Risk-off suggests continued market swings

Back in November, I noted that the USD can offer hints for a potential reversal on the S&P 500. I noted that when you see a divergence in trend between the two (USD vs SPX), it can signal a change–either up or down, depending on the divergence. When I wrote the blog in November, the SPX was rising while the USD was falling hard. Sure enough, that divergence lead us into a massive decline on the SPX in December. Since that time, this correlation offers some relief for stock market enthusiasts – the two are moving in a correlated fashion again. The SPX put in a new high (trade related volatility aside) a month ago, and the USD began to trade upwards again.

From the perspective of the USD/SPX relationship, the market looks OK at this point. However, there are some signs of continued volatility for the summer. We’ve seen some significant “risk off” trades happening on the markets recently. Consumer staples, utilities, and the long US treasury bonds are all moving up in the face of a broader corrective environment.  Combine that with my macro-risk analysis via the Bear-o-meter reading of “4” – which was a fairly drastic move from its prior bullish levels of “7”—and you have an environment that is not necessarily bearish – but isn’t overtly bullish either.

I continue to endorse a trading strategy using a technical analysis methodology to deal with what is likely to be a choppy summer.

Ask Me Anything

I’ve done “Ask Me Anything” blogs in the past, and it’s probably about time that I do another one. This is your chance to fire off questions that you’d like to see answered on the blog. Preferably broad enough in scope that a wide audience would appreciate the answer. So—asking about a sector, a country, or some predominant stocks like the FANG’s or Canadian dividend stocks might be widely appreciated. Asking about your position in Loblaw’s is too focused. Leave the individual stock questions for my next BNN show—which happens to be on Monday June 3rd at 6:00pm

Use the comments section below to ask a question. Keep them to technical analysis driven questions. As much as I like to rant politically, I’d prefer to focus on the topic at hand for this one. Thanks, and look forward to hearing your questions!

11 Comments

  • Hudbay’s recent fall from grace interests me. The numbers add up reasonably well and there have been some Board adjustments, but does that call for such an extreme drop in stock price? Am I missing something?

    Reply
    • Bruce–recall that I do not do single stock comments on the blog–better to call into my BNN show coming up

      Reply
  • Keith you used to be a fan of range trading SNC, in light of the political influence is there still a trade here?

    Reply
    • Timm–in a word, no.
      We sold, took our lumps, moved on. Too many moving parts.

      Reply
  • I read an article recently suggesting oil may move down to the $55 level and possibly even $48 in the next 2 months. What is your take on oil?

    Reply
  • Hi! Keith,

    For your ask me anything post, can (or how ) you safely trade ranges with lower highs and lower lows? Thanks.

    Reply
  • Keith, I’ve done very well with MA and V over the years but have struggled to time my buy points for other so-called fin-tech plays like Square. Can you comment on this area generally or on a fin-tech ETF? And if I can be greedy and ask another question, for once XIU is running neck in neck with the SPY year to date. Do you think Canada could outperform the US this year, and if so, what sectors or areas in Canada look most attractive to you? Any input on these questions would be most appreciated!

    Reply

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