I would be careful about switching to a running with the bulls strategy right now. The S&P 500 ended the day strong on April 25, 2018. We could an upward carry through at market open on Thursday, April 26, 2017, but then, I think we should look to take profits into that strength if possible. The reason is that Friday’s have been pretty horrible days for the stock market over the last few weeks.
Looking at the S&P 500 two-minute chart, we’ve got this very big volume surge going into the close. We also have this awesome Force Index surge. I mean often times, at the end of market action, we do get these surges.
I’m thinking that we could get a strong open in the morning, some kind of follow through, especially when you look at this and you have these series of low, uh, of higher lows, and higher highs.
Looking at the 60 minute chart on the S&P 500 we’re still operating underneath this bearish cross that we’ve been talking about for a few days since it happened. So while we’re underneath that, operating underneath a bearish cross like this, with the 13 hour moving average underneath the 30 hour moving average, you want to get in, get out, take your profits quick, and move to cash. Notice that we have, this is pretty awesome, the MACD going positive. This is the first time that the MACD has gone positive since we had this bearish cross of the 13 hour moving average going underneath the 30 hour moving average. So this is something new and somewhat bullish folks. Nevertheless, price trumps the MACD and untill we get a bullish crossover of the 13 hour moving average line, this blue line, crossing above the red line, we have to play this market safe. So what I would prefer to do since it’s Thursday, I would prefer to try to take profits, if at all possible, Thursday morning.
If the pattern holds, Friday’s have been some very wicked end of week closings over the past few weeks, you know, going into that long news cycle and with so much stuff going on, and all the drama from the Trump administration, you never know when some big issue is going to hit.
My thoughts are that the market could open strong and then fade as we go into Friday, as traders get out ahead of the weekend.
One of the catalysts that could hit at any time, is that we’re still waiting for President Trump to come out with a list of the hundred billion dollars worth of Chinese goods that he’s going to put tariffs on. So that could happen any day now, and when Trump comes out with that list, then the next move after that, what do you think is going to happen? Well the Chinese are going to retaliate, which will further push markets lower.
The other big catalyst that could hit is NAFTA. Ministers from Canada, Mexico and the United States were scheduled to temporarily wrap up NAFTA and negotiations this Thursday. The Trump administration is pushing to reach a final deal within the next 2 to 6 weeks. Rumors are the Trump administration wants to announce an agreement on NAFTA before the end of next week.
The Mexican peso is absolutely plunging relative to the US dollar. I mean look at this folks. Granted, we’ve got this big doji candlestick right? So I mean we could get some kind of turn on this but, and, and, and this could have also to do with the relative value of the US dollar, but you would think that in an environment in which the NAFTA, NAFTA talks, were going in Mexico’s favor, you would think that the Mexican peso would be rising against the US dollar, not falling. Again, that’s just speculation, but it’s something to think about it. It’s possible that these NAFTA talks are not going very well at all, in which case we’ll find out about that over the coming days and perhaps a week or two. That has the potential to be a catalyst, to be a downward catalyst for markets.
The 10 year treasury yield continues to rise. It’s currently at 3.03%. You can see that from July it was at 1.37%. So we’ve gone from 1.37% all the way up to 3.02% in about 22 months. That’s a massive rise folks. Now I hear people saying that, oh, but you know, if you go back further on this chart Lance, and let’s just go ahead and do that so, so you can see the, the, argument. We’re still at a really low rate on the 10 year yield. They like to point out that we were up around you know 5% back in 2008, 2007 and, and, and 2008, and to, today, were only at about 3%. So therefore, historically speaking, this is still a really low level and so there’s nothing to worry about. It’s all good.
Well, the problem with that, and I, I, I think I accurately pointed this out in a show a couple days ago, is that you can’t just take this number you know, in an island all by itself, and compare it to this number, and say okay, well it’s, it’s lower now, so don’t, don’t even worry about it. It’s, it’s lower. Because what, what was the world like? You have to look at consumers. Back here, everybody was able to tap into home equity lines, you know 800+ billion dollars a year in homeowners tapping at home equity lines and using that to make consumer purchases. Today, most consumers don’t have access to that, those home-equity lines. We live in a nation of renters now. Also, over this time, Healthcare cost is up 140%. You’ve got energy up 45% over the last 10 years, okay and that’s just counting healthcare and energy because they don’t count those in the inflationary numbers, which is absolutely stupid. Meanwhile, wages are only up about 25% over the last 10 years. So if you take into account the rising cost of pretty much everything and then healthcare and energy just sapping and, and taking away all of the gains in wages, people are actually poorer today than they were back in 2007 and 2008. Therefore, if consumers are poorer today than they were back then, then the 10 year treasury yield being at 3% is a much bigger deal. You can’t just compare what the number is now, versus what the number was back then, and say see it’s all good, right? There’s context. So that’s a big fallacy I see people making and how you know that I’m right, there’s no question that I’m right, the market’s telling you that I’m right. Why is the market going down so much on this treasury on, on treasury yields? Why are stocks having so much problems on the rising treasury yields? Why? If, if these people were right. If, if the Cramer people and other traders were right that 3% is nothing to worry about, then the market wouldn’t be doing what it’s currently doing. You’re not smarter than the market and that’s one of the big things I have against Cramer is that Cramer came, Cramer’s got an ego that’s just monstrous. It’s one of the reasons why he’s on the list of the worst stock market predictions of all-time. He’s in the top 10. He, his ego gets the best of him, and he gets pompous, and he starts thinking, oh the markets over re-reacting about treasury yields. It’s not something to worry about. No, the, the truth is, it is right now, and that’s all you gotta trade folks, okay?
Now granted it’s not just the 10 year Treasury yields that’s putting a pressure on markets. Rising Treasury yields are the byproduct of a Fed that’s hiking rates to combat inflation. Tariffs are very inflationary. So of course were not saying it’s just the 10 year yield but the way that markets are responding to the 10 year yield should be a, a huge red flashing warning signal folks.
A guy on Stocktwits was saying, oh you know you don’t know what, what you’re talking about Lance and I’m going to grab a bull by the horns. That, that’s what you need to be doing. Grab this bull by the horns. To, these Trump tax cuts, this is gonna be the best economy ever, a new gilded age. So, but, so you’re going to grab a bull by the horns. Alright, think about that for a second folks. Are you really grabbing a bull by the horns? This bull market started in March 2009, maybe you could say that you were gonna grab a bull by the horns back in March 2009, right? That’s how you use that phrase, grab a bull by the horns, as the bull comes charging in, in a bear market, you grab it by the horns, that’s what that means. Maybe you could even say, use the term grabbing a bull by the horns, maybe even in 2010 or 2011, maybe even up to 2017, you could’ve said that. But the expression grabbing the bull by the horns is no longer accurate. With many traders talking about peak earnings, and that’s the big chatter that I’m picking up right now is peak earnings, especially after Caterpillar saying that everything was so great and then calling quarter one as possibly the peak quarter for the year, kaboom! Right? So, but everyone’s talking about peak earnings. So if we really are at peak earnings any kind of bull grabbing will likely be grabbing the bull by its tail, not by its horns, and grabbing a bull by its tail is never a good strategy.