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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

Up 10/2/20

Up 8/21/20

Up 10/9/20

Sub-Intermediate

?- 10/26/20

? 10/28/20

? 10/26/20

Short term

Dn 10/26/20

Dn 10/27/20

Dn 10/26/20


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 (-)

Wednesday, June 25, 2014

Daily update 6/25

The bulls showed up like other reversal days.  Here is the daily SPX chart.


I forgot to mark yesterday as an outside day.  Historically this is an odd occurrence for SPX.  However, we have now had 8 of them this year.  The first five were all followed by price weakness within two days.  The last two were just before the ECB meeting and did not have any downside right away.  The last swing low went back to the area of those bars though.  If we are going to see weakness from yesterday's outside day and reversal it should happen tomorrow.  Here is a blurb about yesterday from Bespoke that was interesting.  Negative Reversals from an All-Time High

After what was looking like a pretty good day this morning, US equities sold off in the afternoon. The S&P 500 hit an all-time high early on but finished the day down 0.64%.  While this type of reversal is normally nothing out of the ordinary, it sticks out more in the recent period of steady increases and low volatility.  Since the bull market began in 2009, this was just the third time that the S&P 500 hit an all-time high on an intraday basis and then sold-off to finish the day down a half percent or more.   The most recent occurrence was in April, and the occurrence before that was in May 2013.

We did not get to new all time highs in this bull market until last year.  Obviously it would not have been possible to happen before that.  Last April and in May 2013 the reversal days were followed by more weakness as SPX hit the 100 DMA before the pullback was over.  That is not many occurrences to work with, but I would say it did raise the odds of more weakness in the short term.   SPX needs to close above yesterday's high to fully negate that view.  Lets have a look at the futures chart.


The futures did not confirm the break of the 18 SMA overnight.  They ended the day just above that line.  We are in no mans land here at the moment.  They really could go either way from here.  I don't think it will take much downside to bring out the sellers though.  The upside might be more tough to come by.

Outside days have been followed by wide range days usually within two days.  All but one of those days have been down.  It seems likely tomorrow could be a wide range day one way or the other.  The way the reversals as described by Bespoke have been working along with the way most outside days have worked this year should make the odds favor the downside.

The 3rd estimate of GDP came in at -2.9% and well below expectations.  The quarter was a huge miss from early projections.  Have a look at the chart.


We have never had a GDP print that low that was not associated with a recession.  This was the third estimate which can still be revised in the years ahead, but is as close as we can get to reality in real time.  The first quarter profits dropped like a recession might be starting.  Now GDP looks like a recession.  The pundits were out proclaiming it was meaningless and the market was up on the day.  It reminds of the Mad magazine cover "What me worry" from when I was a kid.  In 1998 when I was first getting into the markets we had a quarter of 2% growth and they were selling stocks like mad on the announcement.  I can remember vividly wondering why everybody was panicking on 2% growth.  SPX ended up pulling back near 20% that fall before it was over.  That turned out to be nothing but a short lived panic as the market recovered quickly.  I sit here today wondering the exact opposite.  We had a GDP print that historically has only been associated with a recession and yet people were out buying up stocks on the announcement.  There is a strong belief that nothing can go wrong.  We are not going to have a recession any time soon.  The FED has our back.  Stocks should have sold off today.  Even if it was only a one day wonder and they started back up tomorrow.  This is truly a market complacency beyond anything I have ever seen.  This is the kind of environment where the dreaded black swan can make an appearance and cause mass panic all at once.

Interesting article on Asia Asia’s Sputtering Growth Engine .

Bob

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