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Wednesday, July 30, 2014

Daily update 7/30

Some stuff up, some stuff down and my poor little brain was going round and round.  What a weird day.  I am going to skip right to the futures chart tonight because SPX didn't really tell us much.

The sellers did not waste any time selling into the big gap up.  The futures tested the all important 100 SMA on the sell off and bounced a bit going into the FED announcement.  After the announcement the futures rallied back up to where they opened.  Sellers showed up again and they drifted lower into the close.   The bears were definitely more aggressive today then they have been lately.  There is quite a battle raging here between bulls and bears.  Price action intraday has been very sloppy with rather sharp up and down moves that end abruptly.  It seems like the bulls need to show some real strength pretty soon or we will end up breaking the 100 DMA.  That could bring in considerable selling pressure given the weak internals.  Tomorrow being month end is sometimes a muted day, but who knows.

I don't know if this is important or not.  I normally don't report stuff without a chart that I can see to verify for myself.  However, with the market in the weakest technical condition we have seen in this bull market I thought maybe I should mention this.  I read this today in Morning MoneyBeat: Bearish Stock Bets Mount

An ominous signal is rising from the options market, where the pile of bearish options bets is growing larger by the day.

The average of outstanding “put” options on the S&P 500 and the S&P 100 indexes last week rose to twice the number of bullish “call” options, said Jason Goepfert, founder of Sundial Capital Research.
Only twice during the past 20 years has that ratio been so lopsided to the bearish side — in mid-February 1996 and in July 2007, Mr. Goepfert said.

Both times, the market floundered in the weeks and months ahead.
“Mostly,” Mr. Goepfert wrote, “the higher the [put/call ratio], the more likely stocks would struggle.”

It is more common for professionals to use puts on the indexes themselves then for retail traders.  Most retail traders use the ETF versions.  That makes it somewhat more likely that it could be smart money buying the puts, but they could just be for hedging purposes.  The 1996 instance saw a little pullback.  However, the July 2007 instance saw a rather large move down into the middle of Aug. from a similarly weak technical condition.   Here is a rebuttal article Why it's not time to worry yet  Unfortunately the rebuttal is an opinion piece.  So basically I have no data to work from.  I hate that.  As you probably know by know I hate opinions not based on at least some facts.   At any rate I thought I would mention it just in case it turns out to be important.

I thought this chart was interesting.

Wall Street loves to say that corporate balance sheets are in the best shape ever.  The reality is a completely different matter when debt is taken into account.  Both gross and net debt have made new highs since the financial crisis.  That should be no surprise really.  Even cash cow AAPL has taken on debt these days.  A lot of that debt has been added to buy back stock and pay out dividends.  Neither activity generates revenue to pay off that debt.  In my book that makes it a very stupid way to use the money and will eventually be a problem somewhere down the road.  One could make a pretty good argument that corporations are actually in the worst shape in the last 60 years.  Wouldn't that help to explain why they are so stingy on giving out raises and hiring new workers?


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