Yesterday the markets continued to chop around in a large range, but after another big down opening that saw the the Indexes drop to DOW 24,780, S&P 2682 and NASDAQ 7080, the Indexes turned higher and worker their way to the days highs at DOW 25,300, S&P 2726 and NASDAQ 7170 by 11:00am. The markets then spent most of the day, trading in a fairly quiet non-threatening range, meaning around Support at DOW 25,000, S&P 2700 and NASDAQ 7100 and a close around these levels, would have been considered a victory. Unfortunately, a late day rise in Yield to 2.85%, sent the Dollar spiking higher, setting off a drop in Commodities and taking the air out of the markets and closing all the Indexes down on the day.
It seems that the late day spike in Yields was the result of the Senate’s Budget Deal that would keep theGovernment open, but would spend an additional $300 billion Dollars that we don’t have and that means that the Treasury Department, will be selling Billions and Billions of NEW DEBT, to pay for the Tax Cut, Infrastructure Plans, the Budget Deal and lets not forget the President’s Parade. Now all these Bonds for sale, will flood the Bond markets with paper, pushing prices lower and sending Yields higher, even if the FED leaves Rates alone. So the Equities market, easy straight up run in 2017, will not be so easy in 2018, simply because the new Republican Administration in Washington, has decided to cut taxes and spend money we don’t have, instead of cutting the Deficit, that will in the end, end the rally.
Technically we have had a big decline, followed by a big rally, so what’s next? Since I am a big fan of usingStochastic patterns, I believe that we are forming a positive “W” pattern and after one more leg down, we can look forward to a decent rally. Unfortunately, due to the recent increase in Volatility, the next downleg, may be brutal, but if the Indexes can stay above DOW 23,500, S&P 2575 and NASDAQ 6700, the rally could see a return to DOW 26,000, S&P 2800 and NASDAQ 7400.
Overnight the Global markets were mixed, but in early trading it looks like we are in for another down
open with the DOW off about 100pts. The Yield on the 10 Yr is off a couple of ticks to 2.83%, the Dollar is higher and Commodities are slightly lower. We have the Weekly Jobless Claims today and we have to see if the Senate Budget Deal will get past the House, so keep an eye on the wires.
Today’s Early Markets
DOW Futures— down 100 London – down 47.58
S&P – down 1000 DAX – down 127.76
GOLD—$1311 Apr Nikkei — up 245.89
OIL— $61.50 March HangSeng — up 128.45
DOW RESISTANCE 25,300 S&P RESISTANCE 2720
DOW SUPPORT: 24,500 S&P SUPPORT: 2640
$NASDAQ RESISTANCE 7100
$NASDAQ SUPPORT 6900