Odds are lower for a defensive rally for a few reasons: credit market behavior, exhaustion of seasonal liquidity bolstering, as retirement contribution flows taper-off. And jitters among traders for the big hedge funds, writes Gene Inger Thursday in The Inger Letter.
Defensive rallies above June S&P 2600 are intended to give markets a modicum of cushion or technical space forestalling potential risks of a breakdown from these levels.
We knew they’d try to do so. Prices just had to contend with the nuances of end-of-quarter shuffles desperate efforts to rebound the FANG stocks, and of course technically what is a defensive action to hold the line.
And there is a line. Right at 2600, which happens to also correspond to a lateral support and all of this takes place as an effort to yet-again hold on to the 200-day moving average, also essentially at the same level.
What are the odds of success this time, as contrasted to the prior rebounds off the same moving average? Some pundits think pretty good, even great, as there’s a lot of angst overall.
But we say not so and can come up with more than four questions to ask about why this time is so special? (The questions could relate to: technical, monetary, fundamental and also political or geopolitical aspects.)
Odds are lower for a few reasons: credit market behavior, exhaustion of seasonal liquidity bolstering, as retirement contribution flows taper-off to money managers. And, of course, jitters among traders for the big hedge funds, who realize they’ve had to use leverage to buy time on the prior lifts from a similar technical defense.
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The New York Auto Show is this weekend, a couple early highlights.
I hear Germany has already agreed to end the 10% tax on U.S. cars we don’t do to theirs.
Few Germans will buy American like Tesla (TSLA) or the new Cadillac smaller SUV, but Germany needs to extend a reciprocity we've given them, as the United States is everyone's biggest market.
Curious how many pundits or politicians are thinking trade war not deal making.
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The late news of Walmart (WMT) interested in buying Humana (HUM) probably isn't a major factor here; nor the UnderArmour (UAA) hacking incident. (We never imagined they had 150 million customers in fitness; apparently they do and all got compromised.)
But the late story suggested Mark Zuckerberg wasn’t fully candid in his denial of knowledge of what Cambridge Analytica was up to or that Facebook (FB) might actually have worked with them is likely to find itself gnawing at Facebook shares latest rebound efforts next week.
Of course, the idea of challenges to Amazon (AMZN) dominance or even Microsoft (MSFT) reorganization plans are all fairly fluid considerations for those stocks, a good bit less than influences over the general market, at least so far.
Bloomberg: here's why Trump went postal on Amazon.
Bottom line: The important rally off the double-bottom 200-day back in February had ended as expected, without an investment grade move.
I argued we would get that rally, but that it was only for trading moves. The rally affair was tricky to say the least; and I think we caught the shuffles just about as well as humanly possible.
Perhaps most notable was the protracted shuffling around a former inflection zone as I labeled it, around S&P 500 (SPX) 2750. That formed a symmetrical pattern, and we broke down from that. Now resistance is shy of that level.
