If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

Up 10/2/20

Up 8/21/20

Up 10/9/20

Sub-Intermediate

Up 11/10/20

Up 11/4/20

Up 11/9/20

Short term

? 11/18/20

Up 11/5/20

? 11/18/20


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 (-)

Thursday, January 31, 2013

Daily update 1/31

Back below 1500.  What now?  Here is the daily SPX chart.


SPX closed below yesterday's low and the 6 SMA.  The short term trend is down graded to neutral today.  However, it closed just fractionally above the 1/29 thrust up day low.  We have the makings of a reversal pattern, but follow through on the down side is needed.  Lets zoom in to the 195 minute SPY chart.


SPY has red bars on this time frame for the first time this year.  However, it is still above the 18 SMA.  Volume was fairly light today on both bars.  Lets take a peak at the 60 minute SPY chart.


SPY dropped below its 50 SMA this morning, then rallied back above it only to fail in the afternoon.  SPY ended the day below the 50 SMA, but needs to confirm that by a bar closing below that last hour low.  The bears sold two rally attempts today.  That is clearly a change of character.  The next chart is the 60 minute chart from when SPY made the high in Sept.  Compare the volume bars to the chart above.


Going into the Sept. high the big volume bars were mostly green.  It was not until after the high was made that the bigger bars were red.  In the chart above for Jan. this year. there are big red bars all through the chart.  From 1/17 to 1/25 the bars were green.  Starting on 1/28 the bars turned red again and that was before the rally high was made.  I think the volume pattern going into this high is much less bullish then it was going into the Sept. high.  I guess we will see what happens.

We need a little more down side confirmation before we can say a pullback has started.  I think that will happen though.  The late day sell off may be an indication the employment report disappoints tomorrow.

The Chicago PMI came in much better then expected.  I am not sure why they did not expect that, LOL.  This region is heavily influenced by the auto industry and Sandy destroyed 200-250k cars.  It should not have surprised anybody.  The market sold the bounce created on the surprise.  I don't know how long the bump will last.  That is a lot of cars to replace and that will help Q1 GDP.  The auto industry is a much smaller percent of the economy then it used to be and the surge will work through the system before too long.

Bob

GDP

After a surprise negative print on the Q4 GDP yesterday morning they spent all day on TV telling me how the underlying numbers look pretty good.  I am sure the few recession camp people will be out there screaming I told you so.  I think GDP is the most highly revised data series there is for the economy and is pretty much useless in real time for figuring out where the economy is going.  Here is an interesting chart breaking down some of the components for those that want to dig into it.

Source

I am not going to say the negative print means we are in a recession already for sure.  I think that probably is likely because of the manufacturing data we have been seeing.  However, in the current situation, I think there will be future economic slowing because of the negative print in the press.  Let me try and explain why.

This chart is of consumer spending as a percent of GDP.

Source

Consumer spending makes up over 70% of GDP these days.  Obviously anything that lowers consumer spending will negatively affect GDP.  This next chart puts the consumer mindset into historical perspective.

Source

The latest consumer sentiment survey took quite a plunge.  More importantly to me, it never got very high after the last recession.  Consumers have been somewhat suspicious of the economy the entire recovery.  This happened in the early 90s also.  However, by the mid 90s the economy and the stock market took off and so did consumer sentiment.  In the weak mindset of today they now have to deal with losing 2% out of their paychecks.  On top of that, they will also be reading about a negative GDP print.  I could be wrong, but I believe this combination will cause consumers to pullback on their spending going forward which will have a negative impact on the economy.  This may be enough to ensure we go into a recession even if we are not already there.

Bob




Wednesday, January 30, 2013

Daily update 1/30

Was that it?  By it I mean the end of the bull market.  This looks a lot better then the Sept. high.  At that high I thought it would be retested again.  It wasn't until after all the distribution over the next few weeks and the post election gap down that I changed my mind.  I should have known better.  Just about every time I change my mind in a situation like that I turn out to be wrong, LOL.  I have to say that this one looks much more appropriate for an ending high.  Here is the daily SPX chart.


