GOOD ANALYSIS - reiterating HIGH YIELDS & OIL PRICE as well as soaring DOLLAR are still keeping markets down.
"...The S&P 500 snapped out of its 10-day funk this week and finally showed some signs of stabilizing just above the all-important 200-day moving average.
S&P
S&P 500 (www.tc2000.com)
Just about every market technician has that as their "line in the sand". When everyone is thinking the same way, we usually find out no one is thinking. My thoughts led me to believe one of two scenarios might play out. Either the S&P never gets to the "target", stabilizes, and goes higher, OR the index falls right through the so-called support level, and scares a majority of traders out of the market before stabilizing.
Given the price action this week, the first scenario might be playing out. The problem with going all in on that notion, the market can easily reverse from here and head lower. What we could be witnessing is nothing more than an oversold bounce that will fall apart quickly.
That falls into the category of what I've come to call a "50-50 market". There is not much conviction to SELL, nor is there enough conviction to BUY. Certainly, not enough of a push either way to give an investor enough reason to do much of anything. One thing that is now very apparent - the intermediate top on July 28th that was posted on the chart at the beginning of August is now in fact a correct call.
FINAL THOUGHTS
If you want to boil the current market down to three key variables, the 10-year Treasury yield, the price of crude oil, and the US dollar are a great start. If the uptrends in crude oil and the dollar start to weaken, it might bring the 10-year Treasury yield back under 4.3%, so the chart to watch is the 10-year Treasury note. As of the close on Friday that has yet to occur, and unless the market adjusts to this new rate environment, equities are going to struggle.
The opening quote should remind investors to deal with reality and avoid the everyday noise of the headlines. Trade the market that is in front of us and not the one that we want. We've seen a perfect example of that lately. It sure seems like the bulk of the investment world just couldn't come to grips with interest rates at these levels and have a hard time believing they will stay there (or higher) for a while. .."
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