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

Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

Up 10/2/20

Up 8/21/20

Up 10/9/20

Sub-Intermediate

Up 10/15/20

? 10/21/20

Up 10/13/20

Short term

? 10/19/20

? 10/19/20

? 10/19/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Thursday, December 31, 2015

Daily update 12/31 Odd up/dn volume in Nasdaq 100 index

Splat.  We ended the year just like last year selling off the last two days.  That made SPX down fractionally for the year.  What an ugly trading year.  We had low volatility and a choppy market.  I guess that is what happens when you have strong competing forces.  Remember we had the positive seasonal affect of the 3rd year of presidential term and year 5 of the decade.  Those two things had some people predicting a 20% up move.  However, we had never had 7 positive years in a row on SPX.  We still don't. The market acted like it was fighting itself all year long.  A few days ago I heard Art Cashin say it was the most difficult trading year he could ever remember (he has 50 years experience on the NYSE floor).  I don't think we have any particularly positive factors for next year.


SPX ended the year back below the 20, 50 and 200 SMAs.  Since Oct. SPX has crossed up through its 200 SMA 6 times so far and been unable to stay there.  That seems bear market like to me.  The breadth was -57% which was a bit light for the magnitude of the move down.  That suggests big cap stocks were the culprit today.  New highs dropped way down to 38 while new lows picked up to 47.


The futures have a confirmed break of the 20 SMA.  They held support at the 200 at least for today.  That may not hold next week.


The green count plummeted today, but the red count is still low.  The bears have more work to do to get full control.  Will the bulls come out and save the day next week?

The futures indicate the bears are trying to take control of this market.  However, they have not quite managed to do that yet.  Another down day on Monday would likely complete the task.  I would not be surprised to see selling in the big winners from this year like the so called FANG stocks.  That could easily infect the rest of the market.  There are so few leading stocks left on the upside people would notice if they all start falling apart.  So far the Santa rally is negative can the bulls pull off yet another miracle in the next two trading days.

This is an interesting chart and comments from Tom McClellan.


I mentioned that volume numbers looked even weaker, and this was true especially for the Nasdaq 100 stocks.  They saw 9-to-1 net declining issues, but 18-to-1 net down volume.

I hardly ever talk about the UV-DV numbers for the Nasdaq 100, because they are usually doing exactly what prices are doing. This year it is finally different, and in ways that I have not seen before. I have these data that I have calculated myself dating back to 1993, and this is much different behavior for this daily Up-Down Volume Line than I have ever seen. The divergences are huge, especially considering that it does not typically make divergences at major tops like 2000 or 2007.

It is tough to make an interpretation about the meaning of an event that has never happened before. But we know that divergences in other types of breadth indicators carry a negative meaning, and so on that basis it is not going too far to look at this situation and see trouble.

Negative divergences do not always mean lower prices.  However, when lower prices materialize in that situation they tend to be majorly negative.  I find it very interesting that there were no divergences noted in either 2000 or 2007.  Why now?  This is just another divergence to go along with the advance/decline line, bullish percent indicator, and other market internals.  Can a top be this obvious and still play out?  While it is technically obvious it is not obvious to the major strategists on Wall Street.  The USA Today ran an article today showing 2016 year end predictions from 17 firms ranging from +1.8% to +14.4%.  None of them predicted even a slight down year.  Unanimous bullish sentiment while the market is in the weakest technical condition I have ever seen with SPX just below all time highs.  Not to mention the fragile condition of the economy at the moment.  Nothing could go wrong here, could it.

This was an interesting tidbit from Shaeffer's research.  Indicator of the Week: Is Having More S&P Down Days Really a Bad Thing?  It includes this table.


The article poses the question whether having more negative days then up days is a bad thing.  The last three times it happened we were in a bear market that ended up a 50% meltdown in SPX.  In the bear market year of 2008 they were dead even.  They provided no evidence whatsoever that this condition is not a bad thing.  How many times have I commented on how 2015 reminds me of 2000?  This is yet another thing.