We got the first white bar on this rally today.  That was a pretty interesting reversal from yesterday's strength.  Lets zoom in to the SPY 195 minute chart.


Both volume bars today show a change to distribution.  We will have to see if that continues or not.  We had a couple of distribution bars back in early Jan., but none for a while.  This chart looks pretty innocent, but there are other things going on.  Lets look at the breadth chart.


Despite making a new bull market high today, the McClellan oscillator closed slightly negative.  This is very rare and indicates a short term exhaustion condition.  This is a pretty reliable indicator for at least a short term pullback.  At the Sept. high it was 172, giving the market high odds of a retest after a pullback.  That happened in Oct. twice before the real pullback started.  With a negative reading today and 57 yesterday at the closing high, it is likely to play out differently this time.  Breadth is painting a much weaker picture then it was in Sept.  Here is the stocks vs their MAs chart.


This chart deteriorated considerably today.  At  the high in Sept. all these indicators were on peaks.  All three have diverged from price recently.  There is a big divergence in the 10 DMA part of the chart.   In looking at this chart and the breadth chart I think the market could fall away much quicker then it did in Sept.

Chart practice has been updated with BSX the stock for today.
http://traderbob58-chart-practice.blogspot.com/
Anybody looking for long term holds might want to check this one out.

Bob

Odds and ends

Here are a few interesting things I have run across lately.  Lets start with the Chinese debt.

Source

During the crisis in 2008-09 I read that the Chinese government was forcing banks to lower lending standards and lend out more money.  Looking at the chart it would appear they achieved that goal.  However, debt vs GDP has now gotten up to levels that have been a problem for economic growth in other countries.  Will that also occur there?  I had heard there was a growing debt problem, but I did not realize the number was this high.  They are supposed to be the engine of growth for the world.  Is that really going to happen?  I think it will be difficult to maintain the growth they have seen in the past.

This chart is something completely different. The Economic Policy Uncertainty index is jointly published by Stanford University and the University of Chicago.  This is a summary of how it is constructed.

To measure policy-related economic uncertainty, we construct an index from three types of underlying components. One component quantifies newspaper coverage of policy-related economic uncertainty. A second component reflects the number of federal tax code provisions set to expire in future years. The third component uses disagreement among economic forecasters as a proxy for uncertainty.
The first component is an index of search results from 10 large newspapers. The newspapers included in our index are USA Today, the Miami Herald, the Chicago Tribune, the Washington Post, the Los Angeles Times, the Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the New York Times, and the Wall Street Journal. From these papers, we construct a normalized index of the volume of news articles discussing economic policy uncertainty.
The second component of our index draws on reports by the Congressional Budget Office (CBO) that compile lists of temporary federal tax code provisions. We create annual dollar-weighted numbers of tax code provisions scheduled to expire over the next 10 years, giving a measure of the level of uncertainty regarding the path that the federal tax code will take in the future.
The third component of our policy-related uncertainty index draws on the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters. Here, we utilize the dispersion between individual forecasters' predictions about future levels of the Consumer Price Index, Federal Expenditures, and State and Local Expenditures to construct indices of uncertainty about policy-related macroeconomic variables.
Source

Check out this chart.

Source

Here is some more snippets from their web site.

As measured by our index, we find that current levels of economic policy uncertainty are at extremely elevated levels compared to recent history.

Since 2008, economic policy uncertainty has averaged about twice the level of the previous 23 years.

A significant dynamic relationship exists between our economic policy uncertainty index and real macroeconomic variables.
We find that an increase in economic policy uncertainty as measured by our index foreshadows a decline in economic growth and employment in the following months.
Source

Employment and economic growth are the weakest in any recovery since WWII.  Is there a connection?  I believe uncertainty really is high these days.  This is far different then the mid 90s and 2000s when the VIX was low for a long period of time.  We don't seem to have the same environment now.  Will this foray into ultra low VIX readings last?

