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Wednesday, January 28, 2015

Daily update 1/28 Is all as it seems with employment data?

Thud.  They started selling the gap up from the open only pausing long enough to get the FED meeting out of the way.  Here is the SPX chart.

This is the third time SPX has closed below the 100 SMA this year.  This is not the same market we have seen the last two years.  It looks like we have competing patterns developing here.  The red letters indicate a potential head and shoulders top while the green letters denote a possible inverse head and shoulders bottom.  Like I have been saying for a while now this market is acting goofy.  The breadth was 72% negative.  Unlike yesterday the small caps joined the selling party.  There were 343 new highs and 104 new lows.  The schizo new high and low data continues.  Lets see what the futures chart has to offer.

The futures ended the day at the lower Keltner channel.  I mentioned the other day that could happen if they did not break out the top.  The MACD went negative today.  The -DI line crossed 35 again.  This is the third time since Dec.  We have not seen selling pressure like that.the last two years.  The blue bar indicates price closed below the lower Bollinger band and is extended.  The futures will often bounce from that condition.  That was a rather wide range bar which probably increases the odds of a bounce somewhat.  People have been consistently selling upside gaps this year.  Most of them have closed the very same day.  That is bear market type action.

FED day moves are often reversed in the next day or two.  The TRIN closed at 3.49 which often will bring out the bargain hunters.  The VIX recrossed above its weekly 200 SMA.  If we are still there at the end of the week the market is likely to take a tumble.  This is on goofy market.  The VIX signal, large number of new highs, and strong breadth all say the market should be breaking out to the upside.  Instead it is bordering on breaking down.  This is the opposite of what we have been seeing.  For years I have seen times when there were many things indicating the market should be headed lower, but it didn't.  While the dip buyers have still been active the sellers at higher prices have outnumbered rally chasers.  The bulls and bears are in a major struggle for control.  That is clearly evident in the competing patterns on the daily chart.  Until one side wins the choppy volatile conditions are likely to persist.  I have talked about all the warning signs this market has thrown off for months so nobody should be surprised if the ultimate resolution is down. 

This is a pretty good article Is The BLS Overstating Jobs  There are a number of interesting charts in there.  There was one I have seen a few times, but have not shown that I find very disturbing.  I have not shown it on the blog because the data has not been updated since 2011.

During the great recession the number of new business openings completely collapsed. We don't truly have a recovery if those lines have not crossed back the other way.  I would think the creations would have picked up over the last few years and closes dropped off considerably.  I would really like to know if that gap has been closed or not.  It sure gives a good look at how severe that recession was.  If anybody sees this chart with more up to date data please send me a link.  We still have a lot of empty store fronts around where I live.  That is probably not the case around the energy plays.  I don't know what it is like around the rest of the country though.

I think the GDP and employment data are being fudged and cannot be truly believed.  There are too many things that just don't add up quite right.  Many countries around the world are fudging data.  When they add things like hookers and illegal drugs to the GDP calculation you know they are desperate.  In the last go round the U.S. added intellectual property.  There is no way possible to figure out the true value of the IP of an individual company much less the entire country.  This is simply a fudge factor to be used as desired.  When I look at the econ data as a whole it does not add up to a strengthening economy.  We are muddling around at best.

I have to downgrade the short term trends tonight.  Down for SPX and COMPX and neutral for R2000.  Another reminder that the trend says where we have been, not necessarily where we are going.  I have no idea if the trend will last or reverse yet again.


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