The Closing Look
On Thursday, stocks continued to rally as they attempt to repair their post-brexit sell off. The wild swings we have seen over the past five trading days are unprecedented and just illustrates how all the interference from global central banks continues to distort markets. Tuesday morning, Mr. Draghi (European Central Bank President) said Central Banks need to do more which basically gave a green light to central banks and investors to buy stocks. Then, earlier today Mr. Carney, (Bank of England President) came out and said U.K. will need more stimulus post Brexit. That effectively juiced stocks helping the indices have a strong end to the month and quarter. In other news, the S&P rating agency cut the rating on E.U. to ‘AA’ after Brexit.
Gary’s Thoughts: Thank you Bank of England…and let us say, there was actually some juice in some of the moves today. A few names outside defensive areas were actually strong. This feels like more than end of quarter shenanigans.
The plain fact is this; the key sectors I look at are extended, but most are above the 50+ day MA,
….cept, xlf, it’s 50- day MA .
I Look inside xlf, I see stocks ready to drop,, on the short intraday charts, and if they do, they will drag xlf backwards, not upwards.
If xlf is falling, the market could easily fall with it.
Problem: The sectors I look at are 50+ day MA , so any pull back, …. resulting from this extended rally, could easily be arrested at the 50+ day MA line.
Pull back stops.
Or, those sectors break down thru the 50 day, and we fall.
So, if you look at it, there are only 3 ways this market can go; up, down, or flat…