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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

?+ 7/10/20

?+ 7/24/20

Up 6/5/20

Sub-Intermediate

Up 7/31/20

Up 7/17/20

Up 8/1/20

Short term

Up 7/6/20

Up 7/21/20

Up 8/1/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Monday, December 31, 2012

Daily update 12/31

The buy signal I mentioned Friday night kicked in today.  Here is the daily SPX chart.


SPX closed slightly above the 18 SMA, but does not have a green candle.  This bounce clears the oversold condition.  There was an increase in volume despite the day before a holiday.  Just keep in mind that this particular buy signal is simply an oversold condition.  It does not always lead to big rallies like the last one did, it can be a one day wonder type up move also.  Lets look at the SPY 195 minute chart.

 
SPY does not have green candles on this time frame either.  It is also still below the 18 SMA.  Very high volume today.  I am sure that was helped along by all the deal talk we got today.  However, we still don't have a deal.  I don't see enough here to say we have made an important low yet.  Will the market follow through on the upside next month?  I have absolutely no idea.  What will the next sound bite out of Washington be?  I don't see how the market can price in a deal we don't have.  To be honest, unless the objective here is to crash the markets, I don't understand what they are doing.  They keep telling us that going over the fiscal cliff is very bad.  However, they never got all the key players together for a meeting until last Friday afternoon in the oval office.  What were they doing for the last several weeks?  I think I was correct all along.  The Democrats do not want a deal.  We will see if that holds up.

Bob

Chicago PMI

The latest Chicago PMI ticked up this month.  This survey is heavily influenced by the auto industry.  There should be an uptick in that industry due to around 250k cars needing to be replaced after Sandy.  Here is the main index.

Source

Even with the uptick the chart is still in a downtrend.  There was mixed  news in the sub indexes.

The new orders surged.  Their charts are pretty hard to see so I am going to show the last six data points they have in the report.


There was a big surge in new orders which I am pretty sure is likely Sandy related.  That was the good news.  Next is the bad news.

Here is the employment index.


The employment index slipped into contraction mode for the first time since the last recession.

This is clearly a mixed data report.  I think there is a pretty big Sandy affect in a lot of data recently.  It may be hard to get a true read on the national economy for a few more months.

Bob

Friday, December 28, 2012

Daily update 12/28

No follow through from yesterday's reversal.  Here is the SPX chart.


Are people finally getting worried that there may not be a deal after all?  Volume declined from yesterday despite the sizable down move.  Here is a peak at the 195 minute SPY chart.


We are a bit oversold now.  If they do come up with some kind of deal this weekend there should be some room on the upside to celebrate it.  If they don't, then I guess we will see how the market reacts.  I am  not even going to try to predict what happens on Monday, LOL. 

I have thought the new high data on StockCharts.com has been screwed up for a while.  I recently have compared it to some other sources on a daily basis and indeed it does seem to be way high.  I looked into TradeStation symbols to see if they had the data.  They do and it looks more reasonable.  I created a chart for the blog with both the highs and lows on it versus SPY and there are some interesting things.  Here is a look at the chart.  I will be talking about it periodically when it shows us something interesting.


Notice that the Nov. pullback saw a much bigger spike in new lows then the spring correction despite the much higher level of the indexes.  This may indicate the market has weakened internally more then it appears. I have never looked at a chart of the two numbers overlaid before.  The data only goes back to the spring of 2010, but it is kind of interesting.  Notice the current decline has brought the lines pretty close together again.

When I was looking for the new high/low data symbols I found symbols for the number of stocks above their 10,20, and 50 DMAs.  These turned out to be very interesting data items.  Here is a chart with those symbols versus SPY.  I will be showing it periodically also.



