Bulls Under Siege – Sort Of

Last night I asked, “Does that make Nasdaq, Semis and Transports anomalies or harbingers?”

Reason being yesterday’s break of S1 or the daily pivot support point.

Today, Semiconductors and Transportation continued to decline while QQQs, IWM and SPY did as well.

However, SPY, IWM and QQQs did not break the fast moving averages or S1.

With political jawboning, from Davos and the dollar to Mueller and the Trump’s stated merriment about testifying, the market has become volatile.

As in the picture, two attackers against a herd of bison might knock off one or two of the mammoth animals, but they certainly will not kill off the entire herd.

So, with the market a bit under siege, does the increased volatility mean the market has topped?

To date, the S&P 500 has not closed under S1 for 19 trading days.

Here’s the rub.

S1, like all pivots, moves up or down day by day reacting to the high, low, closing levels of the instrument the pivot tracks.

For example, S1 has been at 280.95 on Tuesday, 282.55 on Wednesday and today came in at 281.78.

Friday, the projected S1 price level is 282.17. There’s your approximate level to watch.

Turning to the dollar, yesterday, UUP the Dollar ETF, closed beneath a key monthly moving average for the first time since 2014.

Today, after a dismal open, UUP rallied. One could say the rally was inevitable because the dollar was oversold. Or, one could say the dollar rallied because Trump talked it up.

However, I say that the bounce, unless we close out January back over 23.45, is a sell opportunity.

The 20+ Year Long Bonds (TLTs) rallied today, as they do when the bulls get nervous.

I would not rule out a double bottom from the lows in October at 122.43 and the low yesterday at 122.54.

For that double bottom to confirm, TLT has to clear 126.00.

If we put it all together, watch SPY against S1 tomorrow. Watch the dollar. And watch the TLTs.

If SPY holds S1, the dollar stabilizes, and rates ease more, most likely assume a couple of bulls got hurt, but the herd remains solid.