If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Friday, August 1, 2014

Daily update 8/1

A little bit mixed as a few indexes were up.  The broad market indexes had a little more down.  Here is the daily SPX chart.

I forgot to check for my oversold buy signal until after I did the update yesterday.  Since the market did not bounce strongly today no harm no foul.  The low today was just above a trend line that extends from the Nov. 2012 low.  That is really where the market started its acceleration upward.  Needless to say it is a key line for bulls.  Lets peek at the futures chart.

The futures have closed below the 200 SMA a couple of bars.  However, they have not clearly broken that yet.  They are certainly stretched on the down side.  If the world doesn't end over the weekend they might bounce next week.  However, the divergences in place before this sell off were massive.  I think there will be sellers still out there.  

The last two days saw a closing TRIN of .58 and .69.  The volume was very big both days.  I thought that was very odd.  I put TRIN on a chart with SPY and indeed it is odd.  Every other meaningful pullback in this bull market saw a TRIN close above 1.5 before a lasting bounce.  To not even be above 1 shows a total lack of panic selling going on.  I can't recall ever seeing anything like that before.  It just seems unlikely this will be the final low in this pullback.  Any bounce is likely to be a good short op.  Maybe the real question is whether we get a decent bounce or not.

I found this article interesting.  Substituting Debt For Income Is Not Success - It's Failure On An Epic Scale  There is something I really and truly do not understand about modern economic thinking.  Every economist alive today was taught that savings equals investment.  It is so basic it should not need to be mentioned.  However, Paul Krugman and many others seem to think we can all spend our way to prosperity.  I don't get it and I never will.  It simply is totally and completely illogical.  Here is a snippet I particularly liked.

The economic "recovery" has been based on a simple premise: debt can be substituted for income with no ill effects. As real household incomes have declined, the legitimate foundation of additional spending--more income--has eroded for the bottom 90%.

Even the ephemeral foundation of additional debt-based spending--the Fed's beloved wealth effect--has eroded for all but the thin layer at the very top of the wealth pyramid.

To replace this diminished income, the Status Quo has substituted debt as the source of additional spending: household debt, corporate debt and government debt.

But debt is not income. Rather, debt requires income to be diverted to pay interest and principal. So substituting debt for income ends up further depleting declining income.

This scheme of keeping a bloated, inefficient Status Quo afloat with debt is not a success--it's a failure on an epic scale.

There are some very interesting charts in that article.  I highly recommend reading it.

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


No comments:


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