Mid-Week Market Outlook: Bears Punch Bulls in the Face

Brandon Van Zee

U.S. equities finished sharply lower today. it was one of the five worst daily percentage losses of 2018 for several stock market indices.

The S&P 500 (NYSEARCA: SPY) finished lower by 3.24%; but despite the big drop, its intermediate posture remains bullish. The Russell 2000 (NYSEARCA: IWM) was down by 4.40% and now has a bearish intermediate posture.

The Dow Jones Industrial Average (NYSEARCA: DIA), NASDAQ Composite, and S&P 500 all closed with bullish intermediate confirmation signals; however the signals may be viewed as less ideal because the momentum line finished at an extreme reading below 5.

Because all four major stock market indices closed below their 30 day moving averages, the “3 Green Arrow” signals have been eliminated, making it a more difficult environment to be a trend trader.

The Russell 2000 remains the weakest link among equity indices from a longer-term weekly chart perspective due to its bearish 10-40 moving average crossover.

Market volatility spiked today as expected when fear enters the marketplace ; the VIX closed higher by 26%.

Mid-Week market Video – December 4, 2018

Some additional insights from today’s stock market outlook video:

  • Some sections of the yield curve have become inverted over the last 48 hours, but the key 2yr/10yr government bond yields have yet to invert.
  • U.S. Treasury bonds and gold finished in positive territory today because they were viewed as relative safe havens.
  • Like their U.S. counterparts, most foreign stock markets struggled today; India seemed to be most resilient with a drop of only 1.27% for EPI.
  • Utilities were one of the only areas of the U.S. stock market to see buying interest with XLU closing higher by 0.07%; this confirmed strength we’ve seen from that sector for the last 2 months on the Sector Selector tool.
  • Financial stocks got hit the hardest and closed lower by over 4%, likely due to worries over profit erosion with the flattening yield curve.
  • Our trade application example focused on selling a put on BlackRock (BLK) due to its price pulling back to a level that has created a historically-attractive dividend yield for long-term investors.

 

Get market insights, stock trading ideas, and educational instruction over at the Market Scholars website.

Twitter:  @BrandonVanZee and @Market_Scholars 

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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