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Friday, February 27, 2015

Daily update 2/27 What a miss on the Chicago PMI

It looked like nobody wanted to do anything of consequence today.  Lets look at SPX.

SPX is still above the key 2100 level, but not by much.  Breadth was slightly positive despite most indexes being down.  New highs dropped down to 121.  They continue to lose momentum.  While we did get downside follow through today SPX did not close below yesterday's low.  We don't have confirmation of the  potential reversal pattern of the last two days.  Here is a look at the futures chart.

The futures had another narrow overnight range.  They tried to break that range on both the upside and the downside during the day, but got rejected in both directions.  We spent most of the day trading between the 6 and 18 SMAs mentioned last night as key levels.  They slipped below the 18 at the close.  However, the break needs confirmation with a lower close.  The last time they closed below the 18 for one bar then rallied strongly.  This is the first time on this rally we closed below it and the DI lines had a negative crossover.  Whether that makes any difference or not remains to be seen. 

The bears are trying to get a grip on the market.  SPY closed below the hourly 50 SMA for the first time on this rally.  The futures are in a position to head south.  It all depends on how people feel on Monday.  The market really tried multiple times to rally today, but each bounce was eventually sold into with more force then we have been seeing lately.  The bulls still have a chance to stave off the pullback on Monday.  However, with SPX only 4 points above 2100 there is not much room for error.  The more important level is the 2090 area from the Dec. high.  If SPX breaks below that we have a failed break out and will probably bring on some more selling.  In reality 2100 is just a round number and is only psychologically important.  The 2090 level is a key technical level.  So we will see what happens next week.

In the middle of Jan. I wrote about the global economy slowing and showed the leading economic data from ECRI that indicated the U.S. was also slowing.  We saw that today with the Chicago PMI with a huge miss.  Here is the chart.

This is the first time it has been more then just fractionally below 50 since we came out of the last recession.  Traditionally this index has been more about the auto industry then anything else.  I had noticed it having unusual strength the last couple of years.  Apparently this index is highly influenced by oil drilling these days.  The energy companies have been idling rigs like crazy so it was only a matter of time before it hit the data.  It seems highly likely this will lead to layoffs in that area.  This is also likely to drag down the national number on Monday at least a little.  I wonder if a big miss on the national number would inspire people to buy stocks on the theory the FED will wait longer to raise rates.  At any rate we are starting to see the negative affects of the oil price drop.  It may get worse before it gets better.

I am starting to hear people talk about the drop in earnings projections.   Investors are staring to notice.  It remains to be seen if they do anything about it or not.

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


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