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Traders' Espresso: A.M. Edition (02/16/18)

|Includes: Invesco CurrencyShares Japanese Yen Trust ETF (FXY), IWM, USO
Summary

Greed replaces fear as the equity recovery hits full stride; major U.S. indices post their 5th straight day of gains; VIX has fallen below 20.

Dollar, gold and oil up; yield on the 10 year Treasury note stabilizes below 2.9%.

Asian indices broadly higher, with the exception of Australia marginally down 0.08%; European bourses at this hour are higher across the board.

Promises of a deal on immigration reform are broken as the Senate rejects bipartisan compromise; gridlock may be just what this "Goldilocks" economy needs.

The University of Michigan Consumer Sentiment survey will be in focus today; housing starts and building permits come in hotter than expected.

Though still elevated, the VIX has now fallen below 20.  U.S. indices have posted their fifth straight day of gains as market turmoil in the rear view seems to fade away.  The $DJI and SPX are back above its 27 day moving average.  In my estimation the NDX and COMP look most overrun (which is not to say they cannot go higher), while the RUT looks the most underbought. 

At this writing the dollar is up, along with gold, oil and the yen.  The rise in the yen may be slowing down as markets seem to normalize.  The yen has hit a key level of technical resistance that it will need to blow through for this rise to continue.

At this hour the index futures are a bit soft; the NASDAQ futures are down 0.33% with the S&P, Dow and Russell futures down about 0.25%.  Pay close attention to price action in the first fifteen minutes of trade to set tone and direction for the day.

Gridlock in the Congress may be just what this "Goldilocks" economy needs, reducing the risk of an economic overheating as President Trump's pro-growth agenda is stalled.  The latest move occured in the Senate, with promises of a bi-partisan compromise on immigration reform broken as Senators vote the measure down.

The results of the University of Michigan Consumer survey for February will be released at 10:00 AM ET; traders will be watching to see if recent market turmoil has spilled over into the broader economy.  Housing starts and building permits, released at 8:30 AM ET, came in hotter than expected.  Index futures initially rose on the news, then started to weaken after about 5 minutes trading lower.  Could it be that this data has re-ignited fears of inflation derailing the "Goldilocks" economy?

My focus going in to today will be IWM, USO and FXY as long possibilities, with QQQ as a possible bear move.  For a broader discussion of the technicals behind these potential trades, check out this morning's video edition of Traders' Espresso.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in IWM, USO, FXY over the next 72 hours.