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Tuesday, March 3, 2015

Daily update 3/3 GLI momentum

I guess the air was a little thin above 5000.  Here is the SPX chart.

SPX tested 2100 twice during the day and it held both times.  That adds to the significance of the level.  Breadth was -57% so not too much selling pressure.  The new highs dropped down to 120.  Once again showing a lack of enthusiasm.  We sure keep doing a lot of testing down towards that 2100 area.  The 18 SMA is moving up and getting close now.  That should push the market higher or be broken and signal a pullback fairly soon.  Lets take a peek at the futures chart.

The futures once again closed below the 18 SMA.  However, they have yet to confirm the break with a lower close.  When it did that last Friday the bulls came out buying on Monday.  Will they show up again tomorrow?  The -DI line kicked up quite a bit today which makes it a bit harder to get a positive cross.  The bears can almost taste victory.  Will they rise to the occasion or fail once again?

If the bulls don't show up first thing tomorrow morning I think we will drop below 2100 and likely test down into the key support area around 2090.  If they show up lets see if they can muster the enthusiasm to get above 2020.

I showed the Goldman Sachs Global leading indicator back in 2012 when there was some worry about the global economy.  Since then things have been pretty calm.  However, the global economy may be slowing significantly again.  Here is a look the momentum indicator.

The momentum indicator has once again gone negative.  It is clearly more negative then it was in 2012, but not quite down to the 2011 level.  I find it interesting I am constantly seeing people saying the U.S. and the global economy are getting better.  That completely contradicts the crash in the commodities markets, the sell off in GWL (global equity ETF ex U.S.), the rapid drop in earnings estimates, and the fact that many central banks are cutting rates.  Even the U.S. data is clearly softening.  I have no doubt the global economy is weakening.  I suspect we are on the hairy edge of a global recession at the moment.  The question is whether it turns back up like it did in 2011 or keeps slowing.  So far the ECRI weekly leading index has not turned back up.  The U.S. could easily continue to slow down.  How would that affect investor psychology?


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