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Thursday, July 16, 2015

Daily update 7/16 IP

SPX closed just 6 points away from its all time high close.  The COMPX made a slight new closing high.

After another big gap up price went sideways all day until a last hour push gained four whole points from the open.  That was enough to get SPX up to the upper Keltner channel line which has stopped the market on recent bounces.  Breadth was a strong +67%.  New highs increased to 150 which is only slightly less then the 172 we saw at the June high.  That was the last time we were in this area.  The new lows at that time were running around the mid 40s which I said was too high for a test of the highs.  Today we had 119 new lows.  That was actually higher then yesterday's 102.  Obviously things are not right.  There is way too many stocks breaking down.

Most of the gains on this rally came in the overnight hours.  Interesting that the ADX is falling on this rally just like every other rally we have had the last few months.  Here we are testing the highs and price is very extended from the 18 SMA.  One might say the market could be getting ahead of itself.  Are people going to be willing to chase price here?  If we stall again will people hold on or sell?  Selling has been the thing to do for the last few months.

The VIX got slightly below 12 today.  It did that right at the tops in both May and June.  People might use that as a sell signal once again.  The market internal divergences are getting really big now.
Here is a look at the number of stocks above their 200 MA as an example.

The last two months have seen a serious deterioration in the market.  SPX is just a fraction below its high close and only 48% of stocks are above their 200.  I think we are at the point now that if we do not break out on the upside and keep going we are going to see a significant sell off.  This market has not been this weak with the indexes at the highs at any time in this bull market.  If I did not know where SPX was and you just showed me this chart I would say we probably have been in a bear market since last July.  It is probably amazing that SPX is at the highs.  Does it really have a chance of staying there and pushing higher?  I think it will be very difficult. I will be watching closely for a rally failure.

The latest IP data came out and it ticked up a bit.

IP stayed above the key 12 SMA for now.  We will have to see if it holds up through next month's revision.  Another positive month would make the picture look somewhat better.  However, IP picked up a couple months in a row earlier this year then plummeted.  What we really need to see is a big jump up in IP and for it to hang on to that jump the next month.  Another little jump up is not really going to clear the current soft patch.


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