Stock Prices Pause At SMA

I’ll add some charts later.

Right now, just a note that the price recovery in the stock markets has “paused” at the Simple Moving Average stack.

This is a “battle ground” behaviour as the longs and shorts fight for dominance.

At present, it looks like no upside “punch through” happening, and that typically means a “fall away” to the downside.

We’re at least 3 days into it, which is a bit odd (though not unheard of). Usually a ‘punch through’ happens fast at the pause at the SMA stack (sometimes only one day); it is usually just a couple of daily ticks before it falls again if going down. Then again, we had a holiday and they change how folks behave (major money players will sometimes be taking extra days off and delaying their participation).

So at this point, it is looking more like a failed recovery at the SMA stack, but the indicators are a bit mixed still. Any major drop day will be confirmation of the failed recovery. Only a hot streak up through the SMA stack will mean a return to the bull run market.

IMHO, it’s about 60% odds of a return to the downside, and 40% odds of an upside breakout. Every day spent stuck here or dropping increases the odds of a renewed drop. Only a clear break above the SMA stack will mean a return to the rising market and further bull market action.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money and tagged , , . Bookmark the permalink.

22 Responses to Stock Prices Pause At SMA

  1. RickA says:

    I put some cash into the market when the S&P dropped 10% from its high.

    So we are for sure going back down.

    I guarantee it (based on past experience).

  2. Larry Ledwick says:

    Just a reminder of how the system is gamed from April of 2014.

    https://www.wired.com/2014/04/michael-lewis-on-how-the-geeks-rigged-the-stock-market/

  3. u.k.(us) says:

    So, now you are a bookie ? :)

  4. H.R. says:

    I did hold some roll-over money in cash in case of a drop ; not much, just 5%.

    Earnings look to be good so my dividend income looks stable or positive. I rolled over when the Dow was in the upper 17,000s so it has a bit to go before it starts eating into my capital.

    A question for the Gentlemen and Ladies of the Club: If the market takes a dive, how low will it go?

  5. John F. Hultquist says:

    “. . . how low will it go?”

    I’ll stick to predicting tomorrow’s temperature.

  6. chiff says:

    The boys are collecting inventory to mark up sometime after the Fed meeting. Did we finish an ABC down and now are ready to rock or do we have one more downdraft to finish it off. I’m thinking one more down as the dollar hit a lower trendline and is bouncing. The bounce could be significant and given the recent correlation with market the trend looks down for a bit. After that off to the races. Commodities should be hit pretty hard.

  7. E.M.Smith says:

    Not a bookie as don’t “make book” (i.e. take bets).

    More a handicapper who writes a race column…

    @H.R.: Just look at prior market major drops. Same percentage. Usually about 1/3, occasionally about 1/2. ( A “correction” is about 1/10 to 1/8 ).

    @Chiff:

    It’s really complicated right now what with the $US moving, and all the other Central Banks farting around, and The Fed promising to tighten “real soon now”, and … The Carry Trade is unhappy as the $US dropping makes it a poor choice as lender of nearly free carry money, the Yen is not much better, and the £ and € are in a pissing match over Brexit. So despite interest rates being very low, the threat of global currency devaluation / risk is making the carry trade more risky. Then there are all those global banking regulations busy tying them ll up. And their capital.

    So it’s a very real problem to “go to cash” when it isn’t clear who’s cash is safe & sound.

    I think all the confounders are why we are having this longer time at the SMA point. Even the computer programs are floundering on little direction setting information.

    @Larry:

    Computer driven high frequency trading is one of the major problems. Allowing unlimited shorting (no uptick rule anymore) is another. Eliminating real market makers in favor of computerized ones with a human tiller is another. It’s just something of a mess. Essentially they’ve made the market more like it was in 1928 but running at warp speed.