 Here is a chart of global economic growth.

Source

I find this chart very interesting.  Clearly the BRICs are not growing like they were prior to 2008.  Global growth has been declining very consistently and is getting down to the rate it was just before the big crash in 2008.  I guess this is the year the pattern is going to change and growth is going to pick up.  At least that is what they keep telling me on TV.  Time will tell.

Here is an interesting chart on bull markets.

Source

The current bull market just passed the median age.   There are five out of the previous fifteen bull markets significantly longer then this one.  How much longer will it keep going this time?  

Bob

Tuesday, January 29, 2013

Daily update 1/19

A little disconnection in the indexes today.  The COMPX, Russell 2000, and the transports noticeably  lagged the SPX and the Dow today.  Here is the daily SPX chart.


The moon shot continued today.  Volume was pretty heavy also.  Lets look at some internals.


The number of stocks above their 10, 20 and 50 SMAs all continued to drop today.  It looks like some profit taking has entered the market.  How about a peek at the new highs chart.


Today had the lowest number of new highs since 1/16. 

Despite SPX being up over .5% today there were only 56% of NYSE stocks positive.  The MClellan oscillator was 57.  With SPX at  new bull market highs these are low numbers.  The internals are weakening now as price moves higher.  How much longer can it keep going?

Bob

Durable goods and LEI

The durable goods came in better then expected, but was it really.  This chart actually surprised me.  Check this out.

Source

The red line is the full durable goods data and the blue line is without transportation and defense.  The blue line would seem to confirm the general weakness seen in the manufacturing data.  This looks consistent with a recession starting last year.  It certainly is not consistent with all the optimism these days about the U.S. economy.

This chart is of the LEI, which I find often turns around the same time as the market.  It therefore is not all that useful in and of itself for stock market timing.  Here is the current chart.

Source

This chart show how this recovery has been weak compared with those in the past.  The index is still quite a ways off the high.  So far the LEI has not rolled over like it normally does before a recession starts.  This is not consistent with a recession.  However, the LEI almost always turns up sharply at the end of recessions and does not really lead very well in that case.  Even though it has normally turned down before a recession starts, we have never had a zero interest rate policy from the FED before.  We don't really know for sure if the old rules still apply.  I think this next chart shows that things may be somewhat different this time.

Source

This really makes this recovery look extremely weak.  It is also at levels that normally would indicate we were in a recession.  It shows a pretty dramatic drop in economic activity that started in the middle of last year.  That seems to line up with the blue line in the durable goods chart above and with the manufacturing data we have seen over the last six months.

This data does not seem to indicate the economy is on an uptick.  With extra money coming out of paychecks now I find it hard to believe the economy is set to soar as some of the pundits on TV would have us believe.  I guess we will see.

Bob

Monday, January 28, 2013

Daily update 1/28

A seemingly innocuous day, but was it?  Here is the daily SPX chart.


There was a bit of a hanging man today.  It looks like 1500 is providing some round number resistance.  SPX is clearly stretched and people have really chased this market.   Is it time for a pullback?  Here is the latest breadth chart.


The McClellan oscillator closed at 54 today and is starting to show some divergence from price.  A down day could turn this negative for the first time this year.  The stocks vs their MAs chart may be more significant.


All three of the indicators have turned down now, even the number of stocks above their 50 SMAs.  People are clearly taking profits on some stocks now.  This could signal the beginning of a pullback.  Next up is the VIX chart.


The VIX took a pretty big jump for such a mild down day in SPX.  This is another possible sign of a pullback. 

