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Wednesday, May 13, 2015

Daily update 5/13 Sales data

As I theorized last night people did sell into strength today.

The futures gapped up a bit and spiked up in the first few minutes after the open.  However, it was not long before the sellers showed up and squashed the rally.  The breadth was +66% at 9:50, but by the close it was only +51%.  Volume increased again.  With price in the lower part of the daily range we have to chalk it up as a distribution day.  New highs were a paltry 56 and still in pullback territory.  Not much to write home about for the bulls today.  Over the last seven trading days we have had 5 down days and 2 up days.  Not exactly what up trends are made of.

The futures attempted to conquer resistance at the red line this morning.  However the trip above the line was short lived.  The price action since late March indicates that line is very important along with the 200 SMA (support).  Price appears to be starting to get squeezed between the two.  We are running out of room so it would seem a resolution should not be too far off. 

The transports are back to key support.  There sure are a lot of tests here.  How much longer can it hold?  Will people notice if it breaks?

The charts do not look particularly good in the short term.  However, the sellers still seem to be looking for strength to sell into.  That could change at any time.  The bulls were unable to build on last Friday's rally.  I think the odds of a significant break out from this ugly pattern on the upside are pretty low.  Now that I have said that we will probably rocket up 35 points tomorrow.  Until we break down there is always the chance the bulls get their act together.

The sales data continues to be very soft.  Here is a look at the wholesale data first.  Source

I suspect this many months in decline and negative YOY usually only happens in a recession.  However, this data series is not long enough to be able to say that with any certainty.  I can say this is clearly the weakest this data has been in this recovery.

The inventory to sales ratio keeps on spiking up.  This seems likely to lead to a reduction in orders which will lead to production cuts.  That is how many recessions start.  The risk is elevated now despite what Wall Street economists would have us believe.  Now on to the retail sales data.  Source

This category of retail sales has not been this bad without being associated with a recession.  This is another one of those data series that is not particularly long.  Notice how it held up during the 2011-12 recession scare period.  It is clearly the weakest it has been in this recovery.

Core retail sales is also at recession type levels.  Both of these charts show dips from the cold 2013-14 winter.  Those dips were followed by strong rebounds once the weather warmed up.  So far that has not been the case this year.  Something is different this time.

I heard some guy on TV saying come on in the water is fine.  Load up on stocks there is no recession in sight.  From where I sit I can see we could be headed for one.  If retail sales data does not pick up here in May it will probably start to become likely.


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