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Monday, April 6, 2015

Daily update 4/6 Credit Managers Index CMI

Are we back to weak data is good again or was it just a one day wonder?

The 100 DMA buyers came out this morning once again to buy the gap down.  Breadth was a strong +69%.  They bought everything but transports and biotechs as those indexes closed in the red.  For such a strong breadth day it is odd that any indexes closed red.  The transports actually closed below the Dec. low (that low was slightly below the key Feb. low).  Will people notice that obvious technical weakness in an important index?  New highs were a steady 143.  Still nothing to write home about.  We got a green price bar on the daily chart so this is decision time.  If we are going to go lower the bears should come out to play again tomorrow.

Today's rally stopped when the futures crossed the 100 SMA.  They were unable to stay there in the afternoon.  Is this going to be a second rejection at the MA or will the bulls hold on and push us higher?  There is no over sold condition now to spark buying.  Lets look at the current breadth chart.

The McClellan oscillator is almost up to overbought.  We have worked off the oversold condition we had at the March low.  While we are somewhat higher, we are not all that much.  This looks different then what we have been seeing the last few years.  SPX has been racing to new highs off those oversold conditions.  

While dip buyers keep showing up on weakness, rally chasers have been mostly absent this year. Will this earnings season spark some buying or selling?  Today turned the short term trend to sideways in the trend table for all indexes.  We have been up two days in a row.  Will the bulls be able to make it three this time or will the bears strike back?  We have a sloppy trading range between the 3/26 low and 3/30 high.  I would think it would be ready to break out of that range before too long.  With the transports breaking down to new lows it becomes even more important for the bulls to get this thing going on the upside soon.

I saw this interesting article on the Credit Managers Index (CMI).  Recessionary Level in Credit Conditions  This is a description of the index.

“The CMI is created from a monthly survey of U.S. credit and collections professionals. The survey asks participants to rate whether factors in their monthly business cycle — such as sales, new credit applications, accounts placed for collections, dollar amount beyond terms — are higher than, lower than, or same as the previous month. The results reflect the entire cycle of commercial business transactions, providing an accurate, predictive benchmarking tool.”

This chart was in the article.

It came in at 51.2 in March.  This is the entire history of the survey which isn't very much.  It did a pretty good job detecting the beginning and end of the last recession though.  It dropped to 51.4 in Jan. 2008 one month after the recession started.  It dropped to 49.9 in March of 2008 as an early warning of trouble.  It bottomed in Jan. 2009 while the recession did not end until June of that year.  During the summer mini crash in 2011 the lowest the survey got was 52.7 that Aug.  The ECRI was out proclaiming a recession was unavoidable in Sept. that year.  It never happened though and the CMI did a good job of not getting fooled. 

While some economic data has been bad at times during this bull market this index has not been particularly weak until March.  This survey is not subject to revisions so it may turn out to be a very timely and useful indicator.  This is the web site for the survey if you want to read more about it http://web.nacm.org/cmi/cmi.asp.  I think I will keep an eye on this one for the next few months to see if it turns back up or keeps getting worse.


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