Fraying at the edges, as the S&P 500 (SPX) moves above the resistance zone, it has a dubious character surrounding it. This was our forecast as far as this new trading week’s intraweek rally with ensuing risk perhaps towards the end of the week, writes Gene Inger.
Nothing will likely be determinate at this point, because you have a market well above support and you have a slew of pending issues that can almost make or break things. (Include the North Korean talks and tariff issues among those concerns.)
Reuters: Tesla drives 4th day of gains for Nasdaq Wednesday. Banks, SPX, Dow higher.
It should be noted that on a minimal breakout of the June S&P 2020-2040 zone (mostly of resistance for weeks) it’s perfectly normal to backtrack just a bit and essentially test the breakout point (the high-end of the range).
It is what we’d expect is going to falter. Even if the market is going to be more successful short-term, that makes it hard to make too much from at this point what is nothing but a modest daily-basis consolidation.
At the same time, while not in the catastrophe crowd of analysts, we are at the minimum unwilling to chase expensive stocks, even as pundits literally scream for investors to step-up and buy more even after the preceding run or pauses and resumed advances.
It brings smiles when some caution as regards correction risk, but then encourage chasing the most overvalued equities.
Basically, it’s a form of hand-holding that’s going on and rationalizing really any and all issues from a never-sell/only-buy perspective.
Even if stocks do advance much further. that approach is still marketing, not analysis of a market, which would have to acknowledge the stretching of the move.
Even those in agreement with us about rising risk seem to be minimizing it by (for-instance) saying that stocks like Apple (AAPL) are only 4% of the S&P.
Ha. Not even close. Really, it’s about 20% of activity. That’s a reference to the concentration of no more than a handful of stocks clearly dominating the day-to-day behavior of the S&P Senior Index.
In-sum: June is about to be an historic month at least potentially. And with the outcome in Singapore at stake, it’s no wonder China toughened up in the South China Sea to make their point. And we are doing the same as China (also not widely reported in the U.S.) threatens Taiwan yet again.
US House leaders want Trump to report on North Korea nuclear program: Reuters.
It’s definitely a time of yin and yang for politics, geopolitics and markets.
So, we’d stay nimble and allow for sharp moves. At the moment it is a market in a short consolidation phase after a nominal breakout only for the Nadaq, and there is no shot at new highs for the S&P for now.
Recorded at MoneyShow Las Vegas May 14, 2018
Duration: 4:10.