In Daily update Wholesale sale back in Aug. I showed a chart with rising auto inventory.   Despite auto sales being good in 2015 they have apparently been producing too many cars.  The Chicago ISM number which is heavily influenced by the auto industry and was extremely strong early in the year but had a huge miss today.

Source

Throughout the entire history of this survey it has only been this low when the U.S. was in or about to be in a recession.  The auto industry is the last strong manufacturing sector in the U.S.  This reading suggests that sector is succumbing to the weakness seen everywhere else.  No way to put a positive spin on this.  Great time for the FED to be raising rates.

I don't like to make predictions about the market because it is usually futile to do so.  However, I will say this about 2016.  If next year ends positive for SPX it will be really surprising to me.  On the other hand, if SPX is down big it would not be surprising at all.  Entering a recession in the U.S. would also not be a surprise.  We are on the ragged edge already.  It would probably be more surprising if we do not go into recession.  A 15% drop in SPX would probably be enough of a shock to push us over the edge.

The market and sector status pages have been updated.

Happy New Year to everybody.  May it be a happy, healthy and prosperous year for you and your family.

Bob

Wednesday, December 30, 2015

Daily update 12/30

Who hit the sell button?


To hopefully make things clearer I color coded the competing patterns.  Today was not good for the bull case.  Breadth was -69%.  That is awfully high for this time of year.  New highs dropped down to 74.  New lows picked up a little bit to 32.  For three days in a row stocks have followed the overnight price of oil.  Today it was down again like it was two days ago.  Coincidence?  Maybe, maybe not.  The fundamentals are clearly cloudy at best.  Perhaps people are just looking for something for direction and are currently focusing on oil.  With the short attention span of the market that might not last long.  The TRIN was a very high 3.02.  That is usually worth a rally the next morning, but it usually happens when already oversold at least to some degree.  We are just coming off extreme overbought so that does not apply here.  It may be more of a warning then anything else.


Resistance held and repelled the futures at least for the moment.  While they found support at the 100 SMA there was a late day move down to that line.  It is too soon to tell if it will hold or not as there was little time during market hours with price in that area.  We are going to have to see what happens tomorrow.


The green count came in today, but is still overbought.  That does not preclude a rally day tomorrow though.  It just means the bulls have to really want it to push higher from here.  I am not sure they have the desire.

While SPX is still slightly positive for 2015 it closed 17 points below where it closed one year ago on 12/30/14.  Whether we end up with SPX positive or negative for 2015 is probably irrelevant.  Barring a 30 plus point rally tomorrow we will be lower then we were in Dec. of 2014. 

We had a high TRIN today which often brings out the bargain hunters the next morning.  However, we not in the usual oversold condition when that happens.  Since there was late day selling into the close there could be follow through selling in the morning.   Regardless of what happens tomorrow next week is really much more important.  We will have to see if they come back from their New Years parties in a buying or selling mood.

Bob

Tuesday, December 29, 2015

Daily update 12/29 Similar to 2011, but different

Buying spree.


Since I already admitted I had no idea which one of two possible patterns was playing out I figured I might as well keep adding.  Now there is a possible little abc upside correction.  Just par for the course in this very choppy year of trading.  The breadth came in at +68%.  New highs expanded to 102.  That is the first time over 100 since 11/4. 


The futures ran up to resistance from 12/17 and stopped.  Its hard to say how significant this resistance is.  There could be a good bit of overhead resistance generally in the area from all year.  Price is getting extended from the 20 SMA and that has often led to a reversal of some kind this year.  Will the bulls keep the pressure on?


The green count sky rocketed to overbought.  This is the highest level since 10/28/14.  It was just 1 point lower on 12/24/14.  The market went up until 12/29, but sold off going into year end.  Hmm.  The breadth data is also showing an extreme overbought situation. 

Only two trading days left.  Will the bulls keep SPX positive for the year?  Will the sellers show up again to sell into the short term overbought condition.  A failure by the bulls here probably will set a negative tone for early next year.  The bulls have to get SPX to a new high.  Anything less then that will not be convincing.

I have seen some people commenting on how SPX is tracing out a very similar pattern to 2011.  While that is true based on price, the internals are different.  Here is a look at how the bullish percent chart looks between now and then.


