The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
A bounce
Overseas markets were weak, with Japan and China dropping significantly. Our futures traded off in sympathy. Crude continued to climb but yields fell small across the curve. Amidst these mixed influences, stock futures rallied in the premarket and the S&P opened slightly higher. The index rallied strongly around 10 AM and chugged along in the +30 to +50 point range for the bulk of the day. Interestingly, the S&P rallied strongly after the Yen rallied strongly. Although nothing official was announced, the Yen strengthened in a manner that looks like another intervention. Support for the Yen has been coordinated between both the US and Japanese governments so that market is taking intervention very seriously. Perhaps stock investors saw support for the Yen as supportive for stocks? Overall activity in the markets remains summery though, 77% capital flow today.
News continuously breaks regarding Iran but today’s stories didn’t influence much. Consequently, the market operated on its own and today the dip-buyers did their usual thing. Their buying didn’t cause a huge wave but they did print a solid gain. Stopping a 3-session slide is the first step though. It remains to be seen what they can continue to do, and by how much.
From a chart standpoint, today’s bounce isn’t even a test of the 50-day moving average (7577). So the bears lost the latest round of short-term trading. It wasn’t a big loss but it still counts. The bears had the advantage at yesterday’s close. Today it’s a fair fight.
The bulls need to establish a new uptrend, ideally breaking above the prior high (7817). They were in this position in late August but couldn’t seal the deal. Second time is a charm, they hope. For the moment, today’s bounce is just a signal. It should calm the nerves of would-be dip-buyers that are frozen due to the many negative narratives. If paused investors push in long, we could trigger an upside run. Probably, a fundamental catalyst will be needed for an assist on that front.
The possible catalyst is nonfarm payrolls (+55k est vs -23k prior) on Friday morning.
I think any number from zero to +100k will help the bulls. Anything too hot gets the Fed-hiking scenarios going. Anything negative starts recession worries.
In the meantime, we’ll watch how the bulls and bears duke it out.
See you tomorrow.
-Mike
Visdom Market Commentary
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