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Monday, June 22, 2015

Daily update 6/22 ECRI U.S. coincident index growth (USCIg)

SPY made an almost perfect doji.  All the gains were in the overnight hours.

SPX failed to make a new high close.  Volume dropped considerably.  New highs increased to 172.  That is the highest since March.  New lows remain elevated at 46.  I don't think that is good enough to drive the market higher.  The breadth was only +58%.  That is pretty low for the size of the move.  SPX hit the upper Keltner channel today.  As you can see it has struggled to go up the last couple of months after that.  I can't find anything in the internals that suggest we are going through a positive change of character.  There are quite a few indicators weaker then when we were last in this area.  Unless we get a a really strong thrust day through the highs we are likely to roll over again.

The futures popped up overnight on more Greece deal news.  Of course we don't actually have a deal, but we would not want to ruin a good story with facts.  It was Monday and a good day to rally.  Just like every other rally over the last couple of months ADX is falling again.  Are we going to be able to sustain these price highs this time?

The song remains the same.  When SPX gets above 2110 it just runs out of energy.  Here is a look at the number of SPX stocks above their 200 DMA.

The last pullback really dinged this indicator.  That is a bit odd given the small size of the pullback.  Apparently the trading range is causing many stocks to have their 200 DMA catch up to their price.  It takes very little sell off for them to fall through it.  Therein lies the problem.  Price is not giving a good over sold condition to bring in the buyers.  At the same time the market appears to keep getting weaker with every test of the highs. 

Tuesdays have been down most of the time this year.  Will that pattern play out tomorrow?  I would guess a close below 2110 might bring out some sellers again.  A small up day with a slight new high here does not help the bull case.  The bulls need to see a strong thrust.

When I was perusing the available economic data I came across the ECRI  USCIg.  This index is their attempt to measure the current strength of the economy.
We can see that 2013 and 2014 showed good strong growth.  However, this year has been quite different.  This index is at 2.5 currently.  The key number is 1.5.  Dropping below that greatly increases the odds of a recession.  Like other economic data series this one is prone to revisions.  It would need to still be there when the next month's data comes out before getting too worried.  Going negative would indicate with pretty high odd we are in a recession.  You can find the data here.
https://www.businesscycle.com/ecri-reports-indexes/all-indexes  Needless to say this does not look like the best time to raise rates.  Will the economy turn back up or keep faltering?


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.