February 10th Market Update – Moving averages are important in a trendless market

There has been a good deal of support across all asset markets in the wake of the Federal Reserve’s change of policy. For those looking to trade, I would predominantly trade from the long side, but exceptions do exist.

Stocks & AMZN

Stocks are supported here, but it is precarious as we see the S&P 500 emini clinging to the 100-day mva.  If there are any trade problems, proposed shutdown talk, etc., I see a test of the 50-day mva within a short time frame. We are clearly overextended in the short term and I have sold off all but two long stock trades. The sharp reversal in the Dow lends support for the Nasdaq and S&P. The Dow is above all moving averages.

ES e-minis clinging to 100-day support.
The same goes for the NQ
The Dow futures are pulling up the NQ and ES
I observe Bezos’s personal behavior, effective loss of half his shares, and the possible pullout from NYC, and wonder what else is going on. Bezos is in his mid-50’s. Is he coming unglued?
Bonds

All the major 10-year sovereign yields continue to fall in the aftermath of the Fed reversal. This trend will continue to surprise for bond bulls. I would not be concerned about yield inversions as the Fed is managing all aspects of the UST yield curve. Below I present a weekly TN futures for perspective.

There is plenty of upside to this chart. If we eventually test the 200-week mva, we could see much lower yields. I think it will happen.
At 4.41%, the 30-year mortgage rate should fall again further over time.

We need to get used to permanently higher priced asset prices, as I believe that yields are well supported at lower levels. If you doubt this, read my February 7th piece, Will the U.S. government ever go bankrupt? Stop reading the fear porn from Martin Armstrong.

Real estate in the lower-half of any region will continue to receive ample support as the tax changes will not affect these sectors. Moreover, rent rolls continue to rise and any program designed to help renters only burdens them. Investors should note this. Supply is not being added to.

Oil

It’s the same old song in a trendless market. HOWEVER, the XOP looks weak and closed poorly for the week. I have to conclude that oil will probably be pulled down as a result going into this week. The only save is that the drillers closed off their lows on Friday as the stock averages rebounded. (Note the red hammer candle on Friday)

The XOP is a dog. It could not keep the already low 50-day mva. Oil troubles ahead. Tomorrow’s performance is VERY important. Another down day seals the deal for oil’s fate.
CL is brushing off the drop in the drillers (for now). If the XOP cannot retake the 50-day mva, I see more problems here.
The dollar
Despite a dovish Fed, the dollar has been well supported. I look for firm support going forward. Thank you oil industry.

Traditionally, the dollar would be fading with the recent Fed actions, and in the wake of the Fed turnaround, I expected a test of the lower 90s on the DXY. This never came about as a growing domestic oil supply and a relative economic outperformance both support the USD for the indefinite future.

Gold

I cannot get a clear picture on intermediate gold as the COT reports lag. However, the latest report from about a month ago showed a larger-than-expected Commercial short covering as gold climbed. Perhaps gold is better supported than the neutral rating I have given it over the past week or so.

Gold has had a nice run and it clearly is up against chart resistance. A strong dollar doesn’t help, but these are trying times
Bitcoin

All meaningful rallies are met with strong selling. Nothing has changed on my opinion. This level could be maintained for a while, like the 6,000 level was for several months.

Could a test of the 100-day on the BTC futures? Possible, but unlikely.