January 2018 Market Wrap-Up

* See UPDATE below...

We could see a tepid recovery of yesterday's "shock drop" in equities (as I described here), until the Fed's next interest rate hike (possibly in March), to send Major Indices to levels somewhat higher than their recent all-time highs. But, we'll likely see higher volatility remain in play and, possibly, more wild price swings, until then.

As I promised in that post, here's January's month-end summary.

DOW 30 INDEX

The first daily chart shows that the Dow 30 Index failed to fill yesterday's gap down and closed 100 points above its low of the day.

Momentum remains above the zero level, but has dropped dramatically after failing to rise to a new high when the Dow made its last new high on January 26. It's an important level to hold in support of such a recovery. Otherwise, a drop and hold below zero would see further weakness in the Dow.

S&P 500 INDEX

The next daily chart shows that the S&P 500 Index failed to fill yesterday's gap down and closed off its low of the day. The VIX is overlayed on this chart and price remains above near-term support of 13.00.

Momentum remains above the zero level, but has dropped dramatically after failing to rise to a new high when the SPX made its last new high on January 26. It's an important level to hold in support of such a recovery. Otherwise, a drop and hold below zero would see further weakness in the SPX.

10-Year Treasury Yields on the Rise

The following two monthly charts show that 10-year Treasury Yields ($TNX) are on the rise.

The first chart shows that it has popped above the upper edge of a very long-term downtrend channel and is headed for near-term major resistance at 30.00.

The second one shows that price has broken above a -1 standard deviation level of a long-term downtrending regression channel.

Whether or not 30.00, if reached, would have any real negative impact on equities, may be looked at in context as to where it was at its height in 2007 (just prior to the financial crisis) and the economic conditions in play at that time, compared with current conditions (as well as the financial soundness of the major banks).

In any event, we may see some volatile swings until, either, this very long-term downtrend is broken by a breach (and hold) above 30.00 (and its last monthly swing high at 30.36 set in December, 2013), or it resumes and drops back into the channel shown on the first chart and below the -1 channel deviation on the second one...two charts worth monitoring over the coming weeks/months.

SPX "Shock Event"

I last wrote about volatility (SPX:VIX ratio) in my post of January 28.

Today, the major indices gapped down at the open and closed near their lows. Here's how the S&P 500 Index (SPX) closed, with the VIX overlayed (daily chart).

This monthly chart of the SPX:VIX ratio shows today's close below major support of 200.

The momentum indicator has fallen to just above the zero level on this timeframe...a drop and hold below would indicate increased selling pressure in equities.

And, for a slightly different perspective, the last monthly chart depicts the SPX in the upper half and the SPX:VIX ratio (in histogram format) in the lower half).

Price on the ratio has fallen below the 20-month moving average (yellow)...hinting of further weakness ahead.

I'll provide an update on where the monthly candle closes on this ratio in relation to major support, its momentum, and the moving average at the end of tomorrow's month-end trading, so stay tuned.

P.S. Throw a little news into the mix regarding volatility...

Source: Bloomberg.com

...plus the fact that the U.S. was not the only world market to be hit in today's large-scale sell-off...and we'll likely witness some interesting action tomorrow, world-wide.

Source: CNBC.com

Traders Dump Wynn Resorts

* See UPDATE below...

The price of Wynn Resorts has plummeted the past couple of days, as shown on the daily chart below of WYNN.

The momentum indicator has fallen below the zero level and volumes have spiked.

A bigger-picture view reveals that price spiked briefly above the 76% Fibonacci retracement level and has now dropped below its 60% Golden Ratio level, as shown on the following monthly chart.

Major price support sits at 155.00, while the 50% Fib level is just below at 149.00. The January '18 candle is forming a bearish shooting star, and volumes have been declining since March '16.

Watch to see how the January candle closes, as well as daily price action, volumes, and its momentum level, inasmuch as a hold below zero will hint of further weakness ahead.

* UPDATE January 30...

Higher Volatility Threatens the SPX: Important Levels To Monitor

* See UPDATES below...

In my 2017 Market Wrap-Up post, I referenced major support (200) and resistance (280) as levels worth monitoring on the SPX:VIX ratio, on a monthly timeframe.

