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Trading Lessons

Stock Market May "Let Go"

Stock-Markets / Stock Markets 2018 Apr 20, 2018 - 03:12 PM GMT

By: Anthony_Cherniawski

Stock-Markets

Good Morning!

SPX futures slid down to the daytime low of 2682.75 in late night trading, then ramped up to trendline resistance at 2698.25 before coming back to the flat line as I write. It appears to be range-bound for the moment, until Index Options (institutional-style) expire at 9:20-9:30 am. Retail options expire at the end of the day.

SPX had Waves 1 and 2 yesterday. Wave 3 may be significantly larger than the 35.59 point decline we saw yesterday. There is a good probability that the retail options investors may be “thrown under the bus.”


ZeroHedge remarks, “World stocks, as tracked by the MSCI All-Country Index, struggled on Friday, dipping in early trading but were set for a second week of gains after a solid start to the the global Q1 earnings season, even as a rally in commodity prices fizzled pressured by the recent dollar spike.

U.S. equity index futures are modestly in the red, alongside Asian markets, where technology shares came under pressure after yesterday's unexpected Taiwan Semi warning, which saw the world's biggest semiconductor foundry cut its revenue target to the low end of forecasts and blamed softer demand for smartphones.”

NDX futures have that sinking feeling, having broken the mid-Cycle support at 6751.91, but rising back above it. It appears that an attempt to hold the line until OpEx may be in order, but supports are due to be take out after the open.

Bill Blain writes, “Back on planet Rest of the World, a very real issue is tech stocks. Their market caps are enormous. 7/10 of the largest companies on the planet fall into the bracket. They dominate global indices, and account for much of ebb and flow of market value activity.

The raises some very big issues, not the least of which is valuations – where me-too investors and investment tourists have piled in. Do the current prices make sense? The conventional wisdom/excuse is you can’t value disruption/paradigm shifts from a conventional perspective. It requires an acknowledgement that extraordinary breakthroughs need to analysed and priced differently. They glitter, they shine, they sound good… so folk buy em – none of which are valid investment reasons!”

VIX futures appear to be suppressed, at least until after the open. Meanwhile the Large Speculators have been accumulating long positions in the futures market while commercial speculators are net short (as of Monday). Of course, VIX plummeted into OpEx on Wednesday morning, favoring the Commercials. We may see the ratio reverse by next week.

James Rickards writes, “Liquidity is the ultimate paradox in finance.

It’s always there when you don’t need it and never there when you need it most. The reason is crowd behavior, or what mathematicians call hypersynchronicity (a fancy word for everyone doing the same thing at the same time).

When markets are calm, no one wants liquidity because investors are happy to hold stocks, bonds, currencies, commodities and other assets in their portfolios. As a result, there’s plenty of liquidity on offer from bank lenders and very few takers.”

TNX is hovering just beneath the trendline at 29.34 this morning. A breakout gives TNX a buy signal. This is what may trigger the sell-off in stocks this morning.

Bloomberg observes, “Rising inflation expectations in the world’s biggest economy pushed up U.S. benchmark yields this week, putting pressure on rates to climb around the world and causing more than a few heads to swivel.

Even as Federal Reserve officials tamped down concern of a price surge in America, yields ticked higher from Tokyo to Frankfurt and New York. The yield of a $51 trillion Bloomberg Barclays index of global sovereigns and corporate debt is approaching a four-year high of 1.949 percent.”

USD futures are surging higher as it emerges from the Triangle formation into the next leg of its Orthodox Broadening Top pattern. As bond yields go higher, money flees from both stocks and bonds to the only choice left…cash.

Charts by stockcharts.com

The Cycles Model indicates the probability that the USD may continue to rise through mid-May.

Today may be an eventful one.

Regards,

Tony

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Anthony M. Cherniawski, President and CIOhttp://mrpracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals.

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

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