This chart will often show nice divergences at turning points.  For now I want to discuss the bottom panel which is the number of stocks above their 50 DMAs.  The red line marks a point where a pullback can become a more serious correction.  Notice that it dropped below that in the spring before the big decline started.  It also dropped below the line in the Nov. pullback.  The green line marks a point where it becomes likely the worst of the sell of is over and any subsequent pullback should make a higher low.  The data goes back to the spring of 2010, so it is of limited history.  I may have to adjust the lines as we get more data.  However, I think they will be close unless the number of stocks on the exchange changes significantly.  In our current situation, we got a warning sign on the sell off.  We have not gotten an all is clear sign yet.  I have mentioned we did not get the usual sign of strength out of the McClellan oscillator we have been getting from oversold conditions.  Here is another indication of the lack of technical strength of the rally.

We are currently in a very short term oversold condition.  I have the same buy signal tonight I had back in Nov. that I reported in the blog.  I have no idea if it is going to kick in right away or not.  Sometimes the market continues lower first and obviously we have a very uncertain situation.  It just adds to the fuel if the market gets a spark on the upside.

The sub intermediate trend has lost its upward bias now.  It is completely neutral.  When I updated the sector status page I noticed that only 5 of the 16 sector ETF's are above their weekly 18 SMAs.  The weakness in the market is pretty broad based.  There were only 3 weekly charts that are still green.  This market can get into trouble pretty easily from what I can see.

Bob

NAAIM sentiment survey

The NAAIM survey was very interesting this week.  Here is the chart.

Source

This weeks reading of 88.1 was the highest reading since the 89.33 level of 2/28/2007.  With all the theatrics and the failing economy active money managers are the most long they have been in 5 1/2 years.  I find that rather amazing.  There are actually only three prior readings around this level in the history of the survey that started in the middle of 2006.  The other readings all happened in relative proximity to each other.  Here is the SPX chart marked with the dates.


The market struggled after each of the high readings.  Several months after the first high reading in Nov. of 2006, the market was actually lower.  Here is a look at the current chart.


The price action preceding the current high reading sure is different then the others.  Those readings all came within days of SPX being at bull market highs.  The current SPX high was back in Sept. 

I think it is pretty clear the market has mostly priced in a successful resolution to the "fiscal cliff".  Expectations are very high.  Will those lofty expectations be met?  What happens if they aren't?  The Nov. 2006 reading came with SPX at 1406.  The peak before the sell off in Feb. of 2007 was 1461.  That sized move from here will only get us back to the Sept. high.  If there is going to be a big move over the next few months it will be down.  If the market continues up it will likely be slow and choppy.

The crash last summer started with a reading of 66.3.  The crash in the spring of 2010 started with a reading of 83.9.   Both of those levels are lower then we are now.  If the market gets disappointed there is considerable downside risk.

Bob

Thursday, December 27, 2012

Daily update 12/27

Clearly the market is still focused on the deal talk out of Washington.  It sells off when the talk is negative and rallies when it thinks the talk might be positive.  The talk all sounds like games to me to make people of both parties believe their party tried to do something.  I am sticking with the we are going over the cliff call at this time.  Here is the daily SPX chart.


Quite the hammer candle today with a long tail.  Was that an important reversal?  The volume was way too light to make a call on that.  Lets zoom in to the 195 minute SPY chart.


SPY had a blue bar indicating price closed below the lower Bollinger band and was extended.  The volume was somewhat elevated, but not all that high.  The second bar, on the talk of the House being reconvened Sunday night, ended up retracing the blue candle.  The volume was higher then the first bar.  Lets zoom in to the 60 minute SPY chart.


This chart also shows the surge of volume on the big rally bar late in the day.  However, it stopped at the hourly 18 SMA.  SPY had a strong bounce from an oversold condition, but it did not do enough to break the down trend yet.  Will there be more upside follow through tomorrow?  What will the talk coming out of Washington be?  I am afraid I don't have a crystal ball. 

Bob



Debt problem in perspective

There is a pretty big flaw in popular economic thinking.  Many economics textbooks today teach that since one entity's debt liability is another entity's asset, the total amount of outstanding debt is unimportant.  Really.  Debt is only an asset if it gets paid back.  If the rise in income does not keep pace with the rise in debt it becomes more and more difficult to pay the debt back.  If that condition persists long enough large scale defaults are probable.  Large scale defaults like those that occurred in the great depression can be quite debilitating to the economy.  Many people realize we have a debt problem in this country.  However, I don't think most people realize it is a world wide problem.  Lets look at some numbers.