The following updated monthly chart of the SPX:VIX ratio reveals a few interesting things:

1. All of the monthly closes since July 2017 have been above 225.
2. December '17 and January '18 have spiked above the 280 resistance level, but not yet held above.
3. A long-term uptrend line (heavy blue arrow) indicates near-term support around 225, at the moment.
4. 225 is confluent with a major external Fibonacci retracement level at 228, as well as the bottom of the original long-term uptrending (green) channel.
5. In my post of February 24, 2017, I identified 200 as a new level to be held above, in order to support a new bull market in equities.
6. In April, 2017 we started to see closes above 200 (the next monthly chart shows the SPX in the upper half and the monthly closes (in histogram format) of the SPX:VIX ratio in the lower half, for a different perspective).
7. Monthly momentum on the SPX:VIX ratio began to weaken last November, which hasn't supported the price breakout on the SPX above 2600.

From these observations, I'd make the following statements (based on a longer-term monthly timeframe and outlook):

1. Watch 225 closely on the SPX:VIX ratio to see if price can continue to close above that level.
2. If so, I'd need to see the momentum on this ratio strengthen, again, to support higher SPX prices.
3. If we don't see a reversal in momentum, it's doubtful that the SPX will reach a target price of 3000 anytime soon, as I had described in my post of January 23.
4. If price on this ratio falls and holds below major support at 200, volatility will rise dramatically and we'll likely see some major profit-taking occur in the SPX.
5. In the shorter term, you can also monitor activity in HYG and XHB, as I recently described here and here, respectively, in connection with the SPX.

* UPDATE January 29 @ 1:55 pm ET...

One last indicator to monitor over the coming weeks/months is the monthly momentum of the VIX, as depicted on the monthly chart below. It's currently rising, but is still below the zero level, where it has languished since mid-2016. A crossover and hold above will see volatility increase.

Price will have to break and hold above 13.00, currently major resistance, for any meaningful volatility to affect equities...it's attempting to do so, at the moment, and has been swirling around that price all day, so far.

The next major hurdle lies above at 20.00, where it faces a confluence of price and trendline major resistance.

* UPDATE January 29 @ close...

The following daily chart of the SPX:VIX ratio shows that price fell below near-term support of 225 today to close just above 200 (major support) at 206.18.

The RSI, MACD and PMO indicators have all turned negative, again...hinting of more equity weakness ahead.

The VIX, itself, closed above 13.00 at 13.84. So, 13.00 now becomes major support, once again...an important level for equity bears to maintain, especially if the ratio falls and holds below 200.

Homebuilders ETF Poised to Make a New All-Time High

The Homebuilders ETF (XHB) is poised to make a new all-time high as it faces its peak set just before the 2007/08 financial crisis struck, as shown on the monthly chart below.

There are two interesting things I notice on this chart. The volume moving average has been steadily declining since September of 2013 as the momentum indicator is nearing its record peak set in May of 2013...hinting of potential profit-taking at current overheated levels.

So, whether, or not, we are about to see a rollover anytime soon should be revealed in coming days/weeks. Keep an eye on volumes and momentum, for possible clues. Furthermore, as the Fed considers 3 to 4 interest rate hikes this year, no doubt mortgage rates would rise, as well, negatively impacting this sector.

The S&P 500 Index (SPX) is shown in the background as the blue area. If the XHB rolls over, it may also bring the SPX with it, but, as I described in yesterday's post, keep an eye on HYG, as well.

WTIC Crude Oil Hovers Above Major Support

I last wrote about WTIC Crude Oil on December 26, 2017.

The following monthly chart shows that /CL has since rallied to retest its bearish moving average Death Cross apex at $65.00 and is hovering above that price, as well as its 50-month moving average.

If $72.00 is, indeed, in the cards, as I described in the aforementioned post (or even higher to retest $75.00 price resistance), it's very important for /CL to hold above $65.00, now major support. A drop and hold below could send it tumbling back to $55.00, or lower.

U.S. High-Yield Corporate Bonds ETF in Jeopardy

The High-Yield Corporate Bonds ETF (HYG) is in jeopardy at major resistance.