Notice how the bullish percent dropped as the month went along.  Now look at 2011.


The reading from 2011 was about 10% higher then now and was rising all month.  Not only does the current reading have the wrong trajectory it is the first time it has been under 50 at year end this entire bull market.  The data starts in 2004 and the only other time this indicator was below 50 at year end was 2007 (42.49 for comparison).  Yet another thing that indicates we could be in a bear market.  The evidence continues to mount

Bob

Monday, December 28, 2015

Daily update 12/28

Un Santa like selling.


SPX is once again red on the year and back below the 200 DMA.  The breadth got very negative mid morning at -78%, but ended up -61%.  Still that was on the negative side for the size of the move down.  I was a bit surprised to see the breadth get that negative this week.  Definitely more selling pressure then normally seen this time of year. 


The sell off this morning briefly penetrated the 50 SMA, but bounced.  The futures are still well above the 20 SMA.  The 100 SMA was still resistance today,  but it is not clear it is going to continue to hold.


The green count picked up today despite the down day.  It is back above 50 once again.

Despite the unusually negative breadth this morning it does not look like the bulls dropped the ball.  Whether they are willing to push prices much higher from here or not is the question.  To which I have no answer.  Probably a good time to relax and enjoy the season.

Bob

Thursday, December 24, 2015

Daily update 12/24

Today was the official start of the famed Santa rally.  I think it was already front run by the big three day rally this week.  With the overbought status mentioned last night further gains may be tough to come by.


 The 100 SMA held today.


The green count actually fell back a bit today.  Not exactly what the bulls want to see.

Last night I mentioned the market was short term overbought at resistance.  For today that resistance held.  It is quite possible it continues to hold.  A lot of people piled in thinking the market will go up next week.  For the most part this year the market has struggled to continue up when overbought.  Is anything really different now other then it is the end of Dec.  Nothing more positive fundamentally that I can see.  If we go up next week it will be due to seasonality.  However, we have had some unusual down days this month that may be indicating the usual seasonality might not play out.  I am  not sure what to expect next week.  We had very light volume this week which is likely to continue.  If a sell catalyst comes up in that condition things can get crazy.  However, it may be the news flow is calm and quiet and nothing much happens at all.

The market and sector status pages have been updated.

Merry Christmas to those that celebrate it.  Happy Holidays to everybody that celebrates anything this time of year.  Have a great long weekend all.

Bob

Wednesday, December 23, 2015

Daily update 12/23 Durable goods

The bulls came out to play again. 


SPX stuck its head just above the confluence of the 20, 50 and 200 SMAs.  There could be some resistance here.  The breadth was an amazing +79%.  Another day of buying the beat down stocks.  The new highs increased a bit to 48, but still woeful this close to the highs.  New lows dropped down to 14 as the sellers hit the vacation trail apparently. 


The futures made it up to the 100 SMA and found resistance as mentioned last night.  The question is whether it is insurmountable or not. 


The 10 DMA lines finally got a positive cross.  The MCO reached the overbought line today.  Getting overbought while making lower highs is usually not a good thing. 


The green count is the highest it has been since Oct.  I am not yet sure if that is good or bad

Are the bulls taking charge?  That would depend on whether that daily chart pattern is an ABC correction or if the double top is the more important feature.  Hence the question mark.  If point 1 had been a new high the higher odds play would be the ABC correction.  However, that was not the case.  It has been over six months since SPX made a new high.  We have a lot of warning signs that indicate we may already be in a bear market.  In bear markets getting overbought on the MCO when testing the 200 DMA from the bottom often leads to bad things for bulls.  It is up to the bulls to keep the upward pressure on.  Will they continue to buy with the market in a short term overbought condition?

Lets take a look at the latest durable goods data.  Starting with consumer durable goods.


The latest data is still negative YOY.  If you are looking for good news it is slightly less negative then last month, but negative is negative.  Next up is core capex.



This one is slightly more negative then last month, but basically in the same area.  No sign of a pick up here yet either.  The longer we stay in this negative condition the higher the odds of recession are.  The economy really needs to show a sustainable uptick.

