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Friday, June 13, 2014

Daily update 6/13

Bounce off the trend line.  Here is the daily SPX chart.

A few dip buyers showed up today at the upper trend line.  Breadth was only 54% positive.  New highs were 102 (SPX were 16).  There did not seem to be a lot of enthusiasm in the bulls.  There was also some selling into intraday pops.  We are now in the middle of the 6 and 18 SMAs.  Which MA gets touched first?  Lets have a look at the futures chart.

We still have red price bars so the bounce has not done anything to change the trend status.  It is still neutral.  Something I forgot to mention the other night is the ADX (blue line) was pretty high at the top.  A lot of times when it is that strong there is a retest.  However, on the instances when there is a true reversal it can reverse sharply.  I think the jury is still out on whether there is a retest or not. 

What happens on Monday?  Good question.  I wish I knew.  We got the bounce off the upper trend line that was expected.  However, what comes next is more difficult.  The Iraq situation is clearly not going to be resolved anytime soon.  What will that do to the price of oil?  Will higher oil prices lower buying enthusiasm?  We bounced enough that sellers might come back to the table on Monday.  If we continue up then I think the odds start to shift to the retest of the high idea.

There has been plenty of unrest in the middle east during this bull market.  So far the market has pretty much ignored all of it.  Maybe it will be no different this time.  Maybe it will be used as an excuse to take some money off the table.  I don't know, but I think everybody needs to pay attention in case the market decides to do that long anticipated correction. 

Here is an interesting article on Japan.  How Japan Blew Its Savings Surplus: What A Keynesian Dystopia Looks Like  What happens in Japan is extremely important.  They followed the advice of those that think you can just print your way out of economic troubles.  They started printing money back in 2001 and they are still in trouble.  They have limped along, but I think things are going to get interesting.  The charts in that article show that the government debt is well over 200% of GDP.  This has not been a problem because the Japanese people have continued to buy the bonds at low rates.  However, the savings rate is getting so low that might make that more difficult.  On top of that, their big trade surplus has been negative for a couple of years.  Recently their current account balance has also gone negative.  As I look at the charts in that article it surely seems things are getting worse not better.  They may soon find themselves relying on foreign money to fund the debt.  Will that money require higher interest rates?  If the grand money printing experiment in Japan fails it will change the world of economics forever.  Stay tuned.

The market and sector status pages have been updated.  Have a great weekend all.


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