Authored by former fund manager and FX trader Richard Breslow, via Bloomberg,
Traders have been seeing cans all over the place just waiting to be kicked.
And yesterday, early positioning seemed to reflect an optimism born from a don’t fight city-hall mentality. No one wanted to get caught yet again leaning left when some headline would send everything to the right. Ignore the news and trade the spin. The market was making up its own forward guidance.
In pre-market trading, tech stocks such as Micron Technology and Apple are ticking along at pre-market session highs, along with big banks Citigroup and Bank of America. Caterpillar, too, is sitting at the highs of session.
Today has an entirely different feel to it. Unlike recently, when we went from maximally bullish to just the opposite in rapid pace, we’re now in a deer in the headlights environment.
Absolutely every move looks tentative and unconvincing. Even the volumes going through show no discernible pattern. People seem to be trading when they have to.
That doesn’t make it easy to trade and the information value derived from what you are seeing shouldn’t be taken at immediate face value. A slew of fairly mediocre numbers from Asia and Europe came as afterthoughts. Which is understandable, but it doesn’t mean they should be binned and forgotten. They confirm a trajectory of economic trends which should be troubling and deserve to be watched very closely. Global bond yields aren’t back down here by mere happenstance.
On that score, and not to be overly dramatic because the U.S. numbers have been clearly outperforming those of its peers by any measure, I’m putting the NFIB Small Business Optimism Index on my radar. It’s still at very lofty levels, to be sure, but its been a very good indicator of the national economic mood since the 2016 election and seems to be stalling a bit at the same great height as it did in 1983 and 2003.
There’s no immediacy as the latest iteration was only released yesterday and it’s a monthly number. But file it away, because the Russell 2000 isn’t trading well, despite the recent bounce.
Aside from event risk, and as I contemplate why 10-year Treasuries are trading at a yield I didn’t expect to see, there are two technical levels very important to follow as they are close.
The dollar index managed to hold above 97 overnight and is trying to stay above the 97.20 pivot. With the stronger dollar being an integral part of the current investing narrative, the battle lines have been drawn.
The S&P 500 is also playing the drama queen as it continues to toy with its technical pivot at 2720.
Which side it chooses is a useful way of gauging the intraday mood.
Lastly, I know everyone is bullish on oil despite its impulsive collapse. I keep reading commentary from people being stopped out by P&L necessity and doing so begrudgingly. If I was looking for a level to key off of, I’d use the 38.2% retracement level of the whole move up starting Feb. 11, 2016. We broke through it yesterday.
And just for the record, remind everyone that the rally started with WTI at $26.05.
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