Here is a chart of global debt from 2010, the latest number I could find.

Source

I would say that was approximately $195 trillion.  How about the population.

Source

Lets round that down to 7 billion which is probably not too terribly far off of where we were at the end of 2010.  That means the per capita debt in the world is 195,000,000,000,000 / 7,000,000,000 = 27, 857.  The world has nearly $28 thousand of debt for every man, woman, and child alive.  That kind of seems like a rather large and unhealthy number to me.  When we look at global income it sounds even bigger.  The National Geographic site has some interesting data in that regard.

Source

This chart shows the distribution of per capita income and population density in four different categories.  Here is an interesting break down of the number of people in each category.


This is from page 2 on the map above.  There are 5 billion people with an income less then $3,945.  There are only 2 billion above that level.  That nearly $28 thousand in per capita debt looks even bigger now doesn't it.  Is it possible the debt has reached a level where it has become a drag on global growth?  Is there a risk of large scale defaults around the globe?  I guess we will find out as the global recession deepens.

Bob

Wednesday, December 26, 2012

Daily update 12/26

Downside follow through.  Bargain hunters remained on vacation today.  The short term trend is now down.  Here is the daily SPX chart.


SPX closed below the low of Friday's high volume down bar and below the 18 SMA.  It also had a red bar today.  I suspect some technical indicators will start firing sell signals on the daily chart now.  Lets zoom in to the 195 minute SPY chart.


The 18 SMA is starting to turn down pretty sharply.  SPY closed below its 50 SMA on this time frame.  It is also slightly under my first support line.  However, the amount it is below it is well within the dividend gap down range.  I would not consider that support line broken yet.  Lets look at the 30 minute chart.


SPY tested its 18 SMA twice today and was rejected.  There was a big volume surge at the close.  Will there be follow through from that tomorrow?  Here is a peak at the current breadth chart.


Both breadth indicators had negative crossovers again today.  It looks like the peak of this rally is behind us now.  We should be starting a test of the Nov. low.  The McClellan oscillator never got up to the strength it did after other sell offs in the bull market.  Remember we had extreme low readings of the daily 20 SMA of the TRIN.  You can read about it here: TRIN.  I believe this was the last gasp of the bull market and the bear will now assert itself.  If you have not developed your bear market plan you are running out of time.  This is likely the last time you will be able to make portfolio adjustments at these price levels.

I heard a guy on TV talking about a Gallop poll saying Obama was getting high marks for his handling of the fiscal cliff.  I would say he still has no incentive to make a deal and apparently is getting rewarded for not negotiating, LOL.  Over the cliff we go.  I also saw a poll from a week ago that was 57%-40% that we would get a deal.  Same poll now 50%-48% on a deal.  People are starting to figure out there will be no deal.  I suspect that is why there is no significant dip buying.  I think as we get closer to year end and there still is no deal the market will get more rambunctious on the down side.

Bob

Calm markets

My perception lately has been that investors seems to be extremely calm despite all the "troubles" in the world.  I thought this was an interesting chart expressing that calmness.

Source

Here is an excerpt from the article with the chart.

Can it be? Leuthold’s monthly Risk Aversion Index, which bakes together various credit and swap spreads, commodity and currency prices, and relative asset returns to offer a broad gauge of skittishness, is at a record low going back to 1980. That span includes the Crash of ’87, the rolling emerging-market contagions of the 1990s, and the multiple human and financial calamities of the past decade.

I guess this means there is absolutely nothing to worry about.  Just go about your business.  There is nothing but clear skies overhead for all markets.  Is that really the case?  Here is a slightly different view of the current situation.