The monthly chart below shows that price is facing double resistance at the confluence of a 60% Fibonacci retracement level at 89.29 and the upper edge of a large triangle formation (both of which began forming during the 2007/08 financial crisis to the 2009 lows).

Major support sits below at the confluence of the 50% Fibonacci retracement level at 83.98 and the triangle apex around 83.30.

The momentum indicator has dropped below the zero level on this timeframe, hinting of more weakness to come, as has been the case, historically.

The next monthly chart shows price action of HYG compared with the S&P 500 Index (SPX).

HYG began to diverge from the SPX as far back as April of 2013 and looks like it's getting ready to roll over again.

The momentum indicator has recently spiked and is at an all-time high on the SPX.

The gap in price action between these two began to accelerate right after the 2016 Presidential election, and is ever widening as SPX spikes in parabolic fashion.

If HYG drops to or falls below its major support around 83.30, we could see some serious selling afflict, not only the SPX, but also other major indices.

If that happened, the chances of the SPX reaching 3000 anytime soon (as I wrote about here) may be in question, so keep an eye on other factors that I mentioned in in my 2018 Market Forecast post.

EUR/USD Currency Battle

The following monthly chart of EUR/USD shows that the Euro has risen to a resistance level (1.2500) at the upper edge of a downtrending channel that began during the 2007/08 financial crisis.

Its next resistance sits at 1.3055, a major Fibonacci resistance level taken from the 2000 lows to the peak prior to to the financial crisis. Fibonacci support sits below at 1.2134.

Momentum is in uptrend on this timeframe and still rising, but has yet to match the all-time high set in March of 2011.

We'll see whether the recent political rhetoric coming from ECB Chair Draghi and U.S. Treasury Secretary Mnuchin will create any chaos in the short or longer term...or whether free-market currency trading carries on with its business-as-usual dealings.

In the short-term, price may be somewhat constrained around this channel resistance level, and some volatility and price consolidation/swings may erupt, until the Euro, either resumes its upward trek toward 1.3055, or falls back to as low as 1.2134, or lower.

In any event, future forward guidance from the Fed and ECB (based on economic data at that time) and their decisions regarding interest rates will, no doubt, have a more meaningful and lasting effect on the price of this Forex pair.

Source: CNBC.com

Source: ZeroHedge.com

SPX 3000?

Year-to-date gains/losses made in the 9 Major Indices and 9 Major Sectors  are shown on the graphs below...amazing gains after only 15 trading days.

The SPX is already over half-way to the 10% target I had forecast in this post for the entirety of 2018.

An extended outlook for the SPX sees major resistance at 3000 (its next "Big Round Number"), which is confluent with two external Fibonacci retracement levels (2984 and 3047), as shown on the monthly chart below.

When would it hit that level? It's anyone's guess, as anything seems possible in the current buoyant market environment. The momentum indicator is still rising on this long-term timeframe and is making new all-time highs in the process. Another 5% gain would send it up to that price, so we could be looking at a year-end target date to bring total gains of 11% by then...not an unreasonable expectation.

Another scenario is that it could reach that level around August of this year (pinpointed at the pink arrow shown on the second monthly chart below), which would put it at the +4 standard deviation level of a very long-term upward-sloping regression channel (beginning from the March 2009 low). That would give it plenty of "wiggle room" to allow for some price dips in between now and then. At the moment, price is in between the +3 and +4 standard deviation levels.

Alternatively, we may see a hit of 3000 (or beyond to its next major external Fibonacci level of 3047) at the +5 channel deviation level sometime in February, potentially taking the Dow 30 along with it to around 26,700 (as I described recently in this post). Subsequently, these indices may move sideways for awhile to allow some of this parabolic surge (that began after the November 2016 Presidential election) to dissipate.

Other factors to monitor, in this regard, are outlined in my above-referenced market forecast post.

Congress Stages an OPEN/CLOSED "Revolution"

It's a good thing that OPEN/CLOSED signs are double-sided and can be easily flipped.

After a 3-day government shutdown, the Senate and House passed a temporary 3-week Continuing Resolution to continue funding the government through February 8th...it's now on its way to President Trump to sign (N.B. signed later today).

So, the OPEN sign is displayed, once again, but like a revolving door, the CLOSED sign will magically re-appear if the 2018 Budget is not passed by February 9th.

