Good morning traders, I am happy to see you had a good day if you were long.
Wait-and-See Mode + Political Triangulation
With a bit less than two hours until the close, US indices are moving between flat and mildly positive.
Utilities taking the brunt of selling and Industrials are getting the most buying attention – sort of a reversal of the previous two sessions. Headline risk is high as the market is waiting for catalysts. Near lunchtime, there was continued speculation about plans for tariffs being modified. It might be worth keeping in mind that
not instituting or curtailing said tariffs is essentially a market-neutral catalyst that has been converted to a market-positive catalyst. Even if all tariff plans were shelved, we are still in a similar situation to last week. But we know any excuse will do as we consolidate here with the S&P fighting to stay above the year-to-date flat line.
NYSE breadth opened near yesterday’s closing values, went blow the flat line is now positive again.
The USD is dropping hard today alongside weaker - then flat - oil. What this means for oil is anyone’s guess but I’d venture that if oil – something that has been in positive sync with the S&P – is not holding up on a weak Dollar, something is slightly amiss. Reports on US and global demand growth today might be impacting trade. Anxiety over tomorrow’s Inventory Report is probably more pressing.
Gold’s GCJ8 contract is trading well higher on the weaker Dollar and possibly a safety bid. As mentioned in a previous post, it looks like it wants to test recent overhead resistance.
Within the US Administration, there are many opponents to the recent proposals for tariffs on steel and aluminum. They intend to parade business owners who use the metals in manufacture before the President sometime on Thursday. Bulls probably think this could set the market up for some extra upside. The political machinations here reflect the upcoming 2018 midterm elections and of course the presidential reelection campaign, where regions inhabited by Reagan Democrats and others seek relief from the economic malaise that lingers long after the global shift in raw materials production. Publicized D.C. talking points at midday center on the idea that NAFTA renegotiation is a prerequisite to country-specific exemptions on proposed tariffs.
Speaking of elections, some primaries in Texas today show a strong showing by Democrat voters. This kind of thing is worth watching.
SPX/ES/SPY: 2722/2721/272.30
S&P has derivatives support at 2680 with 2620 being a probable bounce point should the market break down below 2650. On the upside, 2730 is proving to be strong resistance but any perceived catalyst could push price right through it. Futures had broken through the overnight low of 2716 but are now above it and still holding the value area.
ES 2675 – the YTD flat line and a high volume point of contention - is pivotal. Longs probably don’t want to see that level violated on a closing basis.
Market Internals
Advance- Decline Lines: +962
. NYSE Breadth:
+1.71:1,
NASDAQ Breadth:
+1.55:1. UVOL-DVOL is weak. NYSE TICK: positive trend. TRIN: 1.10
S&P Futures
View attachment 998977
(SPX/SPY 2680) - on Tuesday night and got back to an RTH high of 2730.25 as cash market participant’s cycled through various sectors doing heaven knows what.
(20min delay)