Bespoke

Bespoke defines all or nothing days when 400 of the 500 S&P500 stocks are up or down together.  The 90s sure were calm compared to the 2000s weren't they.  I often hear the pundits on TV when asked about uncertainty say there has always been uncertainty and it is no worse today.  This is clearly not true.  The reason 400 or more stocks move together in the same day is because of the uncertainty in the world.   People are buying and selling in panics when the index is up or down because they don't really know what to do.  Despite what appears to be a calm market this year, we have not returned anywhere near to the calmness of the prior two decades.

There is a difference between knowing what the problems are and knowing how the problems are going to work out.  The market cannot possibly price in an unknown outcome.  I think there is an extreme calm in the markets that everything will work out just fine.  If everybody knows what the problems are and if there is a solution to any of them, why haven't any of the problems been solved?  I suggest there is no easy solution when the problem is too much debt.  The market seems to be screaming at me I am going to crash while everybody is twiddling their thumbs and thinking about how much the market is going to go up next year.  Here is what the Wall Street firms think for  next year.

 Source

There is one firm that is expecting a small decline next year.  The others are bullish, and some very bullish. Here is the latest Bespoke poll results.

Bespoke

The percent of people bullish has stayed extremely high and has been noticeably high ever since the market topped in Sept.  I believe there is extreme complacency throughout the investing world.  I think a lot of people are going to be caught off guard and that will make for a lot higher volatility in 2013.  I am always amazed at how the market manages to put people to sleep right before pulling the rug out.  It really is quite interesting to watch.

Bob

Monday, December 24, 2012

Daily update 12/24

No rebound from Friday's big move down.  Here is the daily SPX chart.


SPX closed right around the down trend line again.  The lack of a bounce today and the lower close means the bargain hunters were missing in action.  Will they come back after the holiday?  Lets zoom in to the 195 minute SPY chart.


The 6 SMA has clearly crossed below the 18 SMA for the first time since the rally started.  The 18 SMA is starting to roll over also.  This chart is starting to turn negative.  Will the bulls show up and save the day?  I think that will all depend on the talk out of Washington.  I don't expect any deal, so I would not expect the bulls to show up.  This could surprise people (or me if I am wrong) as I think the majority still expect a deal.  As we get closer to the end of the month with no deal, the market may care more and more about it.

Happy Holidays to all that celebrate this time of year.  Safe journey to all that are traveling this week.  For everybody else, Happy Week. 

Bob

GLD monthly chart

I was pondering the break down below the daily 200 SMA of GLD on heavy volume and I decided to peak at the monthly chart.  Here it is.


This chart really looks kind of like a top here.  In the 2008 correction, GLD closed below the 18 SMA similar to the current period.  After crossing back above that MA there was a high volume up bar that I circled.  In the current rally, GLD crossed above the 18 SMA and even closed higher on the next bar which should be confirmation of the resumption of the up trend.  However, there was no volume and now price is back below the 18 SMA again.  There is a real possibility that the very big green volume bar back in 2011 was a volume climax top.  The FED is doing unlimited QE which is supposed to be bullish fundamentally for gold.  So why does the chart look like this?  Was the big crash in the mining stocks really a sign there is going to be a big drop in the price of gold?  GLD broke the down trend line of the initial correction which should have brought in some buying volume.  It looked like it did on the daily chart, but it is not evident on the monthly chart.  Price tested the red resistance lines and turned back pretty sharply.  I think GLD needs to find some buyers very soon or it might end up testing that green support line again in the 148 area.  Should that line ever break, a drop back to 100 is not out of the question.

Bob

Friday, December 21, 2012

Daily update 12/21

The market may be catching on that there will be no deal on the fiscal cliff.  Here is the daily SPX chart.



SPX tested the down trend line from above today and also the 18 SMA.  Volume was very heavy today, but it was quarterly expiration so that is normal.  Will the trend line continue to hold next week?  Lets zoom in to the 195 minute SPY chart.


