Midweek Update – Caution!

Let’s make this brief: I did not like Tuesday’s stock market action at all. We had a surge in volume with downside pressure, and heavy selling in the last couple of hours of the trading session. Here’s a two day chart:

It always pays to look at how market leading stocks are acting; my current bellwether is Apple. It has continued to lead the market higher, but yesterday saw an outside reversal on the shares. We are seeing a pattern of selling at each new high.

Commodities, on which I have been urging readers to be careful the last couple of weeks, also put in a reversal yesterday.

What tied it all together? Strength in the US Dollar. We’ve been saying for weeks that rising bond yields and an improving US economy would support the Dollar (though we should note that long term Treasuries did rally late on Tuesday on the weakness in risk assets). Yesterday Marc Chandler of BBH made the same point, and we will need to watch how this moves the financial markets.

My take: there wasn’t enough here to make me hit the sell button, but it got my attention.


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