Bob

Tuesday, December 22, 2015

Daily update 12/22 Unusual negative Dec. action

Bulls came out to play.


Another light volume rally day.  Breadth was a very strong +73%.  That is a bit strong for the magnitude of the move.  Likely some money moved into the beat down energy stocks that have lower market caps so they did not move the SPX all that much.  New highs were only 30.  New lows dropped significantly down to 64.  Another indication today's buying was likely a lot of bottom fishing.  Notice SPX is still below the 20 and 50 SMAs and they are now experiencing a negative crossover.  Some people will view that as short term negative. 


You can't see this on this chart because of overnight data, but the futures closed the 12/18 big gap down based on intraday data.  They ended the day above the 20 SMA, but a break above has not been confirmed yet.  The futures stopped right at the 200 EMA.  Whether that is significant resistance or not I don't know.  Just mentioning it.  The 100 SMA is very likely going to be resistance should we get there.


The green count crossed above the red today, but it is still below 50%.  We had a similar cross on 12/4 that did not amount to anything so the bulls need to follow through on the upside here.


The MCO has a positve cross today and the 10 DMA lines are getting close.  They could cross tomorrow if we get another strong day.

The market has worked off the slight short term oversold condition from the post FED selling tantrum.  It has not gotten enough strength to say the bulls are back in control though.  There is still more work to do.  Now that we are back to neutral if they still have more to sell the bears may show up again.  Unfortunately I have no way of knowing whether they are done or not.  I did not see any sign of selling exhaustion that I could recognize.  Going to have to wait and see what tomorrow brings.

Since the beginning of Dec. we have had three -1.5% or worse days and one -1.44%.  Two of those days were back to back.  With that in mind read the following snippet from Setting Us Up for More ‘Fed-Ache’

Jason Goepfert of Sundial Capital reports that the action on Dec. 17 and 18 amounted to the first time since 2007 that the S&P 500 has suffered back-to-back 1% losses in the latter half of December. The time before that was in 2000.

Moreover, he reports the market has not suffered back-to-back 1.5% losses in the last half of December since 1937, or any time in December since 1982. Going back to 1928, he notes, back-to-back 1% losses in the last half of December has only happened during bear markets, which is probably an important message.

I didn't know that piece of trivia when I wrote last night "However, longer term the market continues to weaken.  On Friday night I took a look at the number of SPX stocks down over 20% from their 52 week highs and found the count has now risen to 40%.  That is actually worse then after the Aug. mini crash.  Its getting pretty hard to argue that we are not already in a bear market."

Now we have unusual Dec. activity that only seems to occur in a bear market.  Things are not looking particularly good for next year and they could be quite negative.

This is an interesting article.  Technically Speaking: It’s Now Or Never For Santa  While there are several interesting things to look at I found this chart kind of stunning.


“What is so significant about those extremes in OEX open interest put/call readings? They were almost all accurate in forewarning of struggles in the stock market. In late 1999 and mid-2007, the extreme readings preceded cyclical market tops. In mid-2011, the extreme occurred prior to the sharp summer decline. And while readings in June 2003 and late 2014 did not precede major weakness, the stock market did stagnate for several months following. Perhaps only an occurrence in January 2012 proved to be a complete bust as a warning sign.

Then, there’s 2015. After 15 readings above 2.0 in 15 years, there have been no fewer than 166 readings that high so far in 2015. What gives? Either it truly is “different this time”…or this is an unprecedented red flag waving in front of us.”
Whenever something unprecedented happens there is really no way to know if it is important or not.  There could be some simple logical explanation for all those red lines.  However, with the ultra weak technical condition of the market this could really be the biggest red flag the market has ever waived before a crash.  Unfortunately we are only going to know in hindsight.

Bob

Monday, December 21, 2015

Daily update 12/21 Hussman article on the FED

The bulls come to the rescue (at least for one day).


SPX closed slightly above the green support line.  Unlike last Monday we did not test the low before rallying.  The breadth was +63% unlike last Monday when it was rather negative despite the bounce in SPX.  New highs were 28 while new lows were 176. 