SPY opened down way more then the gap from going ex dividend.  The last dividend gap was big relative the recent market moves.  Not so much now.  I think it is ok to continue doing the analysis on SPY going forward this time.  Last night I showed the price channel and asked if we were headed to the lower rail.  I guess the answer was yes, LOL.  Price opened below the channel line and stayed just barely below it at the close.  I have circled some high volume bars on this chart.  I noticed that when we have gotten a volume spike relative to the last few days, SPY has followed through in that direction.  I have a question mark over today's bar.  Was it a change of direction or just option expiration volume?   We will have to wait and see if there is any downside follow through next week.

I heard a Republican congressman interviewed this afternoon on Bloomberg.  I did not catch his name.  He was asked why they did not vote on the bill last night.  His response was that they could not get the votes because some people did not want to vote for a tax hike.  Seriously.  Didn't most people already vote for the bill that is causing one of the biggest tax hikes in history, LOL.  He also said he thought we were going over the fiscal cliff.  He said that the Democrats never wanted the Bush tax cuts in the first place and want them to go away.  Well duh.  I guess the Republicans are starting to figure out they have been outwitted.  I don't think the market will be happy about it.  It looked like the entire move up was on hope for a deal.  If that hope is dashed I think prices will reflect that.

The sector status page shows 8 out of the 16 ETFs have green weekly bars.  When we made the high in Sept. all 16 sectors were green.  The market has much less momentum now.

Bob

Philly FED data

The Philly FED manufacturing data came in much better then expected this month after coming in much worse then expected last month.  I am sure this is all a Sandy affect.  It is probably a bit hard to say exactly  how meaningful this is.  Here is the main index chart.

The last few months have seen quite a bit of volatility in the number going back and forth between positive and negative.  The six month forecast did not have as big a bump as the current activity index.  It is likely that some if not most of the positive move is from rebuilding after Sandy.  This survey covers New Jersey so it is the survey that will be the most affected by the storm.  The rebuilding may distort the effectiveness of this survey for months relative to the national economy.

Here is the new orders index.

New orders ticked up to 10.7.  This is the highest reading since Feb.

Here is the employment index.

The employment index is the highest since April.  It was only marginally positive at 3.8 though.

Here is the future new orders index.

The future new orders was in the same area it has been all year.  It did tick up, but it was not as high as it was back in Sept.

Here is the future employee index.

The future employee index ticked up this month, but remains somewhat below where it was last spring.

There was quite a contrast between the Philly FED survey and the Empire survey that was worse then expected a few days ago.  It is possible that both of these surveys will be more affected by repairing damage from Sandy then by the national economy for many months to come.  It will be interesting to see how the other regional surveys outside the north east look.  That might give us a better picture of whether the national economy is starting to pick up or not.

Bob

Thursday, December 20, 2012

Daily update 12/20

A bit of a rebound today.  SPY goes ex dividend tomorrow so it will be down in the morning.  That also is probably why nobody wanted to sell today.  I don't know what happens now.  It could depend a lot on the talk out of Washington.  Here is the daily SPX chart.


SPX is back inside the upper Bollinger band.  Volume was lower on the rebound today then it was on the move down yesterday.  We can see that on SPY as well on the 195 minute chart.


I have readjusted the support and resistance lines since the price action the last three months just ripped up and down without much regard to them.  I have marked the three tops with red resistance lines and the last two swing lows with green support lines.  We will have to wait and see if any of them mean anything.  There is also an apparent price channel forming now.  We last touched the upper line.  Is a trip to the lower line in the cards?  Both red volume bars from yesterday were higher then today's green ones.  We haven't clearly shifted into distribution on the volume yet, but that remains a possibility.  It was up at these price levels in Sept. that the bullish volume dried up.  Will that happen again, or will people keep piling in?

The fiscal cliff talks are going just about like I expected.  There is a lot of talk to make people think they are actually negotiating, but there isn't really anything being done.  Will the market care as we get closer to the end of the month?  Despite the positive day in SPX, the VIX ended the day up another 1.79%.  I think this is one of the biggest SPX/VIX divergences I have ever seen.  It looks like a big move is brewing to me.  With the market already loaded up with longs it seems more likely the end move will be down.  I guess we will see about that.