Will the market follow through on the down side tomorrow?  There are some warning signs tonight.  Remember on 1/24 we had a very high number of new highs like we had at the market top in Sept. which looked like another buying climax.  This looks a lot like another top.  Remember that the COMPX still has not gotten above last year's high.  That means if the market does pullback here there is a possibility this is the final high of the bull market.  The sentiment picture sure looks that way.  If that is the case the market should fall away pretty fast once it gets going.  The final high in 2007 came on a reversal day and was very obvious.  However, that is not the norm.  Most of the time they look much more like the current chart where the market runs up and just stops without any real obvious negative price pattern.  This looks like a market in need of a pullback.  Any more then that we will have to determine as the price unfolds.

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

Bob

Current sentiment picture

The sentiment continues to get more frothy.  Here is the latest NAAIM chart.

Source

The current NAAIM number is 86.  There are very few readings that high in the data that goes back to 2006.  On 1/25/2012 the number was 56.  Frothy now, but was low then.

Here is the II survey.

Source

The bull/bear spread is now 31 points and is wider then it was at the Sept. high.  A spread greater then 30 points has historically indicated a top is close by.  We are there in this one.

Here is the latest AAII chart.


Source

This one has the most bulls since late 2010.  They were correct then as the market continued higher.  I circled the peak at the final high in 2007.  It was slightly more bullish at 54 as opposed to the current 52 reading.  Needless to say there is plenty of optimism here.

Besides the NAAIM number being much higher then last Jan. check out this chart.


Last Jan. about 50% of NYSE stocks were above their 200 DMAs as opposed to 82% now.  We never got that high last year.  The last time we were this over bought was in 2011.  The market went into a long trading range shortly after that.  As we know it ended up crashing later in the year.

I got an email with a chart that is down right scary for bulls.  Unfortunately they did not give a source link so I could not show it on the blog.  The email said it was from a Bank of America survey of professional investors.  The chart is of their cash position and goes back to 2003.  It shows they have the lowest cash position in that time frame.  The previous low water marks were in 2007 and 2011 right around those tops.  It is considerably lower now.  If anybody happens to see that survey on the internet please let me know.  I would love to show that chart.

We have a much different picture this year then last Jan.  There is a lot of optimism while the market is much more overbought.  We also have revenue and earnings growth rates that are lower.  I don't know exactly how this will play out, but I think it will be different then last year.

Bob



Friday, January 25, 2013

Daily update 1/25

SPX closed above 1500 resistance.  Now we will just have to see if it stays there or not.   Here is the daily chart.


This the eighth day in a row SPX has closed higher.  How do you predict when a runaway market is going to stop, LOL.  Lets take a peak at the monthly chart for a change.


SPX has stopped at that upper line the last two rallies.  Here we are again.  Only this time people are piling into equity mutual funds and stacking up margin debt.  Not only that, but day after day on TV people are telling me how great things are.  Really, LOL.  There is a trader they interview once in a while that has a white jacket with black spots.  I call him cow guy.  If you have seen his jacket you know why, LOL.  Yesterday he was telling me how last Jan. he kept waiting for a pullback and missed the rally.  Not this year.  He says we can't wait for a pullback, we must get long now.  That is commonly called FOMO (fear of missing out).  There are many good investment strategies, however FOMO isn't one of them.  There are some things different from Jan. last year.  The manufacturing data started picking up considerably in Nov. and Dec. of 2011.  The indexes were still well below their 2011 highs not at bull market highs. The COMPX was charging up along with the other indexes.  There were lots of things to worry about and everyday the media was telling me all about them.  Apparently we have now solved every problem from what I hear and read.  I guess I am a lot skeptical in that area, LOL.  How much higher we go from here I do not know.  One thing I do know is that this will end with an ugly crash just like every other FOMO instance.  I don't think I have seen this much FOMO since the 2000 top.  We definitely did not have that in 2007.  The key to identifying that 2007 top was the big divergences in key indexes.  We don't have such an obvious disparity this time, but we have poor economic data and lots of FOMO. 

Here is a chart making the rounds on the internet.

