Bears Attack. Bulls Defend.
Stocks were experiencing a strong selloff on Monday right through lunch. Then Trump trade chief, Peter Navarro, hit the media circuit to “clarify” what was being reported by the Wall Street Journal which was a cessation of Chinese investments into U.S. technology companies. Now normally, Larry Kudlow would have been the administration’s mouthpiece, but he has been recovering from a heart attack. So, the most protectionist person in the administration had to come out as less protectionist. An odd day for sure.
Stocks rallied over the final 60+ minutes, mitigating some of the losses. You can see below what looks like the same chart from yesterday. It basically is except that we now have a full day of trading for Monday and it’s clear that the bulls defended the widely watched 200 day moving average which I wrote about on yesterday.
Notice that this is third time in 2018 where prices have visited and kissed this line. Again, the line itself has no magic. No mystical powers. It’s just very widely watched and followed. And sometimes, it can become a self-fulfilling prophesy as computer-based algorithms gun for price to move down to the line to entice others to take action. On Monday, the bulls defended that area.
Anyway, as I wrote yesterday, I still do not think we have seen the bottom from which prices will rocket to all-time highs. It seems like we need some more work on the downside. While the masses were fretting about the tech bloodbath, I explained on Nightly Business Report last night that there are absolutely no indications that yesterday was anything more than one bad day, certainly not the end of the tech bull market.
In fact, as you can see below on the far right of the chart, price just declined to the horizontal blue line which is where bulls and bears fought a number of previous battles during 2018.
The pullback doesn’t appear to be over. There could or should be an attempt at a bounce even though the final week of June doesn’t have the greatest track record. If so, watching the sectors that lead will say much about what lies ahead. The signs for Q3 remain very positive.