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Tuesday, April 22, 2014

Daily update 4/22

Up to where the rubber meets the road now.  Here is the daily SPX chart.

SPX got slightly above the March intraday high before stalling through the afternoon.  There was a bit of selling going into the close.  That left SPX right at the .786 resistance level.  There were only 28 SPX stocks making a new high today.  Those numbers continue to be weak.  Breadth on the other hand was very strong at 71% positive.  We now have a slight overbought condition in the area of all time highs.  I wonder how that is going to work out with IWM and QQQ lagging so badly.  Lets take a look at the SPY 60 minute chart.

SPY shot up at the open, but stalled once SPX got above the March high.  It sold off in the afternoon and ended with a confirmed break of the 6 SMA.  First time that has happened since this bounce started.  Will there be some more profit taking or will the bulls step in and buy again?  SPY is now pretty far away from the 50 SMA and the MAs are still in a bearish formation.  It seems kind of risky going long here.  I guess we will see if people hold their nose and buy or not. 

SPX failed to conquer resistance today and is short term overbought.  Do people that have been buying this bounce hold em or fold if we get a little selling pressure in the next day or two.  Since the late day pullback was the first selling that lasted more then a few minutes it is a bit hard to say.  This move seems to be nothing but a technical bounce.  Those can reverse completely if there is no fundamental reason for people to hold on.  Is the selling in the momentum stocks over or not?  I don't know how to answer that question.  My gut feeling is that there is more to come.  I still do not believe the market is really safe for longs until IWM and QQQ make new highs.  If we continue the selling in the morning I will be watching that hourly 18 SMA.  Does it bottom above it or break below it. 

I constantly hear the pundits talk about how corporate balance sheets are in the best shape ever.  I wrote a post quite a while back that showed that was not true as corporate debt had increased significantly.  The pundits are simply talking about cash.  Check this out.

When looking at corporate debt relative to fixed assets we can see they are more levered now then at any time since 1953.  In fact it looks like the leverage is about double what it was in 1982.  I can't say whether this is a serious problem or not, but are corporate balance sheets really in the best shape ever?


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