Is this a market thing or a geoploitical thing?
by, 04-17-2017 at 01:22 AM (381 Views)
The closer we got toward the close on Thursday, before the long 3-day market weekend, the more investors moved into defensive mode while the precarious geopolitical events played out. There was a weak bounce just after 1 PM but the losses accelerated into the close and the Dow ended the day down 139-points. The 0.5% to 0.7% losses aren't disasters by any means, but these moderate down days have been adding up lately.
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The situation in North Korea seemed to take center stage as instability rises in that region. Heading into the long weekend, investors opted to take the better safe than sorry approach, so if we open on Monday morning without any major developments, I suppose these same investors could be buyers again.
Nothing has been resolved so stocks are not out of the woods yet, at least as of this writing Sunday evening, and we'll have to see how long investors prefer gold and bonds over stocks. We're in a bull market so if and when this blows over we could get a quick move to the upside, but we may have to see that resolution first.
The banks' earnings were pretty good last week, but that was overshadowed by the geopolitical events. Today Netflix reports earnings but on Tuesday we start to get larger inflows of reports from companies like Goldman Sachs, Yahoo, IBM, Bank of America, plus many smaller banks.
It didn't seem to mean much on Thursday but here's the historical holiday performance surrounding Good Friday again. The day after Easter has a negative historical bias but again, that's after what is normally a strong Thursday before Good Friday. Tuesday has a strong positive bias ... again... based on a normally strong Thursday, which we did not have.
The SPY (S&P 500 / C-fund) lost 0.65% on the day falling to the bottom of that descending parallel channel, but it did fall through and close below the 50-day EMA for the first time in a long time. It hasn't hit the 3 to 5 day close confirmation of course and the question will be whether stocks will bounce back now that the long weekend (for the market) is over. The geopolitical situation isn't much better, but nothing too alarming happened over the weekend that investors were concerned about.
The weekly chart made a lower high and lower low compared to the prior bar as it the longer-term downtrend continues since peaking in early March. It also fell below that old resistance line, which is the top of that red rising channel.
The DWCPF (S-fund) fell through some shorter-term support with its 0.87% loss on Thursday. There is some support near 1170, but it is now below the 50-day EMA.
The Dow Transportation Index continued to fail after a series of tests of the 50-day EMA. These "h" formations are not usually good news but there is still a chance of a double bottom at 8800.
The EFA (I-fund) fell below its trading channel as the world embraces for potential problems. The question here like the U.S. indices is whether buyers will step back up if the North Korean situation defuses.
The High Yield Corporate Bond Fund has dipped, but nothing too worrisome so the credit market doesn't seem all too concerned yet. Technically, that could be a lower low forming on the chart and so holding here seems fairly important. You can see that this chart shows one of those "h" formations back in March that actually resolved with a double bottom.
The AGG (Bonds / F-fund) is rising on the safety trade while stocks pull back. That large open gap near 109.75 is now in play. The question here is if bonds can continue to perform well if stocks bounce back. Not that stocks bouncing back is a given at this point.
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