Stock Bulls Take Charge, Technically Speaking

Via Global Macro Monitor,

In our Monday post on Bull and Bear Traps we noted the bulls had to do three things, and we also noted the bullish pennant technical formation.

It is imperative the S&P bulls:  1)  hold the 20-day moving average at 2,663.04;  2) bust and close above the 50-day at 2,679.56.   The slope of the 50-day is now negative and in a downtrend, which, on its own, is bearish,  and 3) take out, close , and stay above the recent high at 2,717.49 

Pennant Forming

It looks like a pennant is forming here, which is bullish if you ignore rising interest rates and oil prices, tighter money, rising inflation, and geopolitics.   Macro traders cannot adhere solely to technical patterns but must consider them.  Just another arrow in the global quiver. – GMM,  May 7

Check, check, and semi–check.   That was fast.

Trading Range

The MoMo bulls are touting the pennant breakout and the close above the recent higher low, but six green candlesticks does not make a new uptrend, in our book.   

We are in a trading range until the recent low breaks or the January 26th all-time high is taken out.

We still maintain stocks are in a bear market and will see much lower prices before year-end based on the macro environment.  The Fed is on schedule to reduce its balance sheetby another $330 billion by year end,  including a reduction of $198 billion in Treasuries and $132 billion in MBS.   Moreover, more rate hikes are coming.

That’s tighter than me trying to fit into a pair of skinny jeans.

Mr. Market, with a nanosecond attention span, may not think or believe the unprecedented Fed tightening is an issue as significant as we do.  Come October, however,  the Fed will be in full tightening mode, reducing the balance sheet by $50 billion per month, and still in rate hike mode.

We don’t fight the market and we don’t fight the Fed.  ‘Nuff said.

Comments

khakuda Fri, 05/11/2018 - 09:30 Permalink

Agree with don't fight the Fed, but they are moving insanely slowly...it is close to not moving at all.  Interest rates are still far below true inflation rates and the balance sheet has barely come down at all.  All while the economy has accelerated.  Meanwhile corporate tax cuts are major fiscal stimulus and have led to huge share buybacks and the rest of the world's central banks are not tightening.

Your points are correct, the issue is timing.  The Fed talks about tightening, but it is impotent and irrelevant tightening...for now.

Solio Fri, 05/11/2018 - 09:41 Permalink

Whatever. MSM purpose is to make distractions from the human trafficking (pedovore/cannibal) crimes that are taking place against the children and their families.

tropicthunder Fri, 05/11/2018 - 09:42 Permalink

S&P 500 seasonality tops out in mid/late-May. Add in the fact that we are already in way ahead in post-expansion, earnings (i.e. rigged via stock buybacks) have already topped out. See this mutha fucker 2200 this Summer.. Load up on them DEATH PUTZ while their cheap boys..

Yen Cross Fri, 05/11/2018 - 09:44 Permalink

  The economic calendar looks pretty rough next week. I don't think we're going to see the type of upward movement that happened this week.

   Oops, those $usd longs are getting crushed today :-D

BiMan1973 Fri, 05/11/2018 - 11:06 Permalink

From an Elliott wave perspective, we have here a contracting triangle.  This happens just before the final move in the direction of the trend.

So we can expect a new all time high just to fool most people that the bull market is back.

Then the crash...

Mike Rotsch Fri, 05/11/2018 - 13:40 Permalink

Gotta say, I'm surprised.  Their "pennant" to me, looked like a descending wedge when I drew it weeks ago.  I fully expected an exit to the down side.  And hard.  In about another week from now.

I hate this market right now.

gm_general Fri, 05/11/2018 - 23:06 Permalink

Reached a major high and then hitting lower highs over and over and over, getting weaker and ready to collapse... Aaand then it shoots up faster than Neo in the Matrix, completely against sense and gravity. This is a market controlled by HFT jokerboys who like to attack just when things have to go a certain way, and they defy and cause it to be ruined and go the other way. I hope they choke and lose everything, greed beyond measure has to be rewarded with total failure.