Market Brief – Monday 10/15/18

The major U.S. stock indices tried to fight to get back over some of their key moving averages but ultimately closed below them. Foreign stocks sold off in overnight trading as global liquidity dries up. Treasury yields were mostly flat as short-sellers were unable to drive yields any higher.

The S&P 500 fought to stay over its 200-day moving average but closed below it. The 200-day moving average is significant, as a close over it indicates last week’s move down was a short-term correction.

Based on the recent data on the positioning of the CTAs, more selling should occur tomorrow. To make matters worse, the S&P 500 closed below the top end of its bull-market channel, suggesting prices are going to drop again. The next line in the ascending bull-market channel is around 2,860, which if hit, would lead to another round of selling by the CTAs.

The Nasdaq-100 bounced off its 200-day moving average but found sellers throughout the day. With Netflix reporting earnings tomorrow, any bad news could send the Nasdaq-100 below its 200-DMA. The DJIA tried to move above its 100-day moving average but also failed. The Russell 2000, which is trading well below its 200-day moving average, found some buyers today but faded some of its gains going into the market close. Today’s price action is not a sign of strength.

September’s retail sales data came in at +0.1% month-over-month, which was below analysts’ expectations of a +0.6% print. Adding concern to the data was the huge drop in restaurant data, which showed a massive -1.8% month-over-month in restaurant sales. Many Americans spent their tax money on fuel, movies and eating out, so this is a major potential leading indicator that the tax cut has passed through the economy. If the tax cut has, this is not good news for retailers going into the holiday shopping season.

Physical gold and the large gold miners lurched higher but failed to close over their respective 100-day moving averages. Today’s move is indicating the beginning of a bull-market rally for gold and the miners. Bulls want to see prices fall to confirm the lower supply zone or the 50-day moving average. Bears want to smash prices well below either point. Should either occur, it will set up a buying opportunity.

If gold tries to move up to its 200-day moving average, don’t be surprised if it takes a hard reversal. Rallies begin when the price of a security crosses upwards through its 50-day moving average and is confirmed when prices retest and hold their 50-day moving average. Our opportunity is coming!

Agricultural commodities moved higher as prices closed over their 100-day moving average. I believe we are seeing the beginning of a bull market in the agriculture space. There was a triple price bottom, followed by an upward movement through their 50-day moving average, which was followed by a successful retest of their 50-day moving average. This is exactly what the beginning of a rally looks like.