The forthcoming trading week should be less exciting than this week, as the range math for many markets, many symbols of which may be opening near weekly lows, will likely facilitate sideways pricing more so than trending trades. That said, there may be some carryover trending character in the early part of the week before sideways pivot math and ranges that markets may need to digest set in place.
The markets plunged Monday, with the Dow falling nearly 1,600 points in the largest intraday point decline ever. This "February 2018 market crash" caused us to look back at some of the more recent historical market moves.
You can’t say I didn’t warn you. A week ago, markets, especially the Dow, hit 610 days from the August 2015 bottom. Most market participants are not aware of it unless they read me or a small handful of other market cycle experts. The challenge I’ve had is the bigger time windows from last September and October didn’t seem to fire off as usual. It was the first time in 19 years an important window didn’t seem to fire off.
The U.S. dollar rose against major pairs on Friday. The release of the U.S. nonfarm payrolls (NFP) proved to be the much needed shot in the arm after the greenback was under pressure for most of 2018. The job gains were above expectations but more importantly, the hourly wages came in higher, giving the Fed a potential green light to hike 3 or 4 times in 2018. The market is estimating a 77.5% probability of the first rate lift to come in March.
Markets got hit yesterday (Monday) and I haven’t seen that many experts try to explain it. How many realize last Thursday was 610 trading days from the August 2015 low? I saw that, Friday was another good market day and I said under my breathe, “here we go again.” But something happened between then and now. Monday was the first day I’ve seen in recent memory where my 1-minute YM charts had a hard time going up. It’s about time.
The U.S. dollar depreciated against majors as soft Q4 GDP numbers on Friday and mixed comments on the desired strength and weakness of the currency made at the World Economic Forum in Davos put downward pressure on the greenback. The Trump administration is pushing its tough stance on trade, but tried to soften the tone in an effort to be more inclusive.
We began last week by wishing everyone the obligatory Happy New Year. And as it turned out, it has already been very happy for the U.S. equities bulls. This is also true for their international counterparts, even if politically challenged Germany is lagging a bit.
The year started out much as it ended with a nice little buy signal, which developed on Friday the Jan. 29, which was the last trading day of the year but did not kick in until the first trading day of the year. There were several signals, but you can see how it developed on the Russell as we had a 35% retracement at a 1535 low. The party continues.