    Part of why I’ve backed off a lot on my volume of trading (doing more long term swing trade and trend trades over months to years) and part of why I do more with ETFs as the large baskets are harder to game (though the HFC boys still do). Frankly, I’ve though of just moving my trading to FX and bonds…

    Oh, and nobody checks that shorts have a covering borrow anymore (well, someone might, but lots of stocks have had more total short than actual shares in existence so…) And them some computer decides to short something hard and in a few minutes can short sell more stock than is in the market. Thus we get 1000 points down in a couple of minutes. All thanks to Congress from the 1980s or so IIRC.

    However:

    “Sure the game is crooked, but it’s the only game in town.”

  8. chiff says:

    Things are never complicated on the market for me. I keep things simple because I’m not smart enough to make them complicated. :) What I find most important is where one buys an equity. I have a list of a hundrerd or so stocks that I wish to own but I won’t buy them until it reaches a buy area. That area arrives when a previous support level is broken and the volume is not on the heavy side. Latest example is OCLR. Put it up on a yearly daily chart and look at the Nov2 2017 bottom @ $5.96 with a heavy volume spike. On Feb2 it broke that level with much lighter volume. I call that an accumulation areaso I buy. OCLR great balance sheet and earnings potential .
    I’m currently waiting on a bunch of gold miners.

  9. chiff says:

    KMI is in a buy zone. Below 15 is an aggressive buy. One can sell an Apr 16 put and reduce their cost per share or just collect a nice premium if it isn’t hit

  10. Larry Ledwick says:

    Interesting item on Zerohedge

    Stock buy back – – – good move by the companies to improve value and ensure they have a dominant position in their own stocks, or just gaming the system burning money to improperly inflate stock prices and then skim the profits as they dump their own stocks at a peak?

    https://www.zerohedge.com/news/2018-02-25/day-reckoning-nears-goldman-projects-record-650bn-stock-buybacks

  11. chiff says:

    Larry, many companies that are paying a 3+% dividend can borrow for less and buy back their stock . It adds to earnings per share and is cashflow positive. That is until rates rise.

  12. chiff says:

    Got filled on $16 KMI

  13. Larry Ledwick says:

    Good summary of where Trump is at, and where he is going in over hauling our economy and trade systems.

    https://threadreaderapp.com/thread/970403280349220865.html

  14. E.M.Smith says:

    I need to get the charts added. Was going to do it last Friday but…

    The pattern is “not good” as we have a “lower high” on the major averages, the SMA stack is 1/2 rolled over, and prices have halted at the SMA stack. With weak up volume and stronger down volume, DMI and MACD both ‘red on top’ and MACD below zero, just not good.

    It’s not a confirmed “get out” but it certainly is not looking like a “be in”. I’d call it a ‘trade out’. Move to a faster time frame and swing trade until final confirmation of a down leg or resumption of bull market trend. Though, perversely, the 10 day 15 minute chart says it’s a current up trend for the trade, though 2 days into the swing up, it’s too late to buy into that swing and more likely time to sell out of the swing trade.

    I’m just seeing lots of risk and not much reward at the moment.

  15. chiff says:

    Precious metal stocks breaking out above down trend line with MACD crossover. Should run for a few weeks. BTG SAND SPVEF HL long

  16. chiff says:

    PG in buy zone. Below $75 aggressive buy zone. One can sell a May18 75 put for $1.04 giving an 8% rate of return if it’s not hit. If hit it reduces the cost and the divvie is 3.68%

  17. Larry Ledwick says:

    Starting to get reactions to proposed tariffs on steel and aluminum from industry.

    https://www.cnbc.com/2018/03/07/us-steel-reopening-plant-and-bringing-back-jobs-ceo-on-trump-tariffs.html

    Hidden in all this discussion is the result of what these tariffs will do, not only will they provide income to the Federal Government for importation of commodities not replaceable by local production but also the sales of locally produces metals will yield tax revenue from sales and the salaries of the workers producing these goods will also add revenue to the Federal Government coffers.

    I have no problem with protective tariffs necessary to ensure a necessary minimum level of production capacity of strategically important materials, as out sourcing all your production capacity is a setup to be blackmailed for access to that strategic resource.

    As the US becomes the worlds leading oil producer in the next few years it will greatly increase our flexibility on a lot of issues. Same goes for steel and aluminum if we can produce essential quantities of those materials we can’t be held over a barrel for those resources.

