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

Thursday, February 12, 2015

Daily update 2/12 Whats up with retail?

Nothing like Putin saying yeah sure lets have a cease fire so I can rearm my guys to get people buying stocks.  Today they ignored the Greek situation.  What happens tomorrow?  Here is the SPX chart.

After a big gap up this morning it was a slow slog to the upside.  There was a clear hesitancy to push price.  However, every little dip in the futures was reason enough to rush in to buy.  We saw that same kind of price action back in Dec. when coincidentally or not we were in the same area.  SPX closed at a new high for the year.  It was within 5 points of the high before stalling.  New highs expanded to 188 which is better then the last few days, but well below the 250-300 we were seeing earlier in the year.  New lows dropped down to 12 which is very positive if they stay down there.  We have the top of the Keltner channel here as possible resistance along with the high.  Lets have a look at the futures.

The futures got quite a boost on overnight news.  This is a test of the Dec. high.  Nothing to do now but wait and see what happens.  We are getting a little overbought in the short term now.   Are the bulls ambitious enough to really chase price higher?  

The breadth was a strong 74% positive so the rally was broad based.  Now we are where the rubber meets the road.  Lets see what the breadth chart looks like.

While both breadth indicators are positive they are not particularly strong.  No clear sign we are starting a thrust that is going to take the market significantly higher.  The more important thing to watch here is the DJ20.  Despite the lower fuel costs the transports are lagging behind.  Here is a look at the chart.

Despite lower fuel costs that should absolutely be a positive for this index it is still below the Jan. peak.  The XLF financial ETF is lagging a little bit also.  There is at least a moderate risk of this retest of the high in SPX being a failure.  The Greek situation is still not settled and may come back to the forefront at any time.  Pay attention.

The lower fuel costs are supposed to be great for retail.  What exactly is going on here.  Take a look at these charts.  This is wholesale inventory to sales ratio.


This one is business inventory to sales.


And now the reason why the ratios are rising so fast.


Sales have been poor for two months in a row no matter how you look at them.  It was the biggest two month drop since 2009.  The obvious problem is that sales need to pick up or businesses are going to cut back on purchases.  That will cut production and hurt GDP.  If the cutbacks are big enough then layoffs will occur.  A big inventory build is usually how recessions start.  I have mentioned this before, but I don't want anybody to forget it.  The negative effects of the drop in oil price happen up front while the savings to consumers happens over the long term.  We are now seeing the up front negative impacts.  The severity of those impacts remains to be seen.


No comments:


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