n this past weekend’s missive, “Stuck In The Middle (Range) With You,” I discussed the view from John Murphy via Stockcharts.com that the S&P 500 may have more downside to come. To wit:
The daily bars in the chart shows the S&P 500 retesting previous lows formed in late October and late November. And it’s trying to hold there. The shape of the pattern over the past two months, however, isn’t very encouraging. Not only is the SPX trading well below its 200-day average. The two red trendlines containing that recent sideways pattern have the look of a triangular formation (marked by two converging trendlines). Triangles are usually continuation patterns. If that interpretation is correct, technical odds favor recent lows being broken.
If that happens, that would set up a more significant test of the lows formed earlier in the year. Other analysts on this site (besides myself) have also been writing about that possibility. That would lead to a major test of the viability of the market’s long-term uptrend.”
Yesterday, the market opened flattish as concerns over the “Huawei Incident” continue to linger. Via Zerohedge:
“China warned both Canada and the US over Huawei CFO’s arrest, warning of ‘retaliation’ and ‘further action’, with the US countering with ‘hard deadlines’ and concerns of ‘predatory behavior.’)”
But it isn’t just China that is the issue.
“Here’s a non-exhaustive list of potential risk-off drivers hanging over Monday’s open (as succinctly summarized by Bloomberg’s Garfield Reynolds):
- China summons U.S. Ambassador over the Huawei case
- Trump Chief of Staff Kelly to leave, amid a welter of fresh Mueller developments
- China reports weaker trade and inflation data
- May pushes ahead on Brexit vote despite Cabinet, DUP opposition
- Soggy U.S. payrolls, though not soggy enough to stop a December Fed hike
- France protests intensify, raising concerns of economic damage”