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Monday, March 16, 2015

Daily update 3/16 Factory output falling

The bounce setup mentioned last night played out  nicely today.

SPX ended the day up 1.35%.  The breadth was only +62% which was rather weak for such a big move up.  Volume dropped from Friday's down day.  Not a particularly good thing when coming off a low.  New highs expanded to 158 which was the best we have had over the last couple of weeks.  However, new lows remained very elevated at 96.  This does not look like a blast off to new highs to me.  Today registered a technical exit from 3/11 buy signal which simply means the extreme short term oversold condition has been alleviated.  Will buyers continue to push price higher now that we are no longer oversold?

The futures got above the 100 SMA today, but have not confirmed the move.  As I write this they are down about 7 points from the 4:PM close.  I have no idea what that is about.  The DI lines got a slight bullish cross today.  The lines are both high which gives the highest odds of this being what I call a bounce cross where the lines cross and almost immediately cross back the other way.  A negative cross should indicate the down move is ready to continue.  So far this month we have not had two up days in a row.  Will that pattern continue or do the bulls have some gas left in the tank?

The FED meets again on Wed.  There is much speculation that they will remove the word patient from their statement.  Many think the market will sell off if they do.  That may be what caused the tepid buying we saw today.  There is still room up to the 18 DMA on SPX for more bounce, but as mentioned earlier the market has struggled to get back to back up days.  I don't know why the futures are down or if they will still be down by morning.  There is certainly some risk of retracing some of today's gain.  There could be upside resistance from 2085-90, but the stronger resistance is in the 2103-05 area.  On the downside we have 2040 and not much else before we get to the 200 DMA.

The economic data continues to soften.  Here is a look at factory output.


This is the first time in this recovery output has fallen three months in a row.  This is yet another sign the economy is slowing not accelerating.  Things are slower then in 2011 or 2012.  I have shown that very clearly in charts over the last few weeks.  We are now the closest to being in a recession we have been in this recovery.  The FED has plenty of reason to not raise rates or even remove the word patience.  So what will they do? 


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