S&P 500 Starts Down Leg – Will it Continue?

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For at least right now, resistance was held and the S&P 500 finished down 2.16% for the week. The good thing the bulls have going for them coming into this week is that the bears were not strong enough to close the week on the lows. On Friday morning, the S&P 500 opened down and the bulls were able to reverse the very short-term downward trend just after lunch.

Just about anything equity related was down for the week. International stocks were for the most part down and US stocks were down with the exception of the Utility Index. The instruments that showed some life were US fixed income instruments, the US Dollar, gold, and silver.

The US Dollar and Gold relationship is interesting because they typically have an inverse relationship. Gold has advanced steadily since October of 2018 putting pressure on the dollar even though the dollar has held and even advanced since October although not as smoothly. Now the dollar and gold are pretty darn close to the top of trading ranges. I can’t see how they both can be winners longer-term. So we want to see how they respond and if one of them can get a strong break to the upside which could signal to the temporary demise of the other.

Now that we could be in the beginning of a leg down in the US equities markets, we want to see how far the bears can take the S&P 500 or if the bulls will simply aggressively buy. We were stopped out of our Technology position earlier in the week since a sell trigger was issued at resistance. Now we are waiting on a further pull back in the US equities markets before initiating additional positions on that end. As far as possible purchases in other areas, we will be looking for some fixed-income positions to put to work. Have a great week!

Warm regards,

Adam Straseske, CMT

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