money if needed, at any time, with his code words 'low inflation'. The QE pump from Q4 continues through next week. Investors are tripping over each other to buy the stock market rally at any price; an epic orgy of equity lust. The SPX gains 22 points, +0.666%, to a new all-time closing high at 3274.70 and a new all-time high at 3275.58. The bullish calls continue. Jim Paulsen at Leuthold Group says excessive optimism is not in the markets and the path for stocks is higher. Paulsen looks for a +10% gain in stocks this year and says risk assets are underpriced. The bulls are running on Wall Street. The US Monthly Jobs Report is on tap in four hours.
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