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Friday, June 5, 2015

Daily update 6/5 Interesting read from the Leuthold Group

Slight confirmation of yesterday's trend line break.

SPX close fractionally below yesterday's low.  Theoretically that confirms the trend line break, but by such a small amount that I can't say for sure.  The number of new lows jumped up to 161 while new highs came in at 61.  Clearly more stocks are starting to break down.  The breadth was -52% which didn't really match up to the size of the IWM move.  Strength in financials, IWM  and the SOX helped hold the market up.  The VIX was actually down slightly today.  No fear out there.

The futures confirmed the break of the 100 SMA this morning.  However, they found support at the 200.  It would not be unusual to bounce back and test the 100 from underneath.  Should that 200 break next week the selling should pick up considerably.

Monday's have been up most of the time this year.  It almost seemed like people were buying to take advantage of that.  There certainly was not much interest in selling into the gap down this morning.  SPX ended the week below last week's low which theoretically confirms the potentially bearish pattern on the weekly chart discussed last Friday.  It seems reasonable to bounce on Monday from here.  I think we will have the same problem we have had all year.  We are not oversold enough to really justify putting new money to work.  That leads me to believe any rally will end up failing to launch the market on a new leg up.  With new lows picking up the way they did today SPX might not make it to new highs this time.  The action looks like a heavy market to me.  Sellers are hitting the bids, but not in an aggressive manner.  What some people might call distribution.  While the market is not breaking down that action puts a damper on the rallies.

I found this article entertaining and informative.  Faded Photographs: Obituary Of The Bull Market  These comments on the most hated bull market in history really cracked me up.  I have shown on this blog how that statement is completely untrue.

The Leuthold Group put the bull’s widely-accepted claim to the test, dusting off ancient artifacts dating back to the days of the bull’s great-great-great-great-great-great paternal grandfather. Their archives included dozens of investor sentiment measures, ranging from long-term psychological gauges like Consumer Confidence, to the shortest-term, market-based measures like the daily relationship between one-month and three-month option implied volatility (i.e., the VIX/VXV Ratio). None of these myriad indicators supported the bull’s contention that he was “hated;” therefore, The Leuthold Group was unable to provide a suitable exhibit for Still Frame 7, the first time in the firm’s history it could not find support for a viewpoint (even one they didn’t share) with a chart, table, or histogram.

On the other hand, there did exist a long list of evidence showing the bull was (like Jordan) among the most beloved of all time. The Leuthold evidence included (but was not limited to): persistent, near-record readings of bullishness by the market newsletter writers tracked by Investor’s Intelligence; a late-cycle embrace of passive equity strategies; a VIX bouncing around cycle lows; rapid shrinkage in “inverse” equity index fund and ETF assets; Consumer Confidence at cycle highs; and a flood of public offerings by money-losing companies.

The market and sector status pages have been updated.  Have a great weekend.


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