Source

I have to admit it is eerily similar.  It is too bad we didn't know it was going to trace out such a similar pattern, LOL.  What are the odds of it actually playing out the same way in the future?  That would be a bit hard to believe, but I guess stranger things have happened.

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

Bob

Kansas City FED manufacturing survey

The latest Kansas City FED survey came out negative like the other three regions did this month.  Here is the chart.

Source

This survey stayed positive longer last year then most.  However, it has been negative four months in a row now.  Far different then how we started the year last year.

Here is a snippet from the report.  Underline emphasis is mine.

The month-over-month composite index was -2 in January, largely unchanged from readings of -1 in December and -3 in November (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing activity declined at most durable goods-producing plants, while nondurable producers noted a slight increase overall. Most other month-over-month indexes were below zero but higher than in December. The production index inched higher from -5 to -3, and the shipments, new orders, and order backlog indexes also rose somewhat but stayed in negative territory. In contrast, the employment index fell from -1 to -8, its lowest level since mid-2009, and the new orders for exports index also declined. The raw materials inventory index decreased from 1 to -4, and the finished goods inventory index dropped from 0 to -10.
Most year-over-year factory indexes fell for the second straight month, with several indexes continuing to post two-year lows. The composite year-over-year index decreased from 7 to 1, and the production, shipments, and new orders indexes also declined. The order backlog index decreased from -7 to -12, and the capital spending index dropped to its lowest level since late 2010. On the other hand, the employment index edged slightly higher. Both inventory indexes fell after rising last month.


Durable goods and employment both declined.  Also important was that the new orders index was -2 and new export orders was -8.  Continued weakness coming?

I keep covering the manufacturing data because I believe it is the key to understanding where the economy is going.  I don't care what GDP, retails sales or the employment data says.  Those are all highly revised data series.  However, if people are buying stuff then manufacturers will get orders to make more stuff and that feeds through the economy in a positive way.  When people slow down on buying stuff the reverse happens.  In our industrial society economic growth begins and ends with manufacturing.  It is really that simple.  Why has China become an economic power?  They started making stuff for everybody else. When the economy is not in a recession slow downs in the manufacturing data are short lived.  Only in a recession is there pervasive weakness like we have had the last six months.  Any economist that says there is no chance we are in a recession is clearly biased or an idiot (potentially both).  My apologies to any economists out there. I think it will be hard for the economy to rebound with an extra 2% taken out of paychecks.  I guess we will see.

Bob





Thursday, January 24, 2013

Daily update 1/24

SPX hit 1500 and found a few sellers.  Here is the daily SPX chart.


That is an indecisive candle sometimes called a rickshaw man.  The volume increased today over yesterday, but we closed barely positive.  Here is the chart of new highs and SPX.


The number of new highs was almost as high as we saw back at the high in Sept.  This looks like another buying climax and is very likely a short term high.  Unlike Last Sept. when nearly every important index was at rally highs together that is not the case today.  The copper ETF is not and neither is the COMPX index.  This is much more likely to be a final high then that one was.  If that is the case the market should fall away faster this time.  This really and truly looks like a blow off top.  It is lot like a mirror image of the 2009 low.  SPX kept going down, but JJC and COMPX did not.  Then the explosion to the upside.  The long trade is very crowded and leveraged just like people were heavily short into that low. I guess we will see what happens.

Here is an interesting table I saw.

Source

I had to do a double take at that.  There are actually two 40% declines after a strong start of similar magnitude.  What will this year bring?

Bob

Rally length

It is obvious when looking at a monthly chart of SPX that the rallies have been getting shorter and shorter.  I thought this was an interesting chart.

Source

Will we break the pattern of shorter length rallies or will history repeat?  This is a very important question at this juncture.  We just passed the next time for a top.  Even though SPX is slightly above last year's high it is still in the area of a possible double top.  I have yet to read or hear anybody mention that.  I have seen some articles about the great rotation from bonds into stocks and that we are now in a new secular bull market.  Even long time bears seem to be saying the market is going higher at least until April or May.  Speaking of bullish sentiment check this out from the latest Bloomberg survey.

