Market Brief – Tuesday 10/16/18

After being unable to trade over its 200-day moving average, the S&P 500 “gapped” above it at open and continued to move higher all day as the equity short-sellers were flushed out. Trading volumes, while higher than they have been, were not high enough to suggest today’s move higher was due to a large number of buyers.

The DJIA closed over its 100-day moving average, where it has been struggling lately, the Nasdaq-100 is still in between its 100- and 200-day moving averages and the Russell 2000 remains well below its 200-day moving average.

Despite the big move in stocks, Treasury yields fell on the day as today’s new 2-month Treasury auction saw a huge number of buyers bidding for a piece of the action. Most of today’s bidders were domestic buyers. Trading volumes on Treasuries have been dropping, which is a sign the short-sellers are likely exhausted. Look for the Treasury bulls to step in soon to push yields lower. I have a hunch the last jump in Treasury yields were due to the CTAs going ‘max short,’ but I don’t have any evidence to validate that.

Industrial production numbers came in at +0.3% MoM for September, which beat analysts’ expectations of a +0.2% MoM gain for the fourth month in a row. Wage growth is tied to industrial production growth, so workers should be optimistic for higher wages in the future.

Physical gold and the gold miners made another attempt at their respective 100-day moving averages and were rejected. This is setting up a retest of the 50-day moving average, which if confirmed, is a bullish signal. I also happen to know the CTAs are ‘max short’ gold right now and I happen to know where their first trigger point is.