The Wall of Worry. Are Stocks and Indices Exhausted? Or Will They Continue Forging a Path to Higher Ground
The major indices, and stocks have reached resistance in record time, while Congress will no doubt initiate a new “Wall of Worry” as Michael Cohen testifies over the next three days. Anticipate a media circus, if the past is any precedent.
For the past nine (9) weeks, the major indices have only rested twice, for more than a few days, before headinh higher. This week might be a good time to sit on the sidelines, as politicians appear ready to derail the gains to date.
NYSE Composite at Resistance
The NYSE Composite has started to show signs of exhaustion. RSI is overbought and HiLo percent is trading near extremes. The 50d has turned abruptly, with the 200d at 12,504.26. These are targets should we see any hard closes (at LOD) over the next three days.
Fibonacci pivots were taken at the 50d retest and the December lows, with the high pivots for both centering on Monday PHOD. Confluence points to a potential zone at 12,300 (+/-), if weakness persists.
NYSE Advancing Declining Stocks – NYAD
Declingin stocks took the lead yesterday, as the NYAD begins to inflect near highs. Out of 3,037 stocks trading, decliners edged out advancers by 511, with 100 stocks unchaged. New highs continue to edge out new lows by a decent margin, which suggests there are still some pockets of relative strength.
We will consider moving more profits to cash and hedge our positions if we get a hard close at the low of the day. We will consider, cash, bonds (TLT/AGG/SHY) index puts, SH, SQQQ, SDOW, SPXU and DOG as hedges to our portfolio.
My first thought this morning? What a perfect time for a politically motivated media circus. It’s the last thing the markets need as a distraction. We try to avoid trading with a political bias, as only price matters. If price action starts to take out the lows, position accordingly. We’ll do the same.
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