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Notes to myself, possibly of interest to others.
-- Bill Northlich

Monday, March 25, 2019

Jeff Saut on Recent Market Activity


Jeffrey D. Saut, Chief Investment Strategist | (727) 567-2644 | jeffrey.saut@raymondjames.com

So the question du jour yesterday was, “Hey Jeff, was that it? Was that the pullback you were looking for?” My answer read like this: "Well, the S&P 500 pulled back from an intraday high of ~2853 to an intraday low of ~2812 for a 1.4% decline. Additionally, it pulled back into my often mentioned 2800 – 2830 support zone. However, I will not be able to determine if ‘That was it’ until I run my indicators tonight (that would be last night). As of this writing, it is too early (5:00 p.m. on Thursday) to run those indicators, more on that tomorrow morning when I warp into my trading turret around 4:30 a.m."
... Also of interest is the continued outflows of money from the actively managed mutual funds, which is a sure signal that is a wrong-footed move. Indeed, as one particularly bright portfolio manager emailed me yesterday:

"If the economy is as weak as many are concluding after the Fed’s very dovish message yesterday then commodity prices should be rolling over and credit spreads blowing out, but that is definitely not the message those market signals are sending you. It seems as though the Fed is encouraging risk taking again. Like they are bringing back the punch bowl and asking us all to take another sip. So in my book you use any short term confusion in the Fed’s messaging to add to risk: global equities, below IG credit, and EM equity and debt. In my humble opinion I think this ultimately sets us up for further melt-up in equities."

Plainly, I agree.

So on Wednesday, on set, CNBC asked me, “What shocked you about today’s FOMC communique” I responded that in the 55 years I have been observing markets I cannot recall ANYTIME the Fed has telegraphed that it would not be raising interest rates the rest of the year! If somebody reading this can recall such an event, please email me. And for those that think we are headed for a recession, please take a look at the Bloomberg Financial Conditions Index (chart 3 on page 3). *

Yesterday’s Dow Wow, as reprised by my friends at the sagacious Lowry’s Research Organization:

"The DJIA and S&P 500 roared back today from the losses suffered over the prior two sessions with gains of 0.84% and 1.09%, respectively. However, market internals failed to match the price gains as Up Volume was a mediocre 65% of total Up/Down Volume while Advances were a more respectable 72% of total Advance and Decline Issues. Similarly, Buying Power gained just 1 point today, matching its recent rally high at 178 although with its 2 point decline Selling Pressure reached a new reaction low at 93."

Well, it’s Friday morning around 5:00 a.m. when trading tends to become very quiet, barring news. Few want to buy at artificial levels; fewer want to sell because they fear another surge could appear. The window for an important upward energy surge opens up again late next week with Q1 performance gaming. As I write, the S&P futures are off 12 points as German bund yields drop below zero. There is not much to say about what might occur and little reason to speculate on probable outcomes. This suggests that prices are going to consolidate a bit here around the highs, and then after the next polarity flip – coming next week – start pushing higher

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