Markets are hanging on for now. For the middle of summer trade in the period before the August vacation season, the end of this week could very well be the most interesting sequence we’ll see until Labor Day, writes Jeff Greenblatt Wednesday.
Last week we were in the situation of seeing Netflix (NFLX) recover after it got crushed in the aftermarket. What did that mean? In terms of market psychology, we reached the point where we had the market rolling over yet it came back again, giving us the feeling it will never go down.
Since that time, good earnings from Alphabet (GOOGL) the other night pushed the NASDAQ higher yet again, but it couldn’t sustain. Wednesday’s action was bullish yet again which could be setting traders up for the next big event. We’ve all heard rumors that GDP coming in at the end of the week is going to be very good. Some say it will arrive in a 4 handle. Others are going so far as to say it could be a 5 handle.
What if it comes in somewhere in the 3 handle? Will market participants be disappointed?
I can’t answer any of these questions, but it does appear we could be setting up another one of the buy the rumor and sell the news sequences.
Markets have basically ignored the 610-day window from the February 2016 low. If you noticed, I didn’t make any bold predictions because you can make predictions or money and chances are you won’t do both.
But 20 years of experience has shown me that markets don’t go straight up or down and when they do turn, there is usually a cycle point associated with it. But where there is 610, there is also 618 and Thursday is day 618 which means the window closes Friday. Markets are not out of the woods yet. After all, the S&P 500 (SPX) put in a near perfect doji on Tuesday. Dojis are not sell signals, they are warning signs. Forget everything I’ve discussed about time windows. There were many dojis Tuesday on individual stocks and it’s not a coincidence. Even if there isn’t a 618 window, if GDP is good, it could still turn into a sell the news event.
Markets have shown incredible resiliency as they’ve lost the PHLX Housing Sector Index (HGX) while Dow Transports (DJT) has remained very questionable. Oil stocks have recovered in the past week.
What is strange is housing and banking stocks have taken turns going up. Even the Dow is up on the day the NASDAQ is flat. The next day the NASDAQ is up 60 while the Dow is flat. That means there is still a rotation going on. Rotations can go on for a season but we need to take a step back and wonder why the whole market isn’t up big on the same day. While this is not a prediction it wouldn’t surprise in the least if a good GDP number entices the public while the smart money heads for the exits.
Wednesday’s headline included earnings hits to GM (GM) and Boeing (BA). GM was in the Dow until 2009 and if it was still a Dow stock the market would’ve been hit much worse. Perhaps that’s why GM was retired.
But BA is the number one weighted stock in the Dow and our Kairos method gave advance notice something was in the air.
As you can see on this chart, the low at 327.29 lines up with the high to high progression at 29 days. But even as this stock gapped down and hit the Dow early it recovered because bulls are not giving up. But in terms of Kairos, most people pay no attention to the cents holder which is to the right of decimal point. In Kairos this is known as the time-holder and an important navigational point when it comes to turns in the market or at least changes of direction.
