ST Trend Down in Counter-trend Pullback as Bonds Rise Sending 10-year Yields Below 3-month Yield...

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 QQQ, SPY, DIA, IWM Bull Flag pullback in Rally Week 13…

 

                   (click image to enlarge)

After its highest close since Oct 8, the SPX, -1.90%, opened lower and sold off 54 points on Friday.

After the European March PMI of 51.3 came in lower than 51.8 estimate, stocks fell in
Europe and demand for bonds, on Friday, sent yields lower resulting in the 10-year treasury yield 2.455% falling below the 3-month yield 2.48%.  Many (naïve, silly or fear mongers?) again pointing to an inverted yield curve as a sign of an impending recession.

This is perhaps an irrational fear, recession from an inverted yield curve, since inverted yield curves are not causal, rather they are effect of factors that cause a recession.  It was not rising short-term rates and other structural issues that caused the inversion, rather the buying of long term bonds that caused the 10-year yield to fall below short-term rates.  Since the structural issues that cause a recession were not the drivers of Friday’s inversion, this inversion cannot be logically viewed as predictive of a recession.

Notwithstanding the above, equity selling did occur, fear rose and institutional hedging/insurance put buying sent the VIX above 16.  Traders fear on Friday was real, but that is not the same thing as an impending recession being real.  Technical traders must respond to how markets trade, while realizing that defensive tactics, at this moment, are counter trend trading.

As a result of Friday’s close near the low of the day, we expect a high probability that equity markets will trade lower on Sunday evening to Monday.  Currently as a bull flag we will look for selling to exhaust and the trend to bounce.  Until then, defensive countertrend tactics are appropriate.

FWIW, 

DJ

The DJIA, closed down 460 points at 25,502, led by weakness in BA, NKE, GS, MMM and UNH. 

One of eleven sectors was higher on Friday, led by utilities XLU +0.72% and staples XLP -0.13%.

SPY down 5.48 at 279.25 on 122.6 million shares, 59% above average volume. Down on higher volume.

VIX up 2.85 at 16.48

Oil down .90 at 58.97

TLT up 1.91 at 124.86 on 13.0 million shares. 

VZ +2.52%, KO +0.92%, led the DJIA, 4 advancers, -22

TIF +3.15%, CAG +2.44% and SJM +2.43%, led the SPX.

PEP +1.07%, MDLZ +0.51%, WLTW +0.17%, and DLTR +0.02%, led the NDX.

Long term up trend intact.  3-day short term trend is down.

Up:

Down: DIA, SPY, QQQ, IWM,

Breadth weakened on Friday, as decliners led 2,362 to 562 on the NYSE and led 2,538 to 523 on the NASDAQ

The SPY MFC green line is in the upper zone, pointed down at 87 and is short-term counter-trend.  Time to be counter-trend defensive.

Uptrend sectors: XLRE, XLU, XLC, XLK, XLI, XLY, XLP,

Neutral sectors:  XLB, XLV, XLF, XLE,

Down trend sectors:

The 6-month intermediate trend is sideways.  The ten-day trend is up.

3-month Intermediate Term Market Trend: Up

3-day Short Term Market Trend: Down

4 of 100 NDX stocks closed higher on Friday.

65 NDX stocks are above their 30 DMA:  CDNS, CTRP, PYPL, TMUS, XLNX, MELI, ULTA, VRSN, INTU, ADI, KLAC, SNPS, MDLZ, PAYX, WLTW, CSX, ALXN, GOOGL, VRSK, ADP, CHKP, CSCO, FOXA, CMCSA, JD, AAPL, PEP, CHTR, INTC, MSFT, COST, QCOM, XRAY, DLTR, ILMN, ISRG, AMZN, CERN, INCY, NFLX, NVDA, SYMC, TXN, ASML, NTAP, SBUX, ATVI, IDXX, LBTYA, NTES, TTWO, LRCX, ALGN, AMAT, AVGO, MAR, ORLY, AMD, CELG, EBAY, WDAY, EA, FISV, MU, SWKS,

NDX Stocks to Watch on Monday:

Moving Above 30 DMA = 0

Moving Below 30 DMA = 15

ADBE, ADSK, AMGN, BIDU, CTAS, CTSH, FAST, FB, HSIC, LULU, MXIM, MYL, NXPI, PCAR, WDC,

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