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Tuesday, July 14, 2015

Daily update 7/14 NFIB small business survey

Upside follow through.

SPX closed above the 50 SMA.  The breadth was +60% and the volume increased slightly.  The new highs were stable at 113.  New lows dropped a bit to 40, but still high for this close to the high.  SPX is just 2 points shy of the key 2110 area which it has been unable to stay above.  Is it different this time?

That is quite the upside run in the futures.  They blasted right through the upper Keltner channel.  They are getting pretty far away from the 18 SMA and over the last few months that has often meant a reversal was not far off.  A pause day would seem to be in order for tomorrow.

Trends have not lasted long at all this year.  It seems like every time I change the short term trend to up or down the market stops going soon after.  Is it going to be any different this time?  We have had a number of decent looking thrusts that just simply fizzle out this year.  I don't see anything in particular yet that indicates it is different this time.  I guess we will see.

The latest small business survey is a bit troubling.

The feel good times of last year have vanished.  We are now back into the not so hot readings we had in the prior years.  Here are some comments from the survey.  Emphasis is mine.

The Small Business Optimism Index fell 4.2 points to 94.1, likely in response to five months of lousy growth. The 42 year Index average is 98.0, while the pre-recession average is 99.5 (1974-2007). This leaves the current reading 4 points below the overall average, a deficiency of 40 net positive percentage point responses to the Index’s 10 component questions. While this is not a recession signal, it is a clear sign that economic growth on Main Street is not set for a strong second half. Nine of the 10 Index components fell and 1 was unchanged from last month. Declines in spending plans accounted for 30 percent of the Index decline, and weaker expectations for real sales and business conditions another 20 percent. The deterioration in earnings trends accounted for about a quarter of the decline.

The comment about the second half of the year is quite important.  That goes against what the Wall Street pundits are spouting off about.  Remember how weak the retail sales data has been and how high inventories are.  Businesses do not seem to be excited about a 2nd half rebound.  If they are right then production cuts are probably coming.  With growth already weak that could end up sending the U.S. into a recession.  I just can't see any reason the FED should raise rates or even be talking about raising rates.

Posted some comments on global recession risk at http://traderbob58-401k-ira.blogspot.com/


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