Finance Forex

Take Some Profits on This Strength: Market Recon

Take Some Profits On This Strength: Market Recon paper is one like this Finance, Forex lists, written with our reporter Erick Emerson during February 6, 2019, these paper can search on top of that hastag Market, profits, Recon, Strength. I'm satisfied to glad you along with providing this others article concerning finance as well I always updating those post daily.

Time To Take Some Profits?

The short answer is… perhaps. Usually, when I answer my own uncertain question with an uncertain answer, I act in a measured, disciplined way. I look over my book. At this point, I would think it likely that at least some target prices have been pierced to the upside. There is no harm in resetting a target price, as long as at least some profit is shaved.

You do know the saying “pigs get slaughtered” is the lament of the experienced trader, right? Everyone among our ranks has disrespected a target price at some point, and then felt quite stupid when taking a loss down the road on the same piece of merchandise.

Most European markets opened on Wednesday morning at a slight discount to their Tuesday closing prices. This has put some mild pressure on U.S. equity index futures as late night melts into early morning. U.S. markets on Tuesday reversed a mid-morning selloff to close near the day’s highest levels ahead of President Trump’s State of the Union address well after the bell. I think perhaps a little too much was expected by the marketplace ahead of the event. The President did make a case for some of his agenda’s more-contested objectives, such as the wall on the southern border. In return, the President offered the other side, a united front regarding some of their objectives, such as an infrastructure rebuild, and a renewed effort to lower drug prices.

Are overnight markets reacting with some negativity to that speech? Are they merely responding to market technicals? Perhaps, the powers that be expect Jerome Powell’s town hall event scheduled for Wednesday evening to actually be the greater threat, if it is that Powell sees the recently “strong enough” domestic macroeconomic data as strong enough for a more sentient central bank to stay on course, or at least publicly opine on doing so.

Lay of the Land

I have been working to reduce already high cash levels in recent weeks. This, for me, is a slow process, as chasing stocks on the run is not something I do. A headwind for nearly all asset classes will be the strength of the U.S. dollar that, despite that very public pause intimated by the Fed in regards to the trajectory for short-term rate policy, just does not soften. A U.S. economy that so far is holding up better than nearly all other developed economies has put a bid under the greenback. Now, take a look at the S&P 500, our broadest, and most significant index and measure of U.S. equity markets.

While the president did discuss ongoing talks with China that would require real, structural change, that may not be what gives pause to equities here. If the negative action seen overnight spills over into the regular session, it may be as simple as meeting resistance at the 200-day SMA (simple moving average). That’s the thin red line above, currently 2741. The index peaked at 2738 on Tuesday, and you will notice that more than any other often-used moving average, this line served as a fluid line of support throughout most of 2018 into October, and then as loose resistance ever since. We probably have to respect this line.

My thoughts on this are laid out in relation to current conditions. Obviously, clearly positive headlines on trade will lead equity markets much higher short term, to fight this battle at a different level. Conversely, anything regarded as disappointing by keyword-reading algorithms could allow for significant decay in asset prices without doing significant damage to this confirmed uptrend (in my opinion…).

You see that blue line at the 2585 level? That spot would be a 5.6% decline from Tuesday night’s close, as well as a standard 38.2% retracement of the Santa rebound. On that, I think it is necessary to understand that this nearly parabolic move off of those lows now leaves the index in a place where appropriate risk is priced in, given that forward-looking earnings are far less fancy than what traders see in the rear view mirror. There has not been a bearish crossover seen in the daily Moving Average Convergence Divergence all year. Relative Strength is sending signals that illustrate a nearly overbought market condition as well.

The marketplace can still go higher from here — and if it does, I will gratefully accept the donations. That said, short-term risks are now skewing slightly to the downside, though the threat is not yet overwhelming. Simply put, I think the time has come for the slope of price discovery to normalize a bit. This would create a better environment for fundamental analysis types, also known as stock pickers. After all, if monetary policy can be flexible, why can’t we be flexible in our response?

On That Dollar… and Oil

Speaking on central banking, the Bank of England meets on policy tomorrow (Thursday) morning, the European Central Bank, not for another month. Much of the current rally in equity markets, whether it makes a lot of sense or not, had correlated quite well with the rebound in crude oil…

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