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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

?+ 7/10/20

?+ 7/24/20

Up 6/5/20

Sub-Intermediate

Up 7/31/20

Up 7/17/20

Up 8/1/20

Short term

Up 7/6/20

Up 7/21/20

Up 8/1/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Monday, August 31, 2015

Daily update 8/31 SPX and R2000 primary trends turn down

SPX closed below the monthly 20 SMA.  Its weekly 13 EMA crossed below the 34 EMA and the 200 DMA turned down.  That is three different popularly used trend identification tools that are negative.  The same thing applies to R2000.  That is not the case with the COMPX yet.  These confirmations come on top of the Dow Theory non confirmation at the highs and subsequent sell signal.  The evidence that we are in a bear market continues to mount.


Resistance at the lower Keltner channel held again today.  Breadth was -53% which was not really inline with the size of the move down.  Bigger cap stocks must have been a drag today.  New highs came in at a whopping 5.  New lows picked up slightly to 38.  Not encouraging stats for bulls.  Single digit new highs is a very weak market.


The futures look real close to rolling over.  I think the bulls need to show up in force tomorrow to keep the bounce going.  There were enough dip buyers today to keep the market from collapsing, but I don't think that will work again.   The bulls need upside.

I don't have enough information to call the bounce dead yet, but getting close.  If the bears show up again tomorrow it could be trouble.

Bob

Friday, August 28, 2015

Daily update 8/28 Margin debt

Pause day.


SPX came to the lower Keltner channel and came to a stop.  Despite the small up move the breadth ended at +60%.  Some of the big cap stocks must have been lagging a bit today.  New highs increased all the way up to 6.  New lows dropped a bit more to 20.  Clearly the beaten down stocks are the ones getting the buyer's attention.  The daily chart is showing the infamous bungee jump pattern so far.  Will the bounce continue tomorrow?


The futures chart had three more bars to confirm the break of the 20 SMA, but failed to do so.  The futures are down a tad now, but they could still confirm that break by morning.  The 6 SMA has caught up to price so we should either launch off that line tomorrow or end up breaking below it.  We clearly have a little resistance here.  Is it insurmountable or not?

I have no idea what happens on Monday.  We stopped here and could turn back down.  However, we got so oversold a down day might just bring in buyers that feel like they missed the train.  While I am certain the odds are high we will see the recent low again, I have no idea when.  It might not be in the next few days.  I am still holding on to the belief that we got oversold enough to get SPX up to the 2040 area.  I will be watching for signs of a roll over in case I am wrong.

This chart really scares me.


These are inflation adjusted numbers for both SPX and the margin debt.  The percentage change in margin debt moved along with SPX pretty well until 1999.  Since then the bull markets have really been way out of line.  I realize this is caused by low interest rates, but the cause does not really matter.  What matters is the unwind.  As a percent of market cap, GDP and probably any other measure you can think of the margin debt is higher then anytime since 1929.  Some day it is going to unwind.  There is always a profit taking phase.  Always.  I think the recent crash scared people enough to start an unwind cycle.  Does it unwind slow or fast?  I suspect fast.

The COMPX has turned its short term trend to neutral.  The others remain down, but an up day would turn both to neutral.

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

Bob

Thursday, August 27, 2015

Daily update 8/27 Durable goods

Bulls showed up in force again.


Quite the V bottom there.  Breadth was +85% which matches up well with the size of the move.  The new highs were still only 5.  New lows dropped way down to 26.  Sellers definitely took a break today.  That move down was so radical that even though we have bounced a long ways off the low there is still plenty of room for more bounce.  We are still 60 points below the 20 SMA.


The futures closed above the 20 SMA today.  They have not confirmed that as a break yet.  That green line up above will likely be significant resistance.  That would be around 2040 on SPX.  That might be doable if global markets behave long enough.  It looks like the bulls are in control in the micro trend. 

The bulls are running with the ball.  Lets see how long they can hang on to it.  I noticed a lot of different opinions from the guests on TV.  About the only thing they agree on is that volatility is likely to stay elevated for a while.  My opinion is that this market is very leveraged and those players got the crap scared out of them.  I am positive a lot of them will want to reduce that leverage and will sell into the rally at some point.  I think it very likely we make lower lows yet this fall.

Sometimes I am amazed at the things I read and hear.  Lately there have been a lot of comments on how the Euro was bought up in a flight to safety trade during the stock collapse.  I am not surprised hearing that from reporters in the media, but I have seen those same comments from market professionals.  This is absolutely crazy.  What happened was simply a  carry trade unwind.  People were shorting the Euro because of the ECB QE and buying up other assets.  They were also doing that with the Yen.  Both currencies popped as those carry trades were yanked off and the currency shorts covered.  No flight to safety involved.  Those happen to be big trading partners for the U.S. so the trade weighted dollar index tanked as a result.  It is the same old thing.  People pile into the trade slowly, but all want out at the same time.  If stocks tank again the currency moves might be different depending on how much of the carry trades still exist. 


People were cheering the good durable goods data.  However, the month to month stuff is really a lot of noise.  When you look at the bigger picture on a year over year basis the picture is clearer, but not very good.


While the latest data ticked up we are still negative.  This is a very weak economy despite what the GDP data says.  The GDP is so unreliable in real time.  The first quarter of 2008 was initially reported with over %3 growth, but was later revised to negative.  There is much better data to use in real time.  A lot of that data is weak.

Bob

Wednesday, August 26, 2015

Daily update 8/26 Unprecedented decline

The bulls pulled off a bounce day.


SPY had nearly a $7 range and it still was an inside day.  Unusual to say the least.  The breadth was +77%.  Nothing special considering SPX was up nearly 4%.  New highs came in at 2 again.    New lows were close to yesterday's number at 240.



The futures have formed a pretty clear resistance area.  They are currently near the top of the range.  Who knows where they will be by morning.  The bulls sure have been busy pumping up the futures overnight.  Is that so they can dump during the day into the strength?  This could be a short term bottom or just a consolidation before going lower.  It is not clear which it is yet.

They seemed to be really cheering the big up day on TV.  Some were proclaiming a bottom.  I don't know how anybody could do that in good conscience.  SPX did not even get above yesterday's high.  We have had back to back inside days.  Forming a bottom is about price discovery so inside days are rarely seen at them.  I am not saying this can't be a bottom, but the market needs to prove itself.  I would rather see a probe to new lows then reverse.  Rallying from here seems more likely to roll over quickly. 

According to Telechart there were only 15% of stocks above their 200 SMAs yesterday.  That is a very extreme reading.  In the last 30 years it only happened in 1987, 1990, 2002, 2008, and 2011.  None of those instances were V bottoms that rushed back to new highs.  If we continue to rally from here we are very likely to be back near these lows again in the weeks ahead. 

The mini meltdown was unprecedented in how close it started from the high.  This is an interesting look at prior big collapses.  Indicator of the Week: Why This Volatility Signal Conjures Up Memories of 1987

Three Straight 2% Down Days: For the first time since 2002, the S&P 500 suffered three straight down days of 2% or more. This has happened 13 other times since we have data on the index (since 1928). Below is a complete list of those occurrences, along with some other stats. You can see the large majority of them occurred during the Great Depression, so I’m not sure how relative those are to the recent signal since, at least as of now, we’re not in a depression. 

This table shows the other times it happened.


As you can see most of the time the market had already been down a considerable amount.  1987 was the only other time SPX was down less then 10% at the time.   This was an unprecedented bout of volatility.   In looking over the dates in the table I noticed the smallest total decline from the top was the crash of 