BROAD STOCK MARKET TRADE ALERT (3:15 pm EST)
The broad stock market opened with a dramatic gap down from yesterday's close with the DOW losing over 400 points at the opening bell. This was no doubt due to Wall Street's worries over global trade wars and an announcement in the news that Chinese officials plan to impose tariffs of up to 25% on 106 American products. Interestingly, another news story released around 11 am by some media outlets highlighted the fact that on Wednesday St. Louis Fed President James Bullard expressed his opinion (in a speech to the Arkansas Banking Association) that:
"...The U.S. central bank doesn’t have to raise interest rates further, as monetary policy is close to “neutral.” "
Perhaps this dovish sentiment from one of the Fed presidents calmed the markets as equities are recovering strongly from this morning's plunge and are now (around 3 pm) pushing above yesterday's close. This is a very bullish sign. Because this morning's drop did not bring the S&P 500 or NASDAQ below their Feb. 9 lows, our intermarket bullish divergence signal is still valid. We are also now leaving last week's reversal zone so it looks like the sub-cycle low is in, and this market should now rally into next week's reversal zone. For all of these reasons I am going to cover my short position in the broad stock market today. We should have no loss on this trade (and perhaps a very small profit) as we are close to where we sold short last Tuesday.
I will comment on the other markets later this evening.
The broad stock market opened with a dramatic gap down from yesterday's close with the DOW losing over 400 points at the opening bell. This was no doubt due to Wall Street's worries over global trade wars and an announcement in the news that Chinese officials plan to impose tariffs of up to 25% on 106 American products. Interestingly, another news story released around 11 am by some media outlets highlighted the fact that on Wednesday St. Louis Fed President James Bullard expressed his opinion (in a speech to the Arkansas Banking Association) that:
"...The U.S. central bank doesn’t have to raise interest rates further, as monetary policy is close to “neutral.” "
Perhaps this dovish sentiment from one of the Fed presidents calmed the markets as equities are recovering strongly from this morning's plunge and are now (around 3 pm) pushing above yesterday's close. This is a very bullish sign. Because this morning's drop did not bring the S&P 500 or NASDAQ below their Feb. 9 lows, our intermarket bullish divergence signal is still valid. We are also now leaving last week's reversal zone so it looks like the sub-cycle low is in, and this market should now rally into next week's reversal zone. For all of these reasons I am going to cover my short position in the broad stock market today. We should have no loss on this trade (and perhaps a very small profit) as we are close to where we sold short last Tuesday.
I will comment on the other markets later this evening.
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