“A Little Help From My Friends (the Fed)”

June 9, 2019

Weekly Market Outlook

By Keith Schneider

blankUS Equities got a lot of new help from one if its friends, the Federal Reserve.

Fed Chairman Powell stated that tariffs could shave some points off of growth, hence, a need to lower rates.

That spurred a vicious stock market rally of almost 4% for the week.

“Gonna get by with my friends (Ah, with a little help from my friends)
Yeah yeah, I'm gonna try (Ah, with a little help from my friends)
Keep on getting high, oh Lord (Ooh)”
- The Beatles

The agreement with Mexico didn’t hurt either, nor did the drop in the dollar versus most currencies, especially the Euro. Hello Modern Monetary Theory, we hope it works but I remain doubtful.

Mixed messages abound with Gold roaring and refusing to sell off, Long Bonds yields hitting new lows they have not seen in almost 1½ years (not budging from frothy levels), and Copper screaming that economic activity is waning.

Other suspicious divergences are that the Russel 2000 is languishing while sentiment indicators remain unconvinced that the rally is real.

Most members of the economic modern family are not happy, indicating a cyclical slowdown.

Now that we have gotten the bad news out of the way, let’s look at some positives.

First, pure price action was pretty awesome, Semis, a spec sector performed well, and some internals improved as well.

As always, price action trumps all, and of course speaking of Trumping action, we are just a tweet away from a sea change so stay flexible and don’t let your politics cloud your objective analysis.

This week’s highlights are:

  • Risk Gauges remain 100% negative but improved, with utilities showing signs of giving up leadership (bullish).
  • All key equity indexes improved phases on weekly and daily charts market phases except IWM.
  • Gold (GLD) and Gold Miners (GDX) look poised to clear multi-year resistance.
  • US Long Bonds (TLT) yields hit lowest levels since Oct 2016.
  • Dr. Copper performed miserably and did not confirm the rally.
  • Market Internals improved (McClellan Oscillator), but our short-term market internal indicator shows the S&P 500 is now overbought.
  • Market sentiment ($VIX.X) did not back off as much as expected on the rally, indicating further weakness.

With markets so directional short-term our favorite indicator is using floor trader pivots along with the opening range to catch these violent short-term moves and stick with the momo while it lasts. (if you’d like to learn how to do this too, check out this free webinar)

And for more great resources….

Did you see this?

For a fun read, please check out this article on Fox Business about Mish.


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Keith Schneider

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