Source

This is a poll of international investors that subscribe to the Bloomberg terminal.  They started doing this survey in mid 2009 so this being the most bullish on stocks in 3.5 years goes all the way back to the origin of the poll.

Here is some text from the article.

Behind the enthusiasm for shares: growing confidence in the U.S. economy and ebbing concerns about Europe. America is in its best shape in two years, according to the poll, with a majority of the 921 surveyed on Jan. 17 describing the economy as improving. In a sign the euro-area’s three-year debt crisis is easing, only 45 percent said the region’s economy is still deteriorating, down from seven in 10 two months ago. 

 I wonder what exactly they are looking at.  Is the U.S. getting better?  The manufacturing data clearly is not.  That is the best real time and least revised data we have for judging the strength of the economy.  Here is a chart of the Macro economic surprise index.

Source

According to the article, it went negative with the recent data.  Clearly the last few weeks has seen data that has been worse then expected.  I noticed there are some instances of the index going negative that are not marked with red arrows because the market did not sell off significantly.  However, there are also some highs in relative proximity to negative cross overs. 

I can say with absolute certainty that the economic data does not back up the contention that the U.S. is the best it has been in the last two years.  It is clearly in the worst shape since the last recession.  I am also sure that the extra 2% being taken out of paychecks this year will have some negative impact.  What are these people smoking? Seriously, I would really like to have some of it.  Whether one believes we are in a recession or not, we are clearly weak and not strengthening yet.  I also expect there will be spending cuts to come.  They moved the ones that were signed into law out two months.  They did not stop them.  To date there has been no discussion about stopping them.  I think the real deal at year end was to spread everything out and give the people the bad medicine in little doses instead of all at once to reduce panic in the market.  It worked so far, but how long will that last if the spending cuts become real.
 
What about Europe?  Is Europe getting better?  This is from a recent IMF statement.

An unexpectedly stubborn euro zone recession and weakness in Japan will weigh on global economic growth this year before a rebound in 2014 that should deliver the fastest expansion since 2010, the International Monetary Fund said on Wednesday.
Source

Europe is in an unexpectedly stubborn recession huh.  I wonder why that is so unexpected.  There is a lot of tax hikes and austerity measures in countries with very high debt levels.  It seems like a weak economy should be expected.  Here is the latest Eurozone PMI chart.

Source

The PMI is still in contraction mode.  It is clearly weak to start the year.  Will it improve or not?  I would say it is impossible to say from this chart.  There certainly has not been a positive crossover yet.

Lets see what Dr. Copper has to say (JJC copper ETF).  That is supposed to be a good indicator of the global economy.


The green arrow is what happened last Jan. The red arrow is what has happened so far this Jan.  JJC is still below its high from last Sept. and found its high this month on the first trading day.  It does not seem to be as enthusiastic as stocks are.  Will it turn up or down from here?  I don't know, but there is definitely no clear sign the global economy is set to pick up.

It seems to me there is a lot of enthusiasm about the economy and prospects for stocks that does not seem to be warranted by the current economic data.  Is this a case of the market leading a turn around in the economy or the last gasp of a bull market?  I guess we will see.

Bob

Wednesday, January 23, 2013

Daily update 1/23

I guess the big news today is AAPL is down a big in after hours trading on its earnings.  Will that cause a bit of a chill on the market tomorrow?  They did a lot of crowing on TV today about how IBM and GOOG earnings were a big boon to the market.  However, SPX was only up .15% at the end of the day.  Here is the daily SPX chart.


That is one extended chart with no shake out move all year.  That kind of pattern can end with a big thud as all the fast money players bail out at once.  I wrote last night that SPY was as extended as it was at the top in Sept. and due for a pullback.  Maybe the earnings miss by AAPL will be a catalyst.  Lets look at the 195 minute SPY chart.



