alice

NFTRH; Market Setup, Pre-FOMC

A snapshot of US markets, Treasury bonds, commodities and precious metals on a day when a .25% rate hike is fully baked in…

There is no sign of anything other than a consolidation within an uptrend, technically.  This is by the way, why there have been hardly any short setups (as opposed to long setups) noted in NFTRH+.  We did a look ahead on the Banks (and GS) yesterday, but the broad market remains in an uptrend.

spx

Relative bearishness in certain items like Transports and Small Caps is being tested today with upside bounces to the SMA 50s.

iyt iwm

While leaders like NDX and SOX are at new highs.

ndx sox

The long-term Treasury bond fund would be making a double bottom if a contrary bounce is to play out.

tlt

Have the long bond and the stock market each factored the March hike but maybe not much more?  Futures players are 95% certain of a .25% hike today.  Then there is an overwhelming bet against a hike in May.  But June is interesting, as more than 50% see another hike upcoming then.

If commodities are going to bounce without completely breaking down, this would be a logical place to do it.  Here is the general commodity tracker, but crude oil is very similar.  If this starts to look like a short-term low, I may take some exposure (SQM was already added back on a small dip).

dbc

HUI continues to try to bounce from the support area in the low-mid 180s.  195 to 200 is a reasonable ‘bounce’ projection if that is what is in play.  If not it’s the 2016 lows retest express.  But I think the sector became oversold enough to give it a decent bounce probability.

hui

Gold (GLD) is unchanged in that it needs to hold above the January low in order to keep a bounce alive and not totally break the chart down, short-term.

gld

Silver (SLV) is closer to its January low and needs to bounce here at the thick lateral support zone at the top of the bullish pattern that launched its February rally.  A lower low would not be good at all for the metal’s short-term case.

slv

Bottom Line

Well, after getting lucky on a couple of profits from the short side, I am getting losses on such positions now.  That includes the EM short that I covered as noted would be the case in NFTRH 438.  This market is entirely capable of turning a frothy atmosphere into a mania and that is one of the scenarios we have going.

What would be healthier for the stock market would be a decent, though routine correction prior to new highs later on.  I don’t see anything that has negated either scenario.  But if the stock market eliminates its bearish divergences in items like Transports, Small Caps, etc., then the next leg would come sooner rather than later.  It’s probably best to let FOMC noise clear for a couple of days as well when evaluating the market.  In other words, on the FOMC release and Yellen’s press conference the machines may well take over.

As for Treasury bonds, I can’t shake the contrary feel I have there about a contrarian bounce.  Regardless, I’ll hold TLT as a portfolio balance and dividend payer unless it breaks to new lows.

If commodities are going to bounce, they need to do it now.  Same goes for precious metals.

As for trading notes, I’ve just gritted my teeth and held the miners.  I own no commodities other than Lithium/resources producer SQM.  IBM was added back on its tap of the SMA 50 and so was CRY along with an add on the Biotech fund IBB on yesterday’s down day.

I hold shorts on the S&P 500, Semis, Small Caps and Goldman Sachs.  Each of these will be watched closely until the market picks a direction.  As of now, long exposure outweighs short exposure.  If the market breaks down, the shorts will be pressed.  If the market goes sideways the shorts could be a hedge.  If the market resumes upward, I’ll probably cover.