The Day Traders Journal
September 25, 2016
September 4, 2016
Greetings fellow investors - The Federal Reserve has announced it plans to keep rates on hold longer than previously thought and markets reacted with a sharp move higher followed by a possible "blow off top" on Thursday Sept 22 with most of the gains done in overnight trading while closing at 2177.18 with an intra-day high of 2180 which triggered profit taking.
Fridays open left investors who were holding stocks in the S&P 500 overnight stranded at the open as the index gapped lower and gave way to selling pressure and closed below the widely followed 50 MA at 2163.97 closing just pennies off the lows as systematic deleveraging strategies gradually rebalanced, largely attributable to options expiration.
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Support Levels investors are watching:
Monday investors will be watching for follow through of the selling that began Thursday at 2179.99 and bled over to Friday giving back all gains from Thursdays gap up. A follow through day of selling on Monday would be negative for equities in the short term.
The S&P 500 is certainly entitled to some profit taking after such a sharp advance in the last 10 days as it found support at 2120, Investors should expect a re-test at least the 5 MA (currently at 2156.77) in the coming days.
Looking deeper into the technical underpinnings of last weeks trading what is noteworthy is the CVI reading showing a possible short term exhaustion setting up which may prelude some additional profit taking should we see follow through come to fruition Next week.
From a historical perspective September and October generally show lackluster gains in the S&P 500 to say the least, also the bearish ascending wedge (shown above) could continue for quite some time but will eventually resolve with a sharp downward move.
That said, now that investors have more clarity regarding the BOJ and the Federal reserve rate hikes many investors will likely be putting money to work on any weakness should the S&P 500 re-test key levels such as the 10 day moving average (currently at 2148.21) for a short term bounce, however a test of the 200 MA around the 2060 level can't be ruled out and would be what many financial managers are watching regarding that annoying rising wedge pattern shown above that is glaring chart watchers in the face, until the pattern resolves itself many investors will be hesitant to put money to work knowing that these type of chart patterns have a very high success rate of coming to fruition.
Could oil weigh down the market?
September 28, Opec ministers will convene in the Algerian capital amid plunging demand from China, While Russia is still pumping at record levels, Iran also boosting production in attempt to regain market share. Libya and Nigeria are also coming back online after disruptions causing nearly 800,000 barrels per day going into storage as the global imbalance becomes critical as OPEC members begin to panic over the draw down in oil prices after losing critical technical support in October 2014.
The impact of Oil prices in the US has done little to help consumers as gas prices remain relatively the same despite oil trading for nearly 70% less than 2 years ago while the Oil and gas producers in the US alone have racked up an astonishing 50 billion in debt with a record breaking 58 oil producers filing for bankruptcy protection in 2016 alone costing tens of thousands of jobs in the US along with oil dependant states budgets reeling from the impact with now 102 oil and gas companies in bankruptcy since the beginning of last year in the US & Canada according to Haynes and Boone law firm which tracks this type of data.
Oil prices will likely be much more volatile than usual in the coming days as investors sift through the headlines next week
IMF announces new global currency on Sept 30
The most influencial event that could shake up markets after the close on September 30th is when a scheduled annoucement by the IMF takes place which will likely cause some near term volatiity in global markets which will likely offer investors a lucrative opportunity to exploit this near term volatility.
No Bail out for Deutsche Bank
Neary 2.7 trillion Euro derivatives exposure is coming due within the next few months, DOJ has also fined (DB) 14 Billion which is staggering considering their market cap is just 17 billion - Over the weekend Chancellor Merkel ruled out the notion of any sort of bailout for the troubled bank which now has 42 trillion Euros on the books which could weigh on markets in the coming hours and days ahead as the bank scrambles to raise cash. Investors should be aware that a "bail in" shouldn't be ruled out which could weigh heavily on the markets both in the US and abroad and is a plausible outcome that is likely not priced into the market, investors should keep an eye on this rare event. Investors with exposure to banks have been rotating out of the financial sector (XLF) recently in preperation for the coming financial tsunami that could effect markets not just in Europe but the world over. Although we're bullish we advocate caution at this time
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Wishing you another prosperous week!
