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Thursday, August 7, 2014

Daily update 8/7

SPX closed below its 100 DMA.  Here is the daily chart.

The bulls tried to get a bounce going by running the futures up overnight, but the sellers struck again.  They pushed SPX below the key trend line and the 100 DMA.  At the end of the day breadth was only 54% neg.  New lows were 63 which is down from over 100 last week.  Despite a series of lower closes on SPX the VIX has not closed higher then 8/1.  Lets look at the futures chart.

The futures slipped below the 8/6 low this afternoon, but a funny thing happened.  Instead of tanking the selling just stopped.  A small bounce into the close had the futures back above that low.  The market looks sold out to me at these levels.  I think we made a low today and will bounce.  If we don't a waterfall down to the 200 SMA is very likely.

I saw an interesting article on China today.  China's "Prelude To A Storm" As Record Private Bonds Mature

Check out these charts from the article.

Not only is the China corporate debt market the biggest in the world, but as a percent of GDP it is much bigger then the U.S.  I did not realize the debt level in Honk Kong and Singapore was anywhere near that high.  Is that a problem?  Check out this chart.

The amount of non-performing loans is actually higher then it was in 2008 when the global economy was crashing down.  Notice the trouble started again late in 2011.  I have said many times the global economy never recovered from the mini 2011 stock crash.  It is evident China certainly did not. 

Wall Street is busy telling us not to worry everything in the U.S. is just fine.  I contend the problems for U.S. markets will be coming from offshore.  The situation abroad continues to worsen every day.  If there is one thing we learned in 2008 is that we have a truly global economy.  If the rest of the world tanks it will drag the U.S. down with it.  I think you should be worried.  In fact I think you should be very worried.

Here is an argument for the bull case Ignore the bears and you could bank a 22% stock market gain
Another interesting article  Is it just a pullback, coming correction or beginning of bear market?
That one contains arguments on both side.  Most bullish.

On the flip side is an interesting read from India's central bank head. RBI’s Rajan Sees Risk of Financial Markets Crash

I had to downgrade the intermediate trend for SPX today to neutral.  The COMPX is still ok at the moment.


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