Selling slowed on Thursday though still moderately negative

Thursday, March 26, 2015 -

Stocks continued to sell on Thursday, bouncing back and forth across the unchanged line and settling moderately negative for the day.

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Stocks continued their downward slide in early trading today, but by mid-day the financial fortunes reversed and the slide turned in to a choppy churn across yesterday’s closing prices in an attempt to forge a support level. And while stocks managed to halt their slide, closing prices were still in the red, but well off the lows for the day.

The Dow dipped 40 points (-0.2%) to 17,678, the Nasdaq slid 13 points (-0.3%) to 4,863 and the S&P 500 edged down 5 points (-0.2%) to 2,056. The NYSE finished at -0.3% and the small cap Russell 2000 at -0.15%.

In addition to trying to avoid a technical correction in the market, investor attention has suddenly been focused on Middle East disruptions just as our President is completing a private nuclear deal with Iran – same say to be announced this weekend.

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Geopolitics in Focus

It wasn’t a good day for stocks but it wasn’t a bad day either, with most of the world highly focused on several important geopolitical events: the pilot-suicide passenger plane crash in the French Alps, a chaotic government overthrow in Yemen by Iran-backed Houthi rebels, aggressive military action from Saudi Arabia to deter these same rebels from moving northward into Saudi territory and the Obama presidential theatre of an imminent nuclear agreement with Iran – that bypasses Congress.

I imagine that many traders just didn’t have the heart to trade the markets today after learning that the crash of Tuesday’s Germanwings flight was intentional. French prosecutor Brice Robin indicated this morning that the co-pilot of the Germanwings flight that crashed in the French Alps brought the plane down deliberately. Why, nobody knows yet.

The news weighed on the airline sector especially hard even though Robin claimed there are no grounds to consider the crash as a terrorist incident. Well, not the kind of terror we are accustomed to, anyway.

The other kind of terror appears to be broadening its hold throughout the Middle East, naturally raising other dears among financial investors who clearly see a broadening war spread in this area. If the warring conflicts get more serious then we could see equity selling accelerate, particularly if President Obama’s nuclear negotiations with Iran reveal surprising leniency on sanctions combined with cooperative compliance with Iran’s continued nuclear ambitions.

Both houses of Congress have warned President Obama about signing any kind of nuclear agreement without constitutional consent of Congress. In a slap to their face, President Obama appears ready to move to the United Nations with the Iran nuclear agreement and with a war crimes suit against Israel in an attempt to circumvent Congress and force Israel to submit to a United Nations demand for a Palestinian treaty.

With Iran now controlling Baghdad in an effort to help wrest Iraq from ISIS terrorists and the U.S. administration in a solo nuclear agreement with Iran much of America is questioning who are our friends, who are our enemies . . . and who are our traitors.

In many ways it looks like this administration is hell bent on making Iran our new partner and Israel our new adversary – the U.S. Congress and the American citizens be damned!

One positive from all this negative Middle East turmoil is that crude oil moved notably higher on the news of the escalation of the conflict in Yemen and Saudi Arabia, with crude for May delivery jumping $2.22 to $51.43 a barrel.

S&P 500 Backtest

For many months the market has maintained an upward triangle pattern, falling below the support line of the triangle once in October 2014 and multiple times in this New Year, 2015.

50326SP500BackTest

Each time the S&P 500 has fallen below the support line it has managed to climb back into the ascending triangle – above the bottom support line . . . until this week!

For the first time in many months the broken support line at the bottom of this rising channel has acted as resistance and turned prices back. Could this be the beginning of a long-overdue intermediate level correction?

Has smart money been here many times? Is dumb money finally getting the picture?

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