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Monday, March 9, 2015

Daily update 3/9 China weakness

That was a pretty feeble bounce from Friday's drubbing.  Lets see what SPX has to say.

SPX managed a modest bounce, but it did not retest Friday's low or conquer any significant resistance.  Breadth was barely positive.  New lows outnumbered new highs 82 to 53.  This looks like a dead cat bounce to me.  Lets have a look at the futures.

The futures continued the bounce off the 100 SMA that started late Friday.  ADX climbed above 35 today.  That is very rare with price above the 100 SMA.  The last time it happened was in Dec. 2013.  The market bounced a bit after that reading, but went on to make a lower low before the pullback was over.  I don't see anything to indicate it will be different this time.

The technical evidence that we are in another pullback to at least the SPX 100 DMA is mounting.    First resistance is up in the 2085-90 area with 2103-5 being the bigger level.  The next support is in the 2062-5 area.  That includes the 50 DMA and Jan. price peaks.  If we break that it should be on to the 100 DMA at 2038.  Today was a really weak bounce.  Unless there is some really good news that sparks some real buying we could head down some more tomorrow.

There are multiple signs of growth slowing in China.

Industrial profits in China are taking a worse tumble then they did back in 2012.  There was a bit of a global growth scare that year, but hurricane Sandy did so much damage in the north east the rebuilding effort ensured we did not fall into a recession.  A look at their import and export data also shows weakness.


There is clear weakness in China and the rest of the world with both imports and exports falling YoY.  Unlike 2012 many central banks around the world are cutting rates.  That would seem to indicate the global economy may be in worse shape then it was that year.  Whether European QE can save the day or not remains to be seen.  This data helps to explain the big drop in oil and other commodities we have seen since last fall.  No sign of any real pickup in price in those markets yet.  There is still a risk of a global recession setting in.


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