Have you noticed that once again the S&P 500 is stuck at 2670? There is this magnet that seems to pull it there so often in 2018. Eventually it will break loose but for now each time we see the index get too stretched to the downside it snaps back here and each time we see it too stretched to the upside we see it snap back here.
Statistically there wasn't much to discuss from Tuesday's trading. We are inching further into overbought territory, although for now the market handled the first trip in there rather admirably. Breadth remains OK, in line. The McClellan Summation Index is rising -- get your glasses, I know you can see it! It even has a decent cushion, whereby it needs a net differential of -1000 advancers minus decliners to turn it back down.
For the market as a whole, I want to explain once again that I am neither bullish or bearish. I simply expect the year to be filled with volatility. That means ups and downs. When we get too stretched one way we should flip to the other way and vice versa. For me to turn decidedly bearish breadth would need to weaken considerably. For me to turn decidedly bearish the sentiment would need to get extreme. And finally, I would need to see the 200-day moving average line roll over.
One thing that is very bothersome though is the action in the Utes. As you may recall I have been bullish on the Utes since early February with a target in the 710-720 area. The Utes did tag just over 710 last week but I was looking for more.
Tuesday's action is a bit curious in that bonds barely budged on the day so the weakness in the Utes is all the more noteworthy. It is my view that recently the Utes have led the bonds. This is a weekly chart but see how the high in the Utes arrived in November, the bonds did not top until about a month later in December.
Even with the recent rally the Utes bottomed in early February and bonds did not bottom until later in the month. This is why the pattern developing on the long term chart of the Utes has me concerned: it's a shaping up to be a potential head and shoulders top.
I would like to think the Utes gather themselves and rally again (since I don't think bonds are ready to collapse; more likely they stick in a trading range for sometime to come) but if they don't, we need to pay attention.
Finally, I know the Euro was weak again on Tuesday and now everyone is chatting up the dollar. The Daily Sentiment Index (DSI) for the dollar is now at 89 (over 90 and it's gone extreme). The euro is now at 7. Under 10 and it's extreme. I'd be shocked if we don't see the euro rally.
