Major averages were up on mixed volume but finished roughly midbar after encountering some weakness late in the day. Both the S&P 500 and NASDAQ Composite ran into resistance at their respective 10-day moving averages.
The financial ETF XLF was down the most on Wednesday, then bounced weakly on Thursday and Friday while the 20-year US Treasury bond ETF TLT has moved up. Both are signs the market is seeing lower odds of an economic recovery via Trump's policies. Along with that come two major headwinds: the slowing GDP and a Fed that has little choice but to keep hiking rates.
Still, the market could find another shallow floor, or may have already found such a floor as QE out of major global central banks remains a powerful force. QE "rescues" markets from having meaningful corrections. Since Feb 2016, the S&P 500 has only had two mild corrections, 5.9% and 5.0%, both in 2016, despite the growing headwinds and political issues.
The concern remains that President Trump's pro-growth policies have less chance of being passed given the allegations from FBI ex-director James Comey. Perception plays an important role such that should it become more bearish, the headwind could cause the market to trade sideways as we saw such behavior exhibited on the S&P 500 from Dec-2016 to Jan-2017 and March-2017 to present. Of course, the market could also enter into a more meaningful correction.
Watch your stocks, obey all sell stops, and keep a fluid stance to profitable opportunities as discussed in our daily Focus List and regular VOSI VooDoo Report updates. As we have highlighted, the undercut & rally is a formidable weapon that captures strong gains in a short time, as well as the voodoo setups which allow one to buy at risk levels typically less than 2-3%.