Well here it is. China counter punches in the trade war drama and markets are down big, pre-US open. Personally, unless precious metals stocks fight the tide in a strong way I am going get get drawn down a bit today on my modest positioning as open short positions probably will not fully balance out the pullback in longs.
But if like me you are waiting for the market to either get the next bounce going or drop far enough to conclusively establish lower lows and or break support (thus establishing intermediate downtrends), then this morning continues to be more of the same.
That is because while some people have predicted that this is a bear trend or bear market in the making, the method I’ve used and written about is to have a vast majority of safe income-paying cash equivalents until technical confirmation comes in. Unfortunately, there is no change whatsoever that can be assigned by this morning’s action. The trends remain as they have been. It’s just more volatility.
In the US, the current pre-market readings (Dow -470, SPX -38 & NDX -112) would result as follows…
- drop the Dow to 23,563, which is not a new low and is above the SMA 200 (23,436)
- drop SPX to 2576, which is not a new low but does drop below the SMA 200 (2590)
- drop NDX to 6346, which is not a new low and is well above the SMA 200 (6274)
SPX has been grinding its SMA 200 so the media can make a big deal about it. Dow touched and reversed upward off of the SMA 200 and NDX has not even touched its SMA 200 since the summer of 2016. It remains in a series of higher highs and higher lows.
So the bottom line is that nothing has changed and we still await resolution in the form of a bounce to relieve the tension or a new decline that actually does enough technical damage to call ‘bear trend’ if not ‘bear market’. This older chart of SPX reminds us that a ‘C’ leg could fill the 2460 gap but more importantly, the bounce (to a theoretical lower high) that would likely come after that could be the one to really short (if that’s your thing) a new bear cycle.
I regret that I held back an in-day update that was going to show 3 global ETFs at critical support yesterday. I decided to wait until this morning so as not to contribute more noise on an already noisy day (aren’t they all lately?). Instead, with the market in Tariff turmoil taking center stage, we’ll go back to simply showing 3 daily charts of ETFs that I am currently short (per the Trade Log), along with their support/breakdown parameters.
Here are the charts as they were in-day yesterday, when I created them.
A loss of support for the Europe iShares would measure to the 37 area.
A loss of support for the Canada iShares would measure out to around 24.
A loss of support for the Australia iShares would measure to around 19.
But more important than the measured targets, breakdowns in global markets would start establishing downtrends with further bearish potential, as in bear market potential, similar to the US.
We should remember how often inflammatory news events prove to be buying opportunities or at least precursors to a bounce. But the Trump/China standoff is also a macro fundamental consideration in the making as a standoff of the belligerent would eventually have far reaching effects if they don’t stop rattling sabers and start making nicey nice.