The futures bounced from support.  They are still below all key MAs though.  The bulls did not do enough today to tell us if they want control back or not.


The red count dropped back under 50, but it is still higher then the green count.  This is to be expected since SPX is right about where it was 7 days ago.  We still do not have a short term trend in place.

Does the positive seasonality take over for the rest of the month or are the sellers still out there just waiting for higher prices.  We had some positive divergences at Friday's low that hint at a possible short term bottom forming here.  However, there really is nothing that is screaming bottom.  The daily chart is making lower highs and lower lows.  SPX is going down, it is just doing it extremely slowly.  Maybe this is an ABC type pullback and we are making a bottom.  I can't really say.  A piece of bad news could easily send the market spiraling down from here.  All I can say is the bulls have more work to do to turn the market back up. 

The market went over a month without back to back up days.  It finally put three days together only to have the entire up move wiped out in two days.  We could easily continue to chop around in the short term.  However, longer term the market continues to weaken.  On Friday night I took a look at the number of SPX stocks down over 20% from their 52 week highs and found the count has now risen to 40%.  That is actually worse then after the Aug. mini crash.  Its getting pretty hard to argue that we are not already in a bear market.  The market technical condition continues to deteriorate.  There can be no argument on that.  It is becoming less and less likely the market is going to break out on the upside.

This is an interesting take on FED actions.  Reversing the Speculative Effect of QE Overnight  Somewhere I read another article that claims the current action is more tightening then people think.  I don't know enough about how all that stuff works to truly understand it, but I can understand that tightening is tightening.  There is no dovish rate hike.

Bob

Friday, December 18, 2015

Daily update 12/18 Global liquidity

Thud again. 


SPX made another close below the green support line.  Breadth was -63% which again was a bit light for the magnitude of the move down.  New highs were a paltry 21 while new lows increased some to 229.  That is a lot less new lows then when we were here before.  There were 365 and 625 on 12/10 and 12/14. I believe the less severe breadth and less new lows indicates the selling was more in taking profits on winners rather then selling losers like before.  There is an old saying and I have no idea who said it, but it goes like this "in the end they get them all".  This refers to the early stages of a bear market or severe correction.  I have commented many times on all the stocks that are already down 20% or more from their highs.  That expression refers to situations like this because they always seems to get resolved by selling the few remaining winners.  That is how final highs become final highs.  This is only two days, but if this action persists it would be a very bad sign for bulls. 


The futures came to a stop at their support line.  Once again SPX is below support, but the futures are not.  Last time we bounced.  We were down enough again on a Friday to suggest Monday should see a lower low at least in the morning.  Last Monday we sold off a bit then rallied in the afternoon to begin the pre FED bounce.  Can the bulls pull a rabbit out of the hat again on another Monday? 


The red count is back into oversold territory again with a slight divergence.


The transport are the first index to close below the Aug. low.  Will this make a double bottom or will this turn out to be a major warning sign?

I have no idea what happens next week.  SPX has not clearly broken support yet.  There are some very minor divergences and we have a seasonally strong time period.  Do the bulls show up or will the sellers keep control?  This market has changed directions so many times this year I don't know how you can predict anything. 

I heard a lot of talk about the lower for longer idea being applied to oil and other commodities.  Well duh.  It is amazing to me it has taken this long to figure that out.  In GLD and GDX 4/15 I wrote "If gold has topped and broken down the most logical reason for that would be a deflation event is coming. "  It was a clear sign that a deflation event was coming.  Commodities have crashed and Europe even has negative rates.  I have been waiting for over 2.5 years for everybody else to figure that out.  Better late then never I guess.

I find this chart a bit shocking.

This chart goes back to 2004 and this is the first time global liquidity has gone negative YOY.  I am sure this is related to the drop in the price of oil and other commodities.  Do you see the problem here though?  What happens if we have another crisis like 2008?  At that time countries and central banks all around the world got together to fight the crisis.  My guess is there would be much less cooperation.  That is already showing up in all the currency devaluations going on.  Countries have adopted a me first attitude.  I expect that would only get worse.  Easy to understand.  All that liquidity and fiscal stimulus did not produce a self sustaining recovery.  Why would it work a second time?

