One culture’s positive sign is another culture’s ominous one. One market instrument’s auspicious move from the policy of continuing low interest rates is another instrument’s reason for dread.
Although the symbol on the left has its oldest reference dating back over 10,000 years, the Navajos, as far back as 2000 years ago, used the design to represent whirling logs. It is a sacred image that was part of their healing rituals. Needless to say, in the 20th Century this symbol’s favorable message changed intensely.
Such is the case with the low interest rate environment and what it symbolizes depending upon whose perspective.
Silver and Gold had explosive moves higher after the FOMC annoucement. I purposely used this extremely controversial symbol to illustrate the double-edged sword the dovish Fed’s policy has and will continue to have over time.
Yes, the good news first. The Dow’s ETF (DIA) is holding 183.70. After yesterday’s exploration of a runaway gap now filled, we have an excellent point of demarcation.
Semiconductors (SMH), with its exemplary not one but two runaway gaps, looked a bit dicey early on. However, after the FOMC, she may not have closed on the highs, but she did not give us any pause that an exhaustion gap is in play. At least not yet.
The Russell 2000, a textbook example of rising out of a 10-day consolidation pattern, closed higher still.
So, what’s the bad news?
I like unity. The Modern Family has had so many issues staying together this year. For instance, Retail, literally 70% of the GDP, has relunctantly participated in this rally. At this point best we can say is XRT remains in an Accumulation Phase. With major resistance overhead, it would take a lot more upside in other areas for XRT to be convinced to keep going up.
Transportation (IYT) looks even worse. Although in a Bullish Phase, the price action suggests it’s only there by default. Furthermore, I’d call Regional Banks more of a swing sector. It too has rallied. It too has rallied right into resistance. Too soon to make a bold call one way or another.