After the Sept. top, SPY did not bounce significantly until after it hit its 50 SMA.  That happens pretty often after the blue bars.  That seems likely in this case if we do actually have a pullback.  Unless something jumps out at me I would not be looking for a long swing trade until we get down into that area which is just above my top green support line.

Keep in mind that SPX dropping back below 1475 could usher in some more selling.  That would mean we could have a potential double top in play.  Since most people are raging bulls these days, that could end up being the correct pattern and a deeper sell off occurs then most are expecting.  There is a lot of internal strength in the market that usually would mute the sell off.  However, we had a lot of strength at the high before the flash crash in 2010.  There is no guarantee of anything in the market.  Should we go below the Sept. low of 1393 we would have to start thinking about the sell off turning into a margin debt unwind which would likely go much lower.

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

Bob

Richmond FED and rail traffic charts

The Richmond FED manufacturing survey came in very negative and another big manufacturing miss to start the year.  Here is the latest charts of the index and the new orders.
Source


Both the main index and the new orders took a big plunge.  This is three for three on the regional surveys coming in negative and missing expectations by a wide margin.  The charts look a lot different then they did during the bull market of the mid 2000s.  The last few years it has had some wild swings up and down.  I have no idea what caused the volatility or if it has any important meaning.  It just strikes me as odd. 

This table shows the weakness all across the report.


The number of employees and average workweek also declined.  I don't see anything good in this report.  We continue to see the year starting off poorly in the economic data.

This next chart is for rail traffic.

Source

Rail traffic obviously drops off at the end of every year as the inventory build for the late year shopping season winds down.  However, this year's plunge is of a much bigger magnitude then usual.   We are back into 2009 levels.  For the last few years it bounced right back in the early part of the year and continued to new highs.  Will that pattern continue this year?  This is the first drop since 2009 that did not make a higher low.  Is that significant?  In 2008, the rail traffic did not rebound as the recession took hold. 

We are starting out the year with poor manufacturing and rail data.  There is definitely a risk that we are already in a recession.  I see a lot of people claiming the economy is getting stronger, but I don't see how you can make that claim unless you pick and choose what data you pay attention to.  I think the pervasive weakness in the manufacturing data is significant.  I can't say the odds of a recession are 100%, but I am pretty sure they are above 50%.  The manufacturing data  looks a lot like we are in a recession.  Will the drag from higher taxes finish the job and ensure we go into a recession this year? 

Bob

Tuesday, January 22, 2013

Daily update 1/22

The Dow made it above its 2012 high today.  Here is the chart.


I am not sure what TradeStation is doing with the volume, LOL.  We can see it closed above the resistance line today.  However, we cannot say the same for the COMPX yet.  If this market is going to go a lot higher it will need to participate.  Lets look at the SPX daily chart.


Price is still extended from its 18 SMA.  It is getting fairly extended from its 50 SMA as well now.  Lets zoom in to the 195 minute SPY chart.



We have back to back blue bars on this time frame indicating SPY closed above the upper Bollinger band and is extended.  It is also about the same distance above the 50 SMA as it was at the peak in Sept.  It is hard to see how there won't be a profit taking pullback coming here pretty soon.  There is a difference in the volume pattern between now and last Sept.  There were two sets of green high volume bars.  One  in early Sept. and again at the top.  The first pullback found support around the area where the last set of big volume bars were.  In late Oct. the sell off found support at the first set of high volume bars.  When the low of that first set was broken is when the market accelerated down into the final low.  We don't have any high volume bars so far around the current high.  We have high volume at the late Dec. low and some on the big gap up.  I have marked those lows with green lines as I suspect there will be support there if tested. 

The biggest problem here for bulls is the short term extended price in SPX.  Will it be able to hold 1475 on a pullback?  If it doesn't we have a failed break out situation.  Will that spark some extra selling pressure?

Bob

Important

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