Morning Market Thoughts

Good morning. Stocks are heavy today, and I doubt it’s going to lighten up before a 3 day weekend. The DJI and SPX are both below their 50-day moving average, which is actually never a bullish sign. The way these indexes slid below the key intermediate term trend indicator is a bit worrisome to me. Over the last two weeks, the S&P rallied off the 50-day moving average, but never really impressed much. There was too much supply at 2,370 (which had been a support level before it was so rudely violated by the bears that it reminded me of a fairly graphic scene in The Revenant (I only watched the trailer. I thought Leo peaked at “Rose!!!”). So once that 2,370 level was broken, it turned into a ceiling of pain. Whenever it was toughed, it started gushing stocks. So now the S&P has been back to visit the 50-day moving average. While Tuesday’s trading appeared to be a successful test of the 50dma, it did not lead to anything. It was a fakeout. No follow through.

It was like a bunch of guys hiding in a foxhole. They’re cowering in fear. Finally, one brave soul with a grandfather named Audie say, “C’mon boys! Let’s go get ’em!!!” He charges from the fox hole, scurries forward to cover, looking for the enemy and readying to do battle. He then looks behind him to see how his band of brothers are doing. All he sees are the tops of some helmets, with some eyeballs blankly staring out from underneath. They’re all still hiding in the foxhole.

It’s pretty lonely to be the bravest guy on the battlefield.

That’s what happened yesterday. Tuesday’s rebound emboldened the bulls, right? But by the time the opening bell rang, there weren’t that many brave souls after all. They were thinking about a 3 day weekend with the family, and didn’t want to take on more risk than absolutely necessary. And they soon concluded that they actually didn’t have to take on ANY risk…so it became absolutely necessary to watch Sgt. Murphy rush out of his foxhole alone and see how things worked out.

They didn’t work out that well…and that’s where we are right now.

Things are pretty flat. Unless you plan on ice skating, try to have a bigger cash position — you’ll be able to enjoy the holiday a bit more.

See you in the Forum.

–Dan

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