- Posted by DynamicHedge on March 8th, 2014 at 8:30 am
The week started with a large gap lower on news of Russian troop movements into the Ukraine over the weekend. Rumor was that China back Russia’s move, and it looked pretty bleak there for a minute. Russian markets went into free fall, but North American markets couldn’t stay offered past noon. Even a garden-variety gap down usually at least has some follow thru to the downside. As usual, the market was tipping its hand.
On Tuesday, Putin called an end to the “military exercise”. All very “routine” he would have us believe. And just like that, a simple de-escalation completely removed the risk-off tone. The S&P 500 gapping higher by 1% and both gold and oil traded lower. Tension continued to ease over the course of the week except for the hawks on Twitter steadily beating the war drum.
When a market can overcome bad news and displays relative strength during geopolitical fear it is a very strong signal.
With the exception of the jobs report, economic data took a collective mulligan via weather-adjusted expectations. Jobs data was strong, and a big increase in temporary help indicates the trend will likely remain higher.
Market sentiment is not rabid but definitely on auto-pilot. I can feel it in my own analysis. Is even a point of looking for bearish data? People are buying stocks based on the last 12-month returns and thinking there is no way markets will ever go down. The reality of a stretched and rising market is that you can keep buying but only with eyes wide open to the fact that any day could be the top.
One bearish scenario I uncovered with some help from the Stocktwits stream (h/t @ZorTrades) revealed a high probability bearish setup in $XLF. Financials have led the market to new highs and a break in a leading sector could tip the market lower. Worth watching.
— Dynamic Hedge (@DynamicHedge) Mar. 7 at 12:15 PM
Cumulative $NYAD is considered one of the broadest measures of breadth and is practically sprinting to the upside.
$OEX stocks above their 50-day MA is not near overbought and still rising. A failure from here could signal a break down in mega caps.
It’s still quite obvious which way the trend is heading. Lower left to upper right.
“A bull market is like sex. It feels best just before it ends.” – Barton Biggs
Not sure how much better things can get for bulls! I do know that as long as the blue line is above the green line, bulls are in control.
Posted by DynamicHedge on March 4th, 2014 at 3:57 pm
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DynamicHedge is an equities, futures and derivatives trader based on the West Coast. He runs a long/short opportunistic relative-value strategy within a proprietary trading group. More