  18. jim2 says:

    I’m for fair trade, as Trump puts it. But more important is the leverage the tariffs will provide.

  19. p.g.sharrow says:

    Over a hundred years ago the young Federal government was made wealthy on tariffs and land sales. The United States went from a backward wilderness to a world power behind trade barriers that protected it’s rapidly expanding industrial might that the internal freedom from regulation allowed rapid adoption of innovation.
    Modern educated insist that open free trade enriches all, BUT!, when unequal trade agreements are made to enrich one nation at the expense of another. Such arrangements were generally inflicted by force of arms but in the present era the Globalists inflicted these unequal arrangements on the Rich Super Power in the name a helping hand to the poor nations of the world. A number of these “poor” nations have successfully waged an economic war on the U.S. to drain her of wealth and power. This must be addressed before the ability to recover is lost.
    New Wealth is only created through Agriculture, Mining and Manufacturing. All other activities of “value added” are wealth accumulation schemes. Shipping jobs to China to get cheaper priced goods is a fools errand at the National level. Reduction in gross national wealth creation means less wealth available to purchase those cheaper goods. Unemployed workers require support while creating no new wealth. Regulators that go overboard to restrict the real wealth creators in favor of clean neat commercial business are destroying the wealth base that their civilization is built on…pg

  20. E.M.Smith says:

    @Chiff:

    Thanks for the pointer at PMetals. I’ll have to take a look… (I’ve been lazy lately and just doing other things…)

    @Tariffs:

    Watching the Globalists go BSC (Bat Shit Crazy) over Trump Tariffs is enlightening. Oh how they squeal when their ox is being lined up for soup…

    Yes, you two have nailed it. It’s a negotiating leverage tactic. China has been given a mercantilist free pass (to the detriment of western workers globally) with western economies being sacrificed on the altar of “Free Trade”. What has been missing from that altar is the point that really FREE trade is free in BOTH DIRECTIONS. Having a free trade one side and mercantilist on the other side is called “Losing to predatory practices”.

    Now lets look at just how much this tariff is going to cause prices of everything to skyrocket as the Globalists are shouting from all corners. Chinese steel:
    https://www.alibaba.com/showroom/mild-steel-price-per-ton.html

    Running about $300 to $600 / ton depending on form and processing. So a 25% tariff would be about $75 to $150 / ton. Now lets say you buy a HUGE American Car that weighs over a ton so it has a ton of steel in it.

    Think you will even notice that $75 to $150 in the sticker price of $40,000+ ?

    I’ll leave it to others to figure out the cost it adds to a steel soup can as I am too lazy to do the math out to some $0.00000 lots of digits point…

    In short, the actual cost of the tariff in the end use products is going to be nearly nill.

    Now it MIGHT show up in something like a giant ship… but those are made in foreign shipyards anyway, with the exception of military gear that is made with domestic production anyway…

    But as a big Sword Of Damocles hanging over come Chinese Mercantilist heads, it’s a Winner!

  21. E.M.Smith says:

    @PG:

    I’d add a couple of other “real wealth” creators as well:

    1) Transportation. I’m wealthier if I can buy my steak for $5 at the local store instead of $4 at one that costs me $2 to get to it and back. Location does increase value. NOT needing to fetch water is an increase in my personal freedom and “wealth” in that the time can go to other uses. So pipelines and similar transport is also a value add and thus wealth creating. That savings of labor time and effort is in some ways the definition of “wealth”. Same goods, less effort.

    2) Builders. A kind of manufacturing, yes. But generally building structures is set out separately.

    3) Research, Development, and Invention. Intellectual manufacture if you will. Finding a new way to do something can create a great deal more goods from a lot less time, effort and money. Being able to use a word processor instead of typewriter / white-out has made me much better off and lets me create far more writing with less work (and fewer errors more easily fixed). Learning to use glass & light to communicate instead of copper gave us MUCH more communications far cheaper and with much less copper demand.

    There may be others, but those are the ones that pop out to me.

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