The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Yields and crude
Futures fell overnight and fresh strikes against Iran set a risk-off mood for the day. Crude prices climbed, as did yields. These two markets have been linked for a while though the explanations for their linkage are unsatisfying. Macroeconomic data this morning didn’t rock the boat although it does suggest softer economic activity. The S&P opened down about 50 points and wandered around a bit during the session. Concerns about inflation, US debt levels and deficits, and a hawkish Fed dominate the financial press. The usual faith and optimism surrounding stocks has lessened. Despite the new month, capital flow remains at summer-like levels, 82%.
The S&P fell 3 sessions in a row today. That’s not a cause for concern but if the dip-buyers don’t pounce soon, one can be excused for suspecting something has changed behind the scenes. For the moment, consensus opinion is that everything in stock-land is fine and that we’re just experiencing the usual gyrations when a bull market pauses/stalls.
Both the bull market and bear market narrative are merely interesting stories at the moment, only becoming vindicated after the fact. However…. the bulls and the bears are also facing a first test if we consider the chart.
The 50-day moving average (7570) is very close. Bouncing off of it will bolster the bull case and allow the dip-buyers to take another victory lap. If we break below that though, the 100-day and then the 200-day averages becoming compelling targets for the bears.
The fundamentals of the investing landscape always matter but for right now, and likely the entire month of September, the chart suggests an upcoming battle. The bulls are looking for a quick bounce and new highs for the chart to support their claims. The bears are looking for a first test, and break, of a significant downside level, before they can start to claim anything.
I think the first battle will occur much sooner than the FOMC decision in mid-September. I think that when the FOMC makes its next decision, we’ll be worrying about the other downside levels or continuing to print new highs.
See you tomorrow.
-Mike
Visdom Market Commentary
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