Bob

GLD and GDX

Lets see how these ETFs are doing.  First up is the GLD daily chart.


GLD is testing the Nov. low and its 200 SMA.  There was a very high volume bar yesterday that was also blue.  That means it closed below the lower Bollinger band making price extended.  Was that some kind of capitulation event yesterday?  There is a double bottom pattern here, but it is certainly not textbook.  The retest is supposed to have lighter volume, not the heaviest volume bar of the entire move down.  It could still work out though.  This looks like a point to watch for support to come in.

Here is the daily GDX chart.


GDX is testing support again for a third time.  Unlike GLD the volume has dropped on each retest.  There isn't any real sign of accumulation though.  The only big volume up bar was the day of the FED meeting with more QE and that failed right away.

Both these ETFs are at potential support, but neither one is clearly making a bottom that I can see.  They are both in position to watch.  I would really like to see some kind of reversal pattern to the upside here and soon.  Break downs in these charts have some room to run should that be the outcome.

Bob

Wednesday, December 19, 2012

Daily update 12/19

I am going to digress for a minute from the usual update to the fiscal cliff.  I was reading an article today where a money manager that normally seems reasonably intelligent was saying it is no big deal.  There would only be a minimal affect on the economy.  This is totally and completely idiotic.  It shows the writer has absolutely no understanding of human psychology and economics at all.  What happens when the stock market crashes?  People get scared and cut back on spending which slows the economy down.  It is the scared people that is important here.  Bernanke has made it clear the FED will be powerless to do anything to overcome the negative affects of the fiscal cliff.  The media has made sure that nearly every person in the U.S. knows that if we go over the fiscal cliff we will go back into recession.  This has scared people to the point that they will cut back on spending and a recession will become a self fulfilling prophecy whether or not the tax hikes and spending cuts would have had a material impact.  We are already in or very nearly in a recession now.  There is no way a slowdown in consumer spending does not finish the job.  The stock market will react negatively and reinforce the negative economic feedback loop.  We now return you to the regularly scheduled market update.

About face.  Here is the SPX daily chart.


That was quite a reversal today.  Notice this a much bigger down day then we saw for the first down day at the Sept. and Oct. swing highs.  The volume declined from yesterday's explosion.  Lets zoom in to the 60 minute SPY chart.


The volume pattern shifted to distribution today.  Will that continue?  SPY closed below the 18 SMA, but we do not have confirmation yet.  The VIX may be the chart of the day.


On a day that SPX was down only 11 points the VIX was up 11.5%.  Wow.  It eclipsed its last swing high and is in the area it was when SPX was about 30 points lower.  The short term uptrend remains intact after the little detour the last two days.  Is it starting a volatility spike as the weekly chart has been saying it might?

The TRIN article I posted suggested we may be in the process of making the final high before the bear market takes hold.  Did we just make it today?  I guess we will see if there is any follow through on the down side.  It is certainly possible.

Chart practice has been updated with CA the stock for today.
http://traderbob58-chart-practice.blogspot.com/

Bob

TRIN

The TRIN has been very low lately.  Check out this chart of the 10 and 20 DMAs of the TRIN vs. SPX.  The blue line is the 20 DMA.  You can click on the charts to make them larger and easier to see.



The 20 DMA is down to .87 today.  This is only the fourth time it has dropped down to .9 since the 2009 bottom.   In late Aug. 2009, the market pulled back some and chopped its way higher until Jan. of 2010.  In April of 2010, the market was about to crash.  In Dec. of 2010, the market was in the middle of a big rally and just kept on going up for another two months.  This is the first time it has been this low when SPX was not at bull market highs since the 2009 low.  Looking back historically, it turns out to be a rather rare occurrence.

Here is look back a little further.


Going back to late 2004, there were five more occurrences.  Three of them occurred as the market was topping in 2007.  On this chart there were two occurrences that happened before the market made new highs.  April 2004 and Oct. 2007.  Both of those times the market sold off.  In Oct., SPX made a slight new high before selling off though.  That sell off was the start of the market crash in 2008.