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

Bob

Thursday, December 17, 2015

Daily update 12/16 Rate hike vs profits

Thud.  I expected some give back today, but this was outright running for the exits.


That was a short trip above the 50 and 200 SMAs.  SPX retraced slightly more then yesterday's gain.  The futures kept on diving after the 4 PM close.  The breadth was only -63% which is a bit light for the magnitude.  That suggests big caps were getting hit the hardest.  You might recall the way this bounce got started was by the big caps.  Well they were bailing out on them today.  The TRIN closed at 3.7.  That is the first high TRIN reading in a long time.  The down volume was 85% of total volume today.  New highs were 44 while new lows increased a bit to 176.  A bloody day.


The futures were well off the overnight high by the open.  They tried twice to get above the 100 SMA, but failed.  I think that inability to go higher is probably what started the selling.  Then it just kept up all day.  The futures did not stay above the 18 SMA long enough to turn it up.  The break of the 18 is unconfirmed, but that might happen in the night.  Needless to say this is not exactly what the bulls wanted to see.


The red count turned up a bit, but is well below oversold levels.  Not very compelling for bulls.

The high TRIN often brings out the bargain hunters the next day.  However, it normally happens when the market is oversold.  A condition we do not have.  Yesterday's rate hike and big rally echoed around the world overnight.  It is quite possible today's rejection might also echo around the world.  If that is the case are the bulls going to step up to the plate and buy?  Unless they show up strong tomorrow the year end rally is certainly in question.  I think the bulls are going to need to pull a rabbit out of their hat now, but they have done that before.  I think tomorrow will be interesting.

The dollar was strong and commodities were weak.  Oil made new lows.  I heard a lot of interesting talk about that today.  It appears it may be dawning on people that oil is in a downtrend.  That statement may sound absurd since price has been dropping for 18 months, but think about it.  All we ever hear about is people trying to pick the bottom in oil and energy stocks.  A lot of people were viewing the down move as temporary.  I have been saying all along oil was not going to bottom until people started cutting production.  Today I feel like that realization is starting to hit people.  If that is the case it will likely cut off the flow of money that has been pouring into cash starved energy companies.  That will start ratcheting up defaults in the months ahead.  Texas is already starting to really feel the affects.  That will only intensify.  Needless to say I think the trouble in the junk bond market is just getting started.

There are several interesting things in this article.  3 Things: Tick Tock, Stocks, Shocker  There are some tables with GDP at first rate hike and the time to recession that are pretty good.    I found this chart very interesting.


This chart really show hows late in the cycle this first hike is.  It looks like other rate hikes came when profits were increasing which is clearly not the case now.  It really is different this time then any time in history that I can find.  Nothing about this looks right to me.  These dovish rate hike people rally crack me up.  Rate hikes are not dovish no matter what is said.  If one considers QE as loosening monetary policy then the FED has been tightening and therefore hawkish since Dec. 2013 when tapering began.  Yes rates are still low, but is the FED tightening policy or not?

Bob

Wednesday, December 16, 2015

Daily update 12/16 Nov. IP

Kind of anti climatic just like the FED wanted.  I don't know if we stay that way the next few days or not.


SPX climbed up to the 20 SMA.  Breadth was a very strong +79%.  New highs increased once again to 45.  New lows remain elevated at 123.  We are almost back up to where we struggled in Nov.  Did the rate hike clear the decks to go higher? 


The futures made it up to the 50 and 100 SMAs.  There is also the upper Keltner channel here.  There could be some resistance in this area.  At any rate the oversold condition has been eliminated. 


The red count dropped considerably.  However, the green count did not overtake it quite yet.  This is essentially neutral now. 


Both breadth indicators are still  negative.  The MCO has gotten up into a neutral condition though.


