Friday, April 13, 2018

Stocks crossed the streams this week. Just sayin'

If you follow charts (and it sure seems like the coked-up traders make decisions based on them), you’ll note that the 50-day moving average of the S&P 500 went below the 100-day moving average yesterday. Known as one of a number of types of “death crosses”, that’s often seen as a bearish signal on the stock market.

Despite a good rally on Thursday, the S&P stayed below its 50-day and 100-day averages, and despite a higher opening Friday, stocks retreated when it got near the 50-day average, and went back down. This kept the stock market in the relatively tight range that it has stayed in for the last 4 weeks.

If you look at that chart, it’s intriguing to see that the S & P slipped below the 50-day moving average on Monday, March 19, driven by the initial revelations that tens of millions of Facebook users had their information sent to pro-Trump data outlet Cambridge Analytica without their consent. And unlike the previous declines, the market kept dropping all that week and has stayed down below that 50-day mark ever since.

I’ve been wrong on the lasting power of the 9-year bull market the last few years, so I won’t say much now. But when you see the combination of the cross on the chart and the Federal Reserve and CBO both predicting higher interest rates and inflation, I do wonder what kind of catalyst can drive things higher. Even today's strong earnings from Wall Street banks were largely met with a shrug, which indicates that expectations of strong profit growth through corporate tax cuts are “baked in the cake”, and that it's more likely that earnings news will drive things down if they fall short.

And I will say that seeing the 50-day and 100-day “streams” crossing each other on the way down brought this to my mind, and now I’ll bring it to yours.

1 comment:

  1. I came across the Economic Distress Indicators map for 2017 which allows zooming in to see individual counties and noticed Milwaukee county placed significantly below most other counties, even compared to cook county in Chicago. Several other counties including Ashland, Forest, Adams and Juneau placed poorly. Nationwide, the map shows the great difference between the wellbeing of people who live in the coastal tech cities and most other areas, especially rural and rust belt cities. It will be interesting to see if the situation improves or worsens when the 2018 numbers are released. The second link shows a corresponding article with interesting stats about how few jobs and funding go to the bottom 60% of US counties. At some point, it makes me wonder if the great divide will eventually cause the country to break apart like the Titanic did. Here are the links: