Saturday, August 15, 2015

Currency Battlestar

The Market Trend Model (data sheet) remains with a negative bias as the stock market indexes moved sharply lower and then sharply higher during the week. The net result at the end of the week showed the indexes little changed from where they began on Monday. Despite the ongoing four-week downtrend for stocks, many market indexes still remain within 5% of their respective all time highs.

The excuse for last week's sloppy price action appears to be the surprise devaluation of the Chinese Yuan (article).  While the market reaction to the newly announced China policy was swift and violent, it was short lived. However, the Chinese currency move now forces Janet Yellen and the Federal Reserve to face another hurdle for raising interest rates as future inflation expectations fall (article). 

The Nasdaq (chart), the Nasdaq-100 (chart), and the S&P 500 (chart) all continue to dance around their 10-week moving averages, while the Russell 2000 (chart) sits just under its 40-week moving average.  The last four weeks have definitely seen sellers in control of the market, yet sellers have made little progress in pushing the stock market indexes substantially lower.

As I stated last weekend, "For now I expect the market's relatively trendless "slop 'n chop" price action to continue until Janet Yellen and the Federal Reserve solidly commit to a transparent interest rate policy (at least for the remainder of 2015)."  As usual, I remain mindful that anything can happen from one day to the next.