Well, I confess I had forgotten what it felt like to bank profits on a daily basis. It’s a nice feeling. Of course, the anti-Christ Yellen has done a fine job yanking away such feelings in times past, so naturally I’m nervous about Wednesday. All the same, these little BTFD rallies keep failing, which warms my heart.
The small caps are approaching support. Of course, my hope is that the trendline does, in fact, break. The FOMC will settle that matter, I think, one way or the other.
Financials have significantly lagged the market since the bottom in February and the gap might be closing as market sells off while strong move in financials indicates further strength ahead, possibly even longer term as interest rate environment is changing and yield curve might reverse and steepen up again.
In my post of December 29, 2015, I stressed the importance of the Financials ETF (XLF) in, potentially, propelling the SPX to an increase of 5-6% for 2016.
You can see from the Daily ratio chart below of XLF:SPX, that price weakened considerably afterwards and fell to new lows not seen since 2012. Price is attempting to stabilize above that low, but all three indicators are still in downtrend and display new “SELL” signals, and price action is still under the bearish influence of the Death Cross formation of the moving averages.
If price drops and holds below near-term support of 0.0105, we could see a significant drop in the SPX, likely to new lows for the year, as I mentioned on April 3.
I’ve offered up Prudential, shown below, as a short idea over and over again, but it just sort of farted along, in spite of its absolutely glorious topping pattern. Well, our national nightmare is over. It’s finally falling, and I expect ungodly lower prices to come in the months ahead.