Sellers Counterpunch

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Market Moves

As the S&P 500 index (SPX) closed 0.75% lower today, the battle between bullish buyers and bearish sellers characterized the first two trading days of 2020. The sharp selling nearly wiped out yesterday’s gains, although buyers stepped in today midway through the session to prevent a rout. These two sessions are likely a microcosm for the year ahead.

Meanwhile, as the Chart Advisor has been pointing out, the Volatility Index (VIX) has been telegraphing the possibility of selling activity now for the past two weeks. In fact, not only the VIX but the VIX futures showed a similar increase, signaling the possibility of higher fluctuation in the days to come. The chart below shows how risk managers tipped their hand in the pricing of VIX futures.

Markets Anticipate More Bad News

The headlines regarding the U.S. actions in Iran may have been the trigger that roiled the markets in early trading today, but the reality is that nervous investors have been looking for protection and diversification in their portfolios for a while now.

As the chart below points out, the price of gold, as tracked by the iShares Gold Fund ETF (GLD), broke out of its downward trend and has moved strongly higher over the past two weeks. Bond prices appeared to have closed above their downward trendline just today based on the price action of the iShares 20+ Year Treasury Fund ETF (TLT). The fact that both of these closed higher for the session indicates the possibility that investors are expecting more bad news in the near future.

One Company Bucking the Trend

Investors have become increasingly interested in the future of General Electric Company (GE). GE shares nearly doubled over 2019 and began the first two sessions of 2020 in favorable fashion. The chart below shows how shares broke out of recent resistance by starting below that price and closing above it on both of the past two days. This buying enthusiasm shows that investors are likely to keep pushing the stock higher in the months to come.

The Bottom Line

Stocks closed lower today, showing signs of investor nervousness that equalized yesterday’s enthusiasm. Investors seem to be preparing for a seesaw year in 2020. On the other hand, investors do not seem to be ambivalent about GE shares.

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Source: Investopedia

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