I was relieved to see the market’s Yellen rally disintegrate so quickly on Friday, although the bulls are still in control. Looking at the Dow Composite below, we need to get beneath the area I’ve tinted. As the crow flies, it isn’t a big trip, but it’s going to take some doing, since it is formidable support.
It’s interesting seeing how some of the gusto has left the rally. The NASDAQ 100, for instance, ceased its power surge ten trading days ago (tinted). Since then, it hung out in a tight range beneath its breakout level for five days in a row, tried another surge higher, simply double-topped, and has stayed beneath the breakout ever since. As you can see, there’s a big spinning top on Friday.
The Russell has had its own style: a tremendous post-Brexit (what a joke that was……) rally, indicated with the green arrow, and then a more tepid, steady-as-she-goes rally which I’ve highlighted with the blue arrow. As I say, though, there’s no trend break, although God willing it would be great to see one.
If we do get weakness, it could simply be in the context of the bull market we’ve been suffering through for the past six solid months. Intermediate-term support for the S&P 500 is about 50 points away from present price levels. Something big – – like, say, some incredibly damning disclosure about Hillary (beyond the fifty other scandals already in play) would do the trick.
One item that was a pleasant surprise on Friday was the VIX, which pushed above the red horizontal below for the past time in nearly two months! This could be the base to build something bigger.
Lastly, the bonds look very vulnerable to a selloff. We have been range-bound for months, but the lower range could give way.
I’ll close by saying people seem convinced an environment of rising interest rates would be glorious things. All I can say is: be careful what you wish for. The world has never, ever been so deeply in debt. Not even close.