Yesterday a very strong relief rally followed the decision by China and Russia to accept new sanctions against NK, which also allowed markets to postpone any urge to sell in response to political and commercial tensions with China.
The consequence was an immediate reversal in exchange rates (US$/Euro and US$/Yen.)
US/Japanese rate differentials also reverted higher.
Gold weakened and the mining sectors were sold.
Momentum stocks (many are Non-SP500 stocks) as well as the NQ8 sector attracted money.
Financials showed a strong reversal as they were in deep oversold territory.
Index investors had to also follow the move and buy the market.
The 20DMF reverted to a long position because its OB/OS signal crossed above the +30 level. This level is a protection level in case the model is in short territory but did not fall below the Oversold level of -70, preventing an oversold buy signal to be issued.
There were some negative divergences in the Futures as the bouncers did not attract much money.
Conclusions:
FOMC is tomorrow and we are still expecting the tax deal to come out. Hence, these events could easily fuel prices higher.
There are however some negative sectors such as transport, Steel (Chinese trade war is off for now,) Medical software and car parts.
Below are some short ideas. Note the SU negativity. I suspect that Warren Buffett has started to unload his position.
