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

Wednesday, January 21, 2015

Daily update 1/21 More on global economy

The market looked about to sell off a bit this morning when news leaked of the ECB QE plan of roughly 50 billion Euros a month.  That sparked a bit of a rally, but it was not particularly strong.  Lets take a look at SPX.

SPX is still below the 18 and 50 SMAs.  Like yesterday it settled a good ways off the high.  The breadth was 60% positive.  That is a bit odd with IWM down on the day, but what else is new.  There were 155 new highs and 63 new lows.  Both numbers were down from yesterday.  We have a three day bounce that started with very strong breadth.  There has been some follow through buying, but it does not appear to be very strong.  There has been intermittent bouts of strong selling, but it has not lasted very long.  Does it have enough juice to make it up to the 50 SMA?  Lets see what the futures chart might tell us.

The futures managed to stay above the 200 SMA today and climbed all the way to the 50.  The price pattern is clearly choppy and shows the bouts of selling.  The MACD and DI lines have crossed positive so we have completely worked the oversold condition.  The price pattern is nothing like the rocket blasts off the lows we have seen the last couple of years.  It looks more like a bear flag at the moment.  It could always get legs though.

Tomorrow morning we should find out the details of the ECB QE.  The Euro rallied rather strongly today like it had priced in a bigger QE then 50 billion a month.  European stocks were up mildly.  The QE leak did not seem to excite stocks all that much.  Tomorrow should tell us a lot more about the short term direction.  SPX and the COMPX did enough today to turn the short term trend to neutral.  IWM is still down. 

This chart is a look at global GDP in dollar terms instead of local currencies.

I have talked about the dollar index rally a few times.  The Euro is a big chunk of that index and the Euro has been falling rather dramatically.  I wasn't sure exactly how strong the dollar has been against other currencies.  The first chart shows how the dollar is really strengthening against most of the world's currencies as the GDP is cratering in dollar terms.  It has not dropped like this since back in 2008.  Unfortunately this chart lacks enough history to be able to tell much.  It has the look of 2008, but how many times would this chart have had that look without having the same dire consequences in past history is unknown.  The central banks of India and Canada have recently lowered rates which indicates there is some global slow down going on.  Is this a bad omen?  I don't really know without more history.  All I can say at this point is that the global GDP in dollar terms is crashing unlike anytime since 2008.  Oil, copper, iron ore and other commodities all seem to be pointing to economic weakness.  Something to keep in mind.


No comments:


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