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Thursday, May 23, 2013

Daily update 5/23

The dip buyers showed up, but not with enough force to get the market positive.  Here is the daily SPX chart.

SPX tested the 18 SMA early this morning and bounced.  Volume was heavy again today.  It looks like another distribution day.  The bulls really put up a poor performance.  Check out this new high chart.

The change in new highs from yesterday was -434 (yellow line in bottom pane).  That is the biggest one day drop since the -474 on 4/27/10 (marked by red arrow).  That was right before the flash crash.  Not only did new highs drop under 200 they dropped under 50 at 45.  I think yesterday was definitely important and we are entering a correction at a minimum. 

The traders on TV today all seemed rather unconcerned about the price action.  That is what the market does to people.  It keeps coming back and coming back until one day it doesn't.  The trouble of that of course is that you can't know if any particular move down is that one time it is not going to come back right away.  We have a lot more margin debt then we had in 2010 or 2011.  A serious pullback could easily turn into a crash like we had in those years. 

What about the FED Bob.  They won't let the market go down.  Let me ask you this.  Why did multiple FED people including Bernanke even mention tapering the purchases.  I am looking at the incoming data and there is nothing showing any huge strength.  In Jobs and the economy I wrote

"Between Jan. and April in 2011 there were 774,000 jobs created.  In the same period in 2012 there were 899,000 jobs.  So far this year we have 783,000 jobs.  So that means we are only slightly better then 2011 and significantly lower then last year.  Nothing special there to indicate the recovery is gaining strength."

Remember jobs were supposedly the main motivation for QE in the first place.  If the job data is not any better then the last two years up to this point why the tapering talk.  The market reacted negatively to his appearance in front of congress yesterday.  Did he try to clarify anything today to talk the market up?  No he did not.  I have heard him issue clarification comments before when he thought the market got the message wrong.  My guess is the FED is worried about what the markets are doing.  Maybe they would like them to cool off some.  This is speculation on my part, but the economic data is not significantly better.  It really isn't.  Even the latest inflation data is not showing any strength.  If QE is being done for the benefit of the economy there is no reason to talk about cutting back. 


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