Caution...more political theatrics to come! 👀




Here's how the Major Indices closed today (shaking off the political sparks)...all at record-breaking all-time NEW highs and closing highs.

Social Media vs "Snitch Media"

I'm beginning to dislike (specifically "interactive") social media platforms...a lot. Furthermore, I think they've reached their saturation point, as I've previously written about here regarding the media, in general.

It's far too easy for someone's intentions to be misinterpreted by mere words that one has written while in "conversation" with other(s)...which is why I don't waste any time on them and much prefer, either face-to-face, or phone conversations with people...and, also, why I've never included a "comments" section on my Blog (if anyone has any questions regarding my articles, they simply email me where they can be thoroughly dealt with to mutual satisfaction).

I wouldn't be surprised if "interactive" social media sites finds themselves in the dark in the not too distant future when enough people get fed up with this shortcoming...especially, now that Mark Zuckerberg is turning Facebook into an amateur police state with this (ill-advised, in my opinion) announcement...

From a trading perspective, this monthly comparison chart of Facebook (FB) and the Social Media ETF (SOCL) show their rise during the past five years, but Momentum has dropped off since it peaked at the end of Q3 of 2017...furthermore, volumes have been steadily declining since the 20-month volume moving average peaked in April of 2014...ones to watch over the coming weeks/months.

P.S.

This tweet (with link to Bloomberg's article) was released just minutes after I posted my article...need I say more...

Source: Bloomberg.com

Excerpt from article: Bloomberg.com

Even the Pope is weighing in on a related subject..."fake news"...

Source: Bloomberg.com

U.S. Government Shutdown Looms...$7.8 Trillion at Stake

* See UPDATES below...

As Democrats threaten to shut down the government at midnight tonight (Friday) without passing the 2018 budget, $7.8 Trillion hangs in the balance (gains made since the 2016 Presidential election).

The following monthly charts show prices of the Dow 30, S&P 500, and Nasdaq Composite Indices as at 12:15 pm ET today, with the blue horizontal line marking election-day prices.

A lot of investments (including pension funds and 401K accounts) in the U.S. stock markets are at stake...stay tuned for what market chaos may await next Monday.

If only my ancient crystal ball had come with automatic upgrades...👀

Source: ZeroHedge.com

* UPDATE @ market close...

Deutsche Bank Struggles Near Major Resistance

Deutsche Bank (DB) has never recovered from its meteoric plunge during the 2007/08 financial crisis. It's currently facing major resistance at the confluence of price and the upper edge of a long-term downtrending channel, as shown on the monthly chart below.

It's critical for price to break through, and hold above, 20.00...otherwise, its future is in question.

And, this tweet just in from Bloomberg Markets...

Source: Bloomberg.com

BITCOIN'S Dramatic Fall From Grace

* See UPDATES below...

I first started writing about BITCOIN in September of 2017 (all of my articles on this crypto curency can be found at this link).

It has fallen to its 50% Fibonacci retracement level [measured from its all-time low of 4.2 (in February 2012) to its all-time high of 19,891.0 (in December 2017)], as shown on the following Monthly chart.

And, as I reported (in the snippet below) on December 24, 10,000 represents a major support level, formed by a downward-sloping neckline of a bearish Head & Shoulders pattern. It spiked below 10,000 on Tuesday to a low of 9,949.4 before bouncing a bit to its current price of 10,967.

If BITCOIN breaks below 10,000 (again) and holds (as well as the 50% Fib level of 9,947.6), we could see a dramatic and swift plunge in price. A measured move of such a break would send it back to its all-time low.

This crypto currency is no stranger to volatility, so anything is possible...so,buckle up!

And, this report (January 16) from Reuters...

Source: Reuters.com

* UPDATE January 17 @ 1:42 pm ET...

Price is still shaky and volatile on BITCOIN, as it dropped below 10,000, once again, as shown on the daily chart below.

* UPDATE January 30...

Amid this flurry of news released today, price on BITCOIN dropped below 10,000, yet again, as shown on the following daily chart.

Price and momentum remain in downtrend since the peak in mid-December last year.

We'll see how long 10,000 can hold in the face of rising investigations, ad bans, crypto thefts/hacks, etc.