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Thursday, April 16, 2015

Daily update 4/16 China market mania

Yet another mixed day.

The opening gap down did not really get many buyers or sellers.  After trading sideways for a couple of hours the bulls pushed price up to fractionally below yesterday's high.  However, once again there were no buyers up above 2110.  A little bit of selling late in the day took SPX negative.  The breadth was -54% which is pretty much in line with price.  The new highs dropped down under 90 once again to 71.  That is even lower then the 82 we had two days ago.  We seem to be losing steam here.

The bulls pushed price up to give us green bars twice the last two days, but no follow through.  We have a slight negative DI cross.  That is the second one on this bounce.  Over the last few years we have sometimes gone for several weeks without a negative cross so this is yet another sign of how lethargic this bounce is.  So far the bears have not pounced as selling pressure has been almost non existent.  This is really a case of the bulls being extremely lazy.  The 18 SMA is catching up to price.  We will either break it or it will push price through resistance soon.

So far the sellers have been holding back giving the bulls a chance to push the market higher.  However, the bulls seem to have very little ambition.  The sellers could lose their patience at any time.  After today's retest of yesterday's high I suspect breaking today's low will usher in some more significant selling pressure.  The market is obviously weaker tonight then it was yesterday.  A gap down in the morning might be more apt to find people willing to sell into it.  A gap up that does not get us above the highs of the last two days might find sellers so be careful.

The data coming out of China has not been good at all.  Last month both imports and exports fell by double digit percentages.  The real estate market has been falling for a year or more.  People are now putting money into stocks.  Check out these charts.


It looks like people are piling into stocks as the economy is steadily getting worse.  Whats more is they are buying those stocks with margin.  What is that 4-5 times increase in margin debt over the last year.  These charts look like margin debt is going up multiples of what the index is doing.  Doesn't this seem like a recipe for trouble when the market finally corrects?


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