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Friday, March 13, 2015

Daily update 3/13 PPI crashing

They could not wait to sell this morning.  However, selling eased off when SPX got down near 2040.

SPX gpt within 2 points of Wed's low before rebounding a bit in the afternoon.  That seems close enough for a retest to me.  Maybe we can head up and fill that big gap down now.  Breadth was -68% so they were selling lots of stuff.  New lows outnumbered new highs 121 to 76.  We are still above key support here.

The futures ended up well off the low.  This looks like a good setup for a bounce to me.  We got the retest ADX suggested we should.   Now it has turned down and we have a few green and white price bars. Are the bulls up to the task?

Mondays have been up on merger news pretty often lately.  It is possible people are starting to buy in anticipating that to happen.  Next week is option expiration which usually has an upside bias.  We have a nice bounce setup lets see what the bulls do with it.  On the downside I don't see any support between here and the 200 SMA.  Should we break Wed.'s low that is where I would expect to head.

Interesting PPI data this month.  Check out these three charts.

These three charts show we have never seen declines of these magnitudes except in a recession.  Here is the core PPI which most people concentrate on.

The core PPI almost never goes negative.  If I turned off the recession bars would anybody be able to tell when recessions happened?  I don't think I could.  To me this chart is useless.  The other charts present a reason to wonder about the strength of the economy though.

We have seen the inventory to sales ratio rising sharply, manufacturing new orders tanking, and now PPI crashing.   The charts I showed for each of these data series look like we might be heading into a recession.  This data is revised much less then GDP and employment.  The economy is clearly weakening not strengthening.  So far I don't see any sign we are decoupling from the global weakness that is causing central banks around the world to ease.  While we might not be in a recession yet I believe there is reason to worry about it happening.  I think the FED probably should not raise rates at this point.  It will be interesting to see if they remove the word patient everybody is so worried about.

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.