Market Briefing For Tuesday, May 30
Next week will not necessarily be a dramatic blow off but an overshoot on the upside at risk of another effort to reverse it perhaps after a couple days. This past week saw yet another significant withdrawal of funds, itself more evidence that serious money is not buying into the onward and upward saga for this market, and in fact is becoming nervous. A number of managers did it too early, or even shorted, so they are sort of sidelined for action. That had an effect of assisting the market to claw higher.
Daily action sees a sort of 'overshoot' in the S&P that is unaccompanied by the Dow Industrials while the NASDAQ is participating. It's too early to say the prior week's shakeout was the 'shot across the bow', as with the 'cushion' they've built-in. This can elongate the overall process.
The entire move relates to the charts I've shown over the past two weeks, with a primary trend-line that was only nominally penetrated early last week, and then the grinding (not exciting) move forward, (which in my very humble opinion, I believe institutions initiated, and sustained solely because of the risk of an 'algorithmic selling squall' if that level came out).
In sum, as I've discussed, they've managed to build up sufficient 'cushion', at least for the moment, that defers a critical effort to breakdown the market; however that doesn't mean it is somehow bereft of risk.
To the contrary, we're hoping for a lower VIX (already a 9 handle); that has a chance to coincide with the S&P overshoot, and then some sort of purge, that will be blamed on the delay of economic improvement prospects, and/or the convoluted political chaos going on in Washington, which may coincide with a potential power shakeup in the White House after Trump's return.
Sure, the market needs a 'cleansing' although it's not necessarily arriving so long as the market grinds higher in a rotational manner, with breadth just OK... with technicals not really overbought but with political tenterhooks lying just offstage.
Such latter concerns both keep people skeptical while also keeping traders trying to fade rallies, and then scampering to safety fairly swiftly. We too, are concerned about this market, while recognizing it's doing especially well as you consider Oil is not participating. The only thing remaining there is an old saw suggesting cheap oil equals low gasoline prices, equals more driving as well as spending. In this era that may actually be entirely incorrect as relates to markets, which very much need Oil as a key leg of overall stability.
While a corrective cleansing can be delayed, it's more likely to unfold should the political process increasingly deny the expeditious implementation of the policy initiatives the Administration outlines, and the opposition shreds, to a degree no matter what those proposals are.
They don't 'ring a bell' at tops but the process becomes more evident at times like this. Within days of a shakeout that spooked ardent bulls; stocks recovered, first by short-covering thrusts, and then by rationalizations that all was somehow well again, and that the Plunge Protection Team was once more active, though this time in the Credit Market, rather than equities. What is clear is that markets dislike uncertainty; so you've had numerous fund managers and analysts express concern; you've had warnings from a few firms and pundits; and the market shrugs all that off. Fine by us; we're concerned too; but not liquidating in a wholesale way nor shorting actively, like some others. Of course having been bullish instantly on Trump's win is and was helpful; while others had to chase the upside for months.
|
Disclosure: None.