We’re now little more than twenty-four hours away from one of the most critical periods of the year. Macro Man is finding it increasingly difficult to contain his excitement at some of the price action he’s seeing, but until we navigate tomorrow’s ECB tender and Fed announcement, he’s trying very, very hard not to go all-in too early.
Still, it was hard not to notice yesterday’s breakdown in the SPX, which registered its lowest closing price of the month, as well as appearing to confirm other indices’ break down below their 200 day moving averages.
But to date Macro Man looks like he’s got plenty of company in keeping some powder dry, as volumes have not picked up to any notable degree, which is what we would expect to see in a true trend reversal/distribution phase.
Eventually, price action will need to attract greater volumes for Macro Man’s anticipated scenario to materialize. Still, one sector in which volume has picked up appears to be company insiders; Trimtabs reported yesterday that the insider sell to buy ratio has risen to 22:1 this month. The phrase “watch what I do, not what I say” springs to mind.
Elsewhere, the commodity complex seems to have rolled over en masse, prompting Macro Man to dust off a few of his cherished puns for the first time in a few months. Among the more notable breakdowns was in gold, which cratered through a well-tested trendline.
Regardless of the medium-term prospects for the yellow metal, there is clearly an embedded long position, perhaps from macro punters but quite clearly from retail ETF buyers. If commodities are going to push lower, than one would have to suspect that gold could, if you’ll pardon another commodity pun, melt down, if only temporarily.
It’s just another interesting piece of the potential “green shoots to brown weeds” transition with which markets are flirting at the moment. How far and how fast this is effected will depend to some degree on whether markets pump up the volume after tomorrow’s central bank event risks.