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Tuesday, June 2, 2015

Daily update 6/2 Record M&A month

While SPX held to the down Tues. pattern some other indexes did not. 

I did a little cleanup of the trend lines.  We have a bit of a wedge going the last couple of months.  SPX tested the 5/26 low and bounced.  However, it still ended the day below the 18 SMA.  Volume was rather light.  The breadth was +53%.  Both new highs (47) and new lows (27) dropped considerably.  I guess neither the buyers nor the sellers were motivated much today. 

The 10:00 AM futures bar closed below the 100 SMA, but the bulls would not stand for that.  They mounted a rally up and over the 18 SMA.  However, the bears would not stand for that and sent price back down into the close.  So here we sit still between the two key lines.  Notice ADX is rising again as it has been on down moves the last couple of months.  The futures are barely above the 100 tonight.  A down day tomorrow will put them under.

Wed. has been a down day most of the time this year.  Will that hold true again or will the bulls show up to play?  Dip buyers have been showing up with regularity, but rally chasers have been missing in action.  We are not going to break out on the upside as long as that continues. 

One of the signs of a bull market top is excessive M&A activity.  There are several reasons for that.  Stock prices are high and some companies use them as currency.  There is also the point in the business cycle when it gets hard to grow revenue and earnings organically.  This causes some companies to look to acquisitions instead.  May was a record month for M&A announcements.  Want to guess what years contained the prior two highest months were.


They were 2000 and 2007.  Yet another warning sign.  When these large deals get done there are often jobs lost.  That can contribute to an economic slowdown.


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