The dollar index tested the downside after the FED announcement.  It was rebuffed and ended the day pretty strong.  As you can see it has tested the 50 SMA for several days in a row and appears to be ready to head up again.  Longer term I think this is key to what happens to SPX.  The jury is still out as to whether the long consolidation this year is a top or a base to go higher.  However, it has done nothing wrong to my eyes.  I still believe it is a base to go higher.  We will see.

We had a big three day rally, but the bulls have not quite got clear control of the market yet.  There was a rush to front run the FED meeting.  The question is was it for a short term trade or longer term holds.  No way of knowing that.  Since we are no longer oversold the bulls will need desire to continue to push prices higher.  I don't know if they have that desire or not.  There is still a little more room up to the major resistance levels. 

Up until the last three days SPX was unable to put back to back up days together for well over a month.  While the bounce in SPX was sizable the internals do not appear particularly strong.  I don't see any clear sign this rally will do any better then the many other rallies since May that failed to make a new high.  We will just have to see what develops. 

There were changes to the trend table for SPX and COMPX.  R2000 did not quite do enough to change anything.   

The latest IP data came in weaker then expected.  Part of the drop was caused by utilities and the warm weather.


As you can see we are at a new low for the year.  It is also negative YOY for the first time in this recovery.  I suspect the FED has never raised rates in that condition before.


There have been a few times in the past when IP went negative YOY and we did not have a recession.  However, more often then not it has been associated with one.  What will it be this time?  The biggest problem I believe is the inventory situation.  There is clearly a risk of more production cuts.  The pundits claim that manufacturing is a small percent of the economy and not to worry.  The problem is that all recessions take root in manufacturing.  One cannot tell where recessions begin and end in the long term chart of the ISM non-manufacturing index.  However, a look at the IP chart above and it paints a pretty clear picture of when they occur.  The bigger the drop in IP the worse the recession was.  At the moment the economy is still not getting better.

Bob

Tuesday, December 15, 2015

Daily update 12/15

No bad news so up it went.


We started with a big gap up for no particular reason that I could discern.  Simply an oversold bounce I would say.  At any rate SPY was able to rally enough to fill Friday's big gap down.   The market continues to fill those gap downs pretty quickly.  Breadth was a strong +76%.  Volume was slightly down from yesterday.  New highs were up a bit to 20 while new lows dropped considerably to 187.  Selling commenced in the afternoon and SPX closed considerably (10 points) off its high.  A few nervous people in front of tomorrow's FED meeting.  Understandable.



The futures stalled at the 18 SMA.  They have not done enough to break the downtrend yet.  There is still a good bit of room up to the 100 SMA.  We could go that far and still be in a downtrend. 


I did not expect the green count to rise much today, but I am a bit surprised the red count did not drop a little more then it did.  Back in Nov. it dropped to 58 on the first rally day.  This does not appear to be a very strong rally kick off so far.  Another strong day is needed.  This is still in the realm of a dead cat bounce.

There seems to be good agreement that the FED will raise rates tomorrow.  There also seems to be good agreement that the market will rally.  Maybe too good of agreement.  Over the last week CNBC has asked quite a few people what they think about what was going to happen.  I heard one person say they expect a sell the news event  no matter what the FED did.  Everybody else expects a sell off if they don't raise rates and a rally if they do.  I commented previously I expected a rally on a rate hike also because the market seems to rally every time a central bank does or says something.  After an initial spike down after the first taper announcement in Dec. 2013 the market rallied like crazy.  At that time I heard quite a few people say they expected a sell off after that announcement.  All I hear now is how the last two weeks of Dec. are always positive and the FED raising rates removes the uncertainty and clears the decks for an end of year rally.  I have heard this scenario so many times from so many people I have to question just a bit if that will happen.  It is rare the market does what so many people expect, but not impossible.  While it may indeed rally after the announcement, I don't think we should be surprised should it sell off.  The market really likes to screw everybody when too many people get positioned on one side of the boat.  It sounds to me the long side of the boat is heavily loaded for this announcement.  No mater what, expect some volatility.  Even when the FED does exactly what everybody thinks it will do there always seems to be extra volatility whenever they move.  Maybe we will know more about what the rest of Dec. might hold after tomorrow.

Bob

Important

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