ESP Tuesday: Everyone’s bearish, leaving the market vulnerable to good news.

Waiting patiently for the all-clear signal.

Image courtesy of forexgdp.com

Stocks are experiencing an encouraging reversal this morning. But a lot can change in a hurry. Still, one of these days the market will rebound decisively, as there are just too many bears prowling. Most importantly, the Fed needs to address the market’s liquidity problems.

Another day with the familiar tariff headlines leading to the now familiar trading pattern of falling stocks with simultaneous high levels of fear - CNN Greed/Fear Index (GFI) at 19 - bond yields falling, and major indexes deteriorating along with the market’s breadth. Yet, as this morning’s turnaround shows, things can change in a hurry.

We continue to hold stocks that are working, remaining patient and building up our shopping list with potential candidates while our cash levels rise. Meanwhile we still own a handful of stocks which are holding up nicely. These are in the natural gas, pharmaceuticals, and housing market with an emphasis on single home rentals and well placed geographical strategies to go along with attractive dividends.

Market Update – Any Good News Could Push Stocks Higher

The New York Stock Exchange Advance Decline line (NYAD) is testing the support of its 200-day moving average while trading close to an oversold RSI reading. Thus, the short term is uncertain. Yet, given the market’s tendency to respond to news aggressively, any good news, such as something from the Fed which suggests liquidity is about to improve.

The bond market is sending a clear message to the Fed. Inflation is the least of your worries. You have a burgeoning liquidity squeeze. The U.S. Ten Year Note yield (TNX) has moved below its 200-day moving average decidedly, leaving the 4.5% resistance level in the dust. If this week’s employment data shows signs that the federal job cuts are taking hold, we could see a test of 4%.

The S&P 500 (SPX) is stuck inside its trading range between 5450 and 5750, as traders wait for tariff news and the employment data due out on Friday.

Certainly, the natural gas sector (XNG) is delivering excellent relative strength. The Natural Gas Index (XNG) is nearing a major breakout. So, in this issue, I’m adding a new natgas stock to the portfolio.

Thanks to everyone for your ongoing support. I really appreciate it.

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