Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

So Here We Are Again

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In my post on Monday 6th October I was looking at the negative divergences on SPX and QQQ, with daily RSI 14 and RSI 5 sell signals brewing on both of those. All of those fixed on Friday 10th October, with both RSI 5 sell signals also reaching target on that Friday.

In my next post on Tuesday 14th October I was noting that there were now daily RSI 14 sell signals fixed on SPX, QQQ, DIA and (weaker signal) IWM. I was saying then that was suggesting a larger retracement soon to reach those targets.

I was also looking at possible topping patterns forming on SPX, QQQ, DIA and IWM then and saying that those would likely break down or reject back up to the highs in what might then be the second highs on a series of double tops.

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Still Some Decent Looking Topping Patterns Here

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In my post on Monday 6th October I was looking at the negative divergences on SPX and QQQ, with daily RSI 14 and RSI 5 sell signals brewing on both of those. All of those daily sell signals fixed last Friday, with both RSI sell signals also reaching target on Friday. There are now daily RSI 14 sell signals fixed on all of SPX, QQQ, DIA and (weaker signal) IWM. This is suggesting a larger retracement soon to reach those targets.

I was also saying then that until we saw some strong breaks below the daily middle bands on US indices they remained in a strong uptrend from the April low. On Friday they all broke hard below their daily middle bands. Since then SPX and DIA have backtested the daily middle bands but failed to break above, and QQQ and IWM have broken back above but are currently back below at the time of writing. Unless that changes that larger retracement may already be in progress.

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So What Happened on Friday?

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US stock markets fell hard on Friday after President Trump reacted to new export restrictions on rare earth metals from China with a threat to add a further 100% tariff on imports from China in addition to the 57% tariff currently in force. Trump walked back that threat over the weekend and at the time of writing futures have rallied about 50% of the decline from Friday’s lows before pulling back somewhat.

So what is the rare earths issue about? Well for those who don’t already know, rare earths are vital for a lot of manufacturing of complex machinery such as cars, jet engines, nuclear reactors & LEDs, are also important in oil refining, and are vital for a lot of high tech manufacturing such as computer components, smartphones, high performance batteries etc. There is a good page about rare earths on wikipedia here which is worth a read.

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New Highs All Round

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In my post on Friday 26th September I was putting the case that the modest retracement that we saw that week might well be over, and in my post on Monday 29th September I was outlining the still possible option that we might nonetheless see another leg down on US indices, though I was assigning that a low probability.

Equity indices resolved higher as expected, and we have seen new all time highs made last week on SPX, QQQ, DIA and IWM. My personal view is still that US equity indices are likely heading higher into the end of the year unless we start seeing strong breaks of the support at the daily middle bands that were backtested and held on SPX, DIA and IWM in the late September lows.

How will that be affected by the current government shutdown? Well that rather depends on how long it lasts, and the longer that lasts the more likely it is that we see equity markets weaken. Looking at the chart below there is a significant negative lean historically for these though I’d note that of the twenty government shutdowns listed on the chart below, the last five starting in Nov’ ‘95 all closed green, with a real outlier in the last one in December ‘18 which was the most bullish shutdown since 1976.

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