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Friday, July 11, 2014

Daily update 7/11

Inside day.  Apparently a lot of people are confused about whether they should be buying or selling here.  Lets see what the SPX daily chart has to say.

SPX managed to stay above the 18 SMA, but just barely.  Volume dropped considerably.  Inside days are supposed to favor the current trend.  Yesterday was down so I guess the odds would be higher for a move lower.  It felt like a very lethargic day.  Do the buyers or sellers get invigorated over the weekend?  Lets see what the futures chart has to say.

The futures ended on a white bar so they have worked off the blue bar over sold condition.  However, they are still below the 18 SMA.  We have a little bit of a triangle pattern forming between trend line support and 18 MA resistance.  Price action is probably going to continue to be sloppy until we break out one way or the other.  Since those lines are converging rapidly that won't be too much longer.

European indexes were hit much harder yesterday then the U.S.  They are in much worse technical shape.  After yesterday's drubbing they bounced back very little today.  Given the technical damage they have suffered I think the odds favor lower prices ahead.  I think it is going to be pretty hard for the U.S. not to join in.  Next week the earnings announcements pick up a lot and so might volatility.  The retail sector did not get off to a very good start this week.  A number of financials are up on deck next week.  They are already expected to be poor.  Will they beat the lowered estimates?  WFC reported today and was down .6%.  I believe it is one of the best run major banks.  That kind of makes me wonder what is going to happen to the others.

The futures -DI warning sign and today's inside bar would seem to suggest there is more downside to come.  Earnings reports might change that picture or accelerate the move down.  Stay tuned.

For economic data junkies check out the Atlanta FED's site updating GDP estimates as the quarter goes on.  It is updated several times a month as the data comes in.  GDPNow
This chart is on that page.

Kind of interesting how the consensus estimates have the high end even higher then at the start of the quarter while the incoming data has shown the real value will likely be considerably lower.  This estimate is supposed to converge with the official BEA data as it gets closer and closer to their first estimate.  The first estimate should be less of a surprise now.  However, that estimate is not very accurate historically.  One thing is clear the data since late May while the market went flying up was not particularly good.  Kind of looks like the market might have been ignoring fundamentals like a blow off top type of move.  I guess we will see.

I posted a link to an interesting BIS paper the other day.  Here is a summary of 32 important points by Mish.  It is a pretty good condensed version of what they said for those with time constraints.  I highly suggest everybody read this or the original paper.  Your investments have been and will continue to be affected by what the central banks do.  The BIS has some rather frank talk about the global situation which is quite unusual in those circles.  BIS Slams the Fed; Ridiculous Question of the Day: "Is The Fed Going To Attempt A Controlled Collapse?"

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.