Here is one more look back a bit further to where my TRIN data ends.


Going back to 2000, there were three more occurrences.  The first two on this chart happened before SPX made new bull market highs.  Both were followed by down moves.  In the Aug. of 2000 occurrence, it was the start of full blown bear market.  The 2003 event was early in a new bull market and SPX was at new highs for that fledgling bull.  There was some choppy action after that low reading, but no major down move.

The only time the 20 MA got this low and SPX was at new highs that was followed close in time by a major move down was the flash crash of 2010.  The flash crash itself probably made that sell off much worse then it otherwise would have been.  However, if it happens before SPX makes new highs it can lead to sizable sell offs.  The last two bear markets started with that low reading near the final highs.  I did not know that when I started this article.  Really.  I just thought it was a rare thing to happen and I wanted to look at the history of it.  I started the article with the first chart before I looked back any further.  It wasn't until I was writing text for the last chart that it dawned on me the last two bear market started with such a reading.  Now I have to ask the question.  Is this the final high before the next bear market gets going?  Since I already think we are starting one I would of course say probably yes.  What else can I say, LOL.

Whether this is really the final high before a new bear market or not, we do have to be on the lookout for a sell off since SPX is not at new bull market highs.  The McClellan oscillator still has not had the kind of strength we have seen coming out of important lows since the 2009 bottom.  That combined with the low TRIN readings and poor fundamentals leads me to believe this is more likely a blow off move then the start of a new leg up.

Bob

Tuesday, December 18, 2012

Daily update 12/18

SPX is above the trend line.  Here is the daily chart.



SPX now has a blue bar so price closed above the upper Bollinger band and is extended.  It is now in spitting distance of the highs.  I believe the move the last two days is based solely on hope for a deal in Washington.  Will we actually get one or is this all just talk to make it look like we are going to get one?  I don't know how to predict that or to predict what sound bites are going to come out of Washington that might affect price.  We are overbought to the point that most of the time we would see a pullback.  Lets zoom in to the 195 minute SPY chart.



SPY has blue bars on this time frame as well as the daily chart.  I don't know what else to say other then price is extended.  I guess we will see whether that means anything or not.

Clearly the market is pricing in a deal.  I am still not sure we will get a deal.  How much further the market goes up would only be a guess.  I think if a deal is done it will be a sell the news event with SPX near the highs.  At some point the market could get worried about a deal not being done again and sell off.  I see no way to accurately predict any of these events.

Bob

Empire manufacturing survey

The Empire data came out much worse then expected this morning.  The expectations I saw were for a positive reading.  That was not the case.  Here is the chart.

Source

We have now had five months in a row of negative readings.  That is the same number we had last year before the survey turned positive in Nov.  Will we continue to see weakness or will we get a turn up early next year?  Lets look at some of the sub indexes.

Source
Here is the new orders index.


The small positive reading we got last month did not continue this month.  We are just not seeing the year end surge we saw last year.

Check out the unfilled orders sub index.


Unfilled orders have been contracting all year.  Exactly how many of these unfilled orders did they have in Jan.

Here is the employment sub index.


This sub index contracted at a pretty good rate again.

Here is the hours worked sub index.


The hours worked each week has contracted again.  This is normally a leading index to the employees sub index as most companies adjust current employee hours before hiring or firing people.  This does not seem to bode well for the employee index turning around next month.

Here is a look at the  new orders and employee indexes six months out.


There is quite a bit of optimism in both of these charts about next year.  That could be a reason why there have not been many layoffs to this point.  The question is whether this optimism is based on hope or something tangible.  Unfortunately, I don't think we can tell.  If you look at the first chart again we can see a big spike up in the blue line (six month out business conditions index) just before it crashed down in 2008.  I think we will have to wait and see if the new orders come in or not.  At this point there is no clear sign of a pickup in business yet.

Bob

Important

The information in this blog is provided for educational purposes only and is not to be construed as investment advice.