Compared to recent days, it’s a relatively mellow morning, with screens green pretty much across the board. The only momentary shock was when Trump off-handedly suggested that an 80% tariff on China would seem about right, which caused some brief EKG action in the /ES.
A month ago, such an announcement would push the /ES limit down for the day, but in these more robust times, one small trader in Nutley, New Jersey sold off his long position and then the market continued on its merry way. It has learned to shake off such news instantly.
Although the week isn’t quite over, I thought it would be eye-opening to look at some charts based on weekly price data, since the cruder granularity can offer valuable perspective.
Starting with the SPY, you can see the phases the market has moved through. Specifically:
- A rounded top, which was a fake-out, leading to……
- A few weeks grinding around near lifetime highs early this year…
- A meaningful drop from mid-February to mid-March, yielding four red bars in a row….
- A brief pause, followed by a bearish engulfing pattern, the monster red bar of Liberation Day (well, Liberation Week in this case)…
- A monster reversal (giant green bar)…
- One week of hesitation…..
- Two more solid “up” weeks…..
- Then, finally, another green bar, vastly smaller than its compatriots, and perched underneath all that overhead supply when the fun began
A somewhat similar pattern played out with the QQQ, and with the same result: prices placed perfectly under what might be an important zone of resistance.
That’s all U.S. oriented, of course, but what about the rest of the world. That’s where the EFA comes in, whose differences are fascinating:
In the above instance, what you had instead was:
- A couple of red bars followed by an absolutely apocalyptic plunge;
- Four gargantuan green bars, which not only undid the trade wars damage but actually pushed the EFA to the highest prices ever printed;
- Then, weirdly, a red bar for this week (Friday’s non-existence notwithstanding), even amidst all the celebrations about a big new trade deal
I’d also like to point out, once again, what is my favorite setup these days, the Materials Select Sector fund (XLB) which, even on a weekly bar basis, is just a pitch-perfect play. A gap with a diamond pattern? I’ll take it!
In all candor, the last three weeks have sucked, and I’d give up a body part of my own choosing to get back to mayhem of early April. Still, even with an inevitable Things Are Great press conference coming up this weekend with respect to China, I cannot help but respect the mass of overhead supply that markets are facing.
God knows I could be dead wrong, and lifetime highs are only a couple of weeks away. For the moment, however, the line in the sand of March 25th stands, and all the price action above it is going to act like a deep bog for any market ascent.
