E Market Briefing For Friday, May 19

Insufficient worry allowed the 'cheerleaders' to proclaim that 'buy the dip' crowds intelligently scooped up 'bargains' created by Wednesday's drubbing.

I'm thrilled that they take that view which enhances odds they're premature at best, and utterly wrong at worst. To wit, whether an effort is made to 'hold the line' (and there is a line, actually two of them as the long main video will describe) or whether we breakthrough sooner, there should be more heavy probing of lower levels forthcoming quite soon.
 

Incidentally, the market was already embarked on our expected post-lunch lift into the 2 o'clock balloon, as I fondly call it referring to historical practices of traders that to an extent carries on for generations, when the news hit. Of course I'm referring to the (reported by media but generally uncorroborated) C-SPAN videos in which former FBI Director Comey is said to have denied any pressures to halt any investigations.

So once again, and it's been true since the campaign; it's about getting the policies enacted, which very clearly the market cares about. If nothing else it's a market focused primarily on how expeditiously tax reform gets initiated.
 



In sum, you have a market that had a fairly mild post-breakdown snapback which largely evaporated in the final minutes. It was more a short squeeze, as contrasted with a true infusion of investment grade capital. 

Daily action was milder than it might have been; while generally adhering to the outline suggested for this post-breakdown session.
 


We suspect that, regardless of the short term action, there is a suspicion of a better political climate to proceed with tax reform and more, merely by the introduction of a Special Counsel, which should cause politicians to cool all their jets a bit.  

So in a sense this becomes an ongoing and also protracted process, which may actually allow serious legislation to flow; which if it does may abbreviate the overall market decline 'in the future'. Short term it now becomes more of a technical battle because if both the noted rising bottoms trendline, and a well-watched 200-Day Moving Average Line come out, algorithmic sellers might take a swing at the market too. 
 

 

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