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“For the execution of the journey to the Indies I did not make use of intelligence, mathematics or maps.” – Christopher Columbus

Morning stock market summary

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After three weeks of declines, it was looking like March would only add to the tally.  Thursday’s rally pushed the S&P 500 into positive territory for the week, though, and with futures indicated higher now, equities are on pace for a positive week…if they can get through today.  It’s a relatively quiet day on the economic calendar today with PMIs for the services sector, the only reports scheduled for release.  These are important indicators to watch for signs of whether or not the economy is running too hot, and the international versions of these reports released this morning showed strength. January’s economic data fed a narrative that the economy just wouldn’t quit even as the Fed tried its best to squash it. This week’s data for February like Consumer Confidence, Chicago PMI, and ISM Manufacturing, though, weren’t exactly positive, and they all missed expectations.

One area of the markets not rallying this morning is crypto.  After a 50% rally through its high over Presidents’ Day weekend, bitcoin has been correcting for the last two weeks capped off with a 4%+ decline in early trading today.  After today’s drop, the pullback is close to 10%, and bitcoin is on pace to close below its 50-day moving average (DMA) for the first time in nearly two months.

A break below the 50-DMA is typically considered a bearish signal, but in bitcoin’s case, this type of pattern hasn’t been followed by a clear trend.  During the parabolic runup from 2016 through 2017, any time bitcoin closed below its 50-day moving average after trading above it for at least 50 days it almost always immediately recovered to new highs.  Beginning in 2018, though, bitcoin was slower to recover following these types of breaks.  In three of the four periods since the start of 2018, prices experienced pretty sizable pullbacks at least in the short term, but they were still always followed by new highs.  In dollar terms, last year’s pullback in bitcoin was unlike any other, but in percentage terms, it has been in this type of situation before.  As bitcoin has ‘matured’ it has tended to follow more typical technical patterns versus the early days when all it did was win, so a pause in this year’s rally, at least in the short-term, wouldn’t be surprising.

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