Street lingo for asking where someone is located goes something like this: “Where you be at?”. I’m asking this question to the market every day in my job. “Where you be at, Mr. Market?”
Surprisingly, Mr. Market can speak. He speaks through the language of price pattern, breadth, sentiment, and volume. Many of those nuances of Mr. Markets language are tracked by my Bear-o-meter. Do a search on this blog under that topic for prior inputs for those factors. Today, I’d like to look at Mr. Markets price patterns and momentum studies on a daily chart. I want to know what Mr. market is thinking about his immediate future. Being a fickle fellow, he might change his mind – but usually when he speaks the language of price trends, he follows through on his word.
Today’s daily chart shows us that the SPX is bouncing off of a support point (former resistance) of 2800. It was vital that Mr. Market stays above 2800 – lest he revisit 2600 in a hurry. This is an old ceiling that Mr. Market managed to break though after a few failed attempts in 2018.
Mr. Market, being the athletic fellow he is, jumped up and touched a ceiling that lies in the mid 2900’s twice last year. But, now he’s in need of a bit more training. It would appear that Mr. Market, who was a superstar athlete with the trend for nonstop jumping to new heights over the past 3 years, began losing his edge in late 2018. Unless Mr. Market gets to the gym pronto – I’d be willing to bet that he’s going to find breaking his past two attempts of hitting 2940 or so will be difficult. Mr. Market, you need to lose some weight, and hit the gym!
Mr./ Market’s not getting any younger. His decline from his youthful energetic days can be seen in the negative divergence of MACD (first pane below price chart) since January. He’s feeling his age. Mind you, he’s still able to lift his head above the 200 day SMA (pink line on price chart) and his consistency of moneyflow (bottom pane) is showing that he’s not yet given up the fight. This, despite neartermed moneyflow momentum (top pane) slowing. And slowing moneyflow momentum usually causes Mr. Market to miss a step—as you can see in other instances of this on that top pane. So his recent stumble during the trade talks might not be so unusual.
Right now, Mr. Market is likely to recover from his oversold conditions. He tends to bounce back from short termed setbacks – don’t write him off just because his momentum looks low. When it gets too low, he usually stages a rebound. My belief is that he may indeed bounce back to his old ceiling in the low 2900’s. But, there is a good chance that Mr. Market is no longer the super stud athlete of yesterday. Not to disparage an old man and his wonderful accomplishments of the past – but I think I’m gonna move a little away from our old friend if he manages to hit the 2900+ ceiling in the coming weeks. This may be one of his last attempts to reach those heights for a while.
Keith on BNN next Monday June 3rd at 6:00pm
Keith appears regularly on BNN Bloomberg MarketCall to answer viewer questions on the technical analysis of stock trends, and to provide unique insights on the factors of technical analysis used in successful investment management. (Note: Times and Dates may be subject to change)
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I got my dad out of his preferred shares ETF ( ZPR.CA ) when it started breaking-down. Now, I’m looking to re-enter because bonds are back to paying too little to fund a retirement. Today, Poloz said he is not cutting rates and that it would take a lot to cut them. Surprising to me, preferred shares stayed weak. Would you wait that the ETF gets back above it’s 20 day moving average, or maybe you have a better idea?
Matt- the pref’s are probably starting to look good. ZPR is good-as is the Horizons one which has Fierro manage it–some support will come in pretty soon for the group–regardless of which ETF you own – they all have to buy the same securities more or less–very limited choices in that space). So if one is a longer termed investor, its going to likely be an opportunity.