Trade Tiff Trauma Tantrum Tariff Tension Trade War. Say that fast followed by the word Obliviate and perhaps all this drama will disappear. If it were only that easy.
Trade Tensions. Trade War Worries. Tariff Tension. Whatever label the financial media wants to use for today's rout in the stock market, it remains just another named excuse to sell.
It's a Monday, and these early week rollovers are almost becoming a 'thing'. Remember we are just weeks removed from the Great Italian Banking Crisis of 2018. Asset prices were tumbling that notorious Tuesday after Memorial Day.
And then a furious rally ensued. Just another named excuse to sell.
Last week we had a trade tantrum Tuesday, with stocks falling after renewed. Trade War Worries. The market recovered those losses and rallied into the end of the week.
This week those worries continue. The market fell sharply today, however, despite a strong late day reversal indices closed markedly lower, with the Nasdaq leading the way closing down over 2%:
Let's start with the the bearish perspective. As I highlighted heading into this weekend, momentum was starting to turn south for both $IWM and $QQQ. They are also both in the midst of a 3 day 'losing' streak.
Today the nasty move lower has triggered momentum sell signals on $QQQ and $IWM. Three consecutive down days for $QQQ and/or $IWM is quite a feat for the bears, although we aren't in 2017 anymore Toto. These swings into negative momentum are a great tool for helping to spot turning points.
Also under the ETF surface the bigger tech names look to be rolling over after hitting fresh record highs.
$AMZN and $NFLX just two of many names that look vulnerable to more profit taking.
Both have seen the premiums soar with today's move, making it more costly to trade for downside. As such if the tech rout looks ready to continue tomorrow, there are other names that offer a better risk/reward for downside, I'll get into them tomorrow in my pre-market video.
On to the bullish perspective.
The $DIA has reached what has been a great bullish reversal point previously. Also $DIA held the 200 DMA today.
Above that sets the DJIA up for a decent reversal over the short term.
As I said heading into this weekend, it is not rare to see the $DIA rally in the face of tech and/or small cap weakness. We've seen some nasty tech pull backs the last few years 1 and 2%+ to the downside while the S&P500 and DOW trade flat to higher.
S&P500 futures came right down to that round 2700 figure at todays lows. That is the same figure that acted as resistance in late 2017. Today it acted as support.
Also the $SPY breakout channel was revisited today with the price action finding support at previous channel support and of course held that $270 level into the close.
$IWM closed above its breakout trendline from 2008.
and back to $QQQ for a second. That $170 level that was so tough to break, is now acting as strong support. That remains a key number to watch in the days ahead.
and finally the VIX. We've seen this all too often. And perhaps this time it will be different. Just maybe..... but I doubt it.
Here we are again ,just in the span of a few months, with another big spike up in the VIX. Maybe the 4th time is the charm..... but I doubt it. These huge rips higher, today the VIX was almost 50% higher, have reversed rather swiftly in the past. Will it be different this time?.... probably not.
The trade war narrative isn't going away soon enough, and yet neither did the North Korean nuclear war drama, and pretty much every other named sell off over the years. In the short term Tech remains the most vulnerable. We are much closer to a bottom or may have already hit it today on the $DIA and $SPY. $QQQ and $IWM need to respect the support for this week to turn right side up. $QQQ $170 and $IWM the long term trendline it closed above today.
A hold of support for the DOW could make a turning point, as such I'll be looking for entries into the names I covered in my weekend post, as well as a few others I will cover in tomorrows pre-market video. We could see a rotation back into the blue chips while tech finds its footing.