The markets are closed for Good Friday and this is the end of the quarter. This is the first on quarter stocks have experienced a down turn in two years. Last Monday stocks advanced 669 points, the largest one-day gain since 2008. But plotted on the highly volatile charts since the all time high in late January, it does not look like a big deal.
A mere 31.6 percent of the S&P 500 stocks are still above their respective 50 day moving averages. And that chart has a double bottomed at a mere 15 percent in February and March. In a normal correction this would be telegraphing perhaps the bottom of a ‘normal correction.’ The New York Stock Exchange Advance Decline Line experienced a cross to the downside of the 13 week Moving Average over the longer 34 week. The same thing happened in early February and the markets bounced back.
Tech stocks have powered the rally since the Trump election. But now we have a tech wreck with Facebook leading the way lower. If there is to be a recovery here, the market will need to embrace the tech stocks again. On the positive side, the NASD 100 is still well above its 200-day moving average.
Money has moved into bonds on the stock market sell-off. The TLT bond fund has moved from 117 to 122, but that is hardly what one would call a flight to quality.
Tom Bowley, Stockcharts.com
Would you like to guess how many days the NASDAQ gained OR lost 2 percent or more in 2017? Three times during the entire year. The difference last year is that expected volatility was nil. Below are the two 2 percent down days that we experienced in 2017, followed by the VIX reading the day before those losses:
- May 17th: -2.57 percent (VIX close on May 16th was 10.65)
- August 10th: -2.13 percent (VIX close on August 9th was 11.11)
In both instances, the market was not fearful heading into that bout of selling. Not surprisingly, the market bounced back nicely. In other words, a selloff with a fairly low VIX typically presents buying opportunities as the market is generally in a good mood. Currently, however, the VIX stands at 22.50, double those 2017 readings as the market is gripped by fear. That leads to the type of wild swings that we’ve been enduring since early February and adds considerable risk to short-term trading.
The U.S. Dollar has moved sideways all of 2018, no news to report there.
Investors have been much more positive towards energy stocks than tech stocks. Anadarko APC has advanced since last September from 40 to 62.50. Apache APA has been in a down-trend which still shows no signs of abating. Overall the XLE Energy ETF suffered a two week drop from 78 to 66 and is still there. The Energy Service ETF XES is still languishing and that is not a good sign for the sector. FRAK the shale producer ETF has fallen from $17 to $14.75 and is slowly recovering.
The weekly chart of crude oil is banging on the $66 previous level of resistance. Patience will let us know if higher prices lie ahead, that appears to be the case.
It does appear that the gold and silver markets are preparing for a bull run. Hecla HL and Coeur D Alene CDE closed up Thursday, CDE advancing 3.76 percent. That does not turn their respective trends up yet. But mining shares look to be forming a base.
Overall weekly stock trends have not turned down. But volatility remains high and shows little sign of abating. All that QE money spent by Central Banks the last nine years can still ignite some inflation.
