Market Indexes: Major U.S. Equity Indexes were mixed; DJIA new ATH
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle
FED Posture: Quantitative Tightening (QT)
The morning started out with the futures higher, supposedly due to good earnings from Caterpillar - a member of the Dow Jones Industrial Average, and an unchanged policy on interest rates from Mario Draghi of the ECB. The market as measured by the S&P500 Index had closed yesterday at 2,838; and the cash market opened up +8 points to 2,846 and continue to trade up to 2,848. At that point, the market reversed again, and prices traded lower - closing the opening gap again. Prices traded down to 2,834 (or -14 points from the high of the day) and then turned higher again.
In the price turn higher, only the DJIA made a new all time high - invalidating the potential diagonal in the process. Neither the S&P500, nor the ES futures, nor the Russell 2000 futures or the NASDAQ 100 futures made a new all-time-high in the process. The Dow Transports sank. With three waves down in most markets yesterday, we have labeled that wave as a likely a:3 wave of a flat or triangle fourth wave, as shown in the hourly chart below.
|S&P500 Cash Index - Hourly|
Prices then traded sideways to lower, and did pierce the lower channel boundary again, but made nothing of it this time although a new intraday low was made at 2,831 (or about -17 points from the high of the day). Prices again reversed from the low, and traded up into the close, which was marginally higher than yesterday at 2,839.
So, with the marginally higher close the Doji candle from yesterday was not confirmed with a closing lower candle today.
After the ECB Meeting, at the World Economic Forum Treasury Secretary Steve Mnuchin said, "he welcomed a weaker U.S. Dollar." Then, later in the day, President Trump said, "I want to see a strong Dollar", and he said that the Treasury Secretary's comments were misinterpreted. The U.S. Dollar rose, the Euro sank, and Crude Oil came of it's highs on the latter comments. Regardless of any motives behind the comments, the U.S. Dollar made a hammer candle in what could be a truncation low on the hourly time scale. Like all candlestick patterns, it is best if it is has the validation of a higher closing candle in this case.
In the S&P500 hourly chart, above, the EWO is still red and declining, so a larger fourth wave may still be in the offing. But, like all fourth waves (and like the DJIA today), new highs are possible within fourth waves.
We hope to have more on that later. But for now, have a good start to your evening!