2:43 p.m. The market’s feeling good after Federal Reserve Chairman apparently blinked—the Dow Jones Industrial Average is up more than 500 points—but is it feeling too good? Jonathan Krinsky, chief market technician at Bay Crest Partners, contends it is.
So what does Krinsky see that has him worried? For starters, there is the so-called NYSE Tick Index, which measures the number of securities trading on an uptick minus those trading on a downtick. At 12:05 today, just after Powell started speaking, it hit 1,648. That is only the 12th time since 2004 that the index has traded over 1,600, according to Krinsky. It’s also coming after three days of gains, a situation that’s only happened eight times before. The S&P 500 has averaged a drop of 0.6% for the five days after such occurrences. “After a few days of rallying, an extreme high TICK can indicate a final buyer capitulation i.e. ‘get me in,’ or shorts ‘get me out,’” Krinsky explains.
But there is more than just the extreme tick readings. Krinsky also notes that the S&P 500 will hit its downtrend resistance at around 2750, and then the 200-day moving average at 2761. “Our sense is that this rally stalls out somewhere in that zone in the next day or two,” Krinsky writes.
That next day or two will coincide with U.S. President Donald Trump’s meeting with Chinese President Xi Jinping on Saturday. And how that tête-à-tête goes could go a long way toward determining whether Krinsky’s pessimism is prescient or just a bunch of voodoo.
Write to ben Levisohn