Friday, September 24, 2021

Morning Note: Testing Support

Quite the week for stocks!

While the S&P 500 has rebounded impressively from Monday's dive, it's still just flirting with breakeven (white line) on the week.

And still a ways to go yet to defy the long-term averages (September down) for the month:

Now, if you're a market technician, among other things you are keenly focused on the green line in the daily chart below; that's the 50-day moving average. It has served as key support for the index since coming off the bottom of last year's 3-week bloodbath:

Here I'll zero way in. Note today's candle attempting valiantly to hold that line that was recaptured yesterday:

Here's what can happen when the market breaks that 50-day MA barrier with momentum (triggering strategically-placed stop losses, etc.). First instance on this 4-year graph occurred early October 2018, resulting in a ~19% drubbing. The second around the covid lockdown, seeing stocks lower by ~35%.

My point? Nothing really, just something we're looking at. Not the least bit actionable given our long-term approach to markets. That said, as clients and regular readers are aware, we do indeed see much froth in the present market setup (having, by the way, zero to do with the look of the S&P's 50-day moving average); which has us actively hedging against the potential for something meaningful to the downside.

Asian equities leaned red overnight, with 11 of the 16 markets we track closing lower.

Europe's ugly this morning, will all of the 19 bourses we follow trading down as I type.

U.S. stocks are mixed: Dow up 59 points (0.18%), SP500 up 0.09%, SP500 Equal Weight up 0.33%, Nasdaq 100 down 0.34%, Nasdaq Comp down 0.37%, Russell 2000 down 0.52%.

The VIX sits at 18.40, down 1.18%.

Oil futures are up 0.50%, gold's down 0.09%, silver's down 0.99%, copper futures are up 0.30% and the ag complex is down 0.21%.

The 10-year treasury is down (yield up) and the dollar is up a not-small 0.35%.

Led by MP (rare earth miner), KRBN (carbon credits), bank stocks, energy stocks and metals miners -- but dragged by uranium miners, solar stocks, wind stocks, silver and emerging market equities -- our core portfolio is off 0.25% to start the session.

While we all have our views about how the world is supposed to work, my how we can't allow that to blur our vision when it comes to making investment decisions!
"...whenever human judgement is involved, it also introduces the potential for bias."

"More information can actually make matters worse for people who take the wrong attitude toward prediction, and use it as an excuse to advance a partisan theory about how the world is supposed to work."  --Nate Silver

Have a great day!

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