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Monday, December 29, 2014

Daily update 12/29 Odd ECRI data

It was a lazy and mixed day.  There was a little bit of selling into the close, but not nearly as dramatic as the last several days.  Maybe portfolio rebalancing is coming to an end.  Here is the SPX chart.

There was a bit of buying again on the open.  SPX got fractionally above Friday's high, but found no buyers up there.  The afternoon was a chop fest.  Typical holiday week action.  Lets take a look at the futures chart.

Those are some really tiny bars.  The ADX line has turned down along with the MACD.  We clearly have lost a lot of momentum.  I would say we are likely in consolidation mode.  We may need a news induced thrust to get much more upside over the next couple of days.  IWM found some buying though.  Check out its chart.

IWM popped out to a new high.  Can it extend?  Will it be able to stay up there?  Everybody seems to expect this to continue up.  Sometimes the market doesn't do what everybody expects.  We have to keep watch in case this turns into a break out failure.

USO sold off yet again to new lows.  While everybody and their brother is calling for a low in oil it just keeps falling.  The lower it goes the more stress there will be in the high yield debt market.  So far that has not spilled into anything but oil related stocks.  This will certainly impact earnings estimates going forward as energy is a pretty big component of SPX.  Between that and the rising dollar causing revenue declines there could be considerable adjustments to the earnings picture.  So far the market hasn't cared.  But then again there is no incentive to sell at year end when you can wait a few days and not have to pay the taxes until the next year.  Come Jan. things may change. Something to watch out for.  In the mean time relax and enjoy that is what the market seems to be doing.

I find this ECRI data very odd. 

The growth rate continued to get more negative the last week.  We can see that it does not get this negative very often.  The two other times it happened in this bull market we saw 15% and 19% corrections.  In fact every dip to this line has seen a similar sell off in stocks.  The 1998 sell off was almost 20% as well.  I am not sure it has ever been this negative while SPX was at all time highs.  Stocks are a component of the index and usually it is a sell off in stocks that drives the growth rate negative.  Something else is going on this time.  Is this going to be the only time in history we don't see a big sell off?  Until this turns up for a few weeks there could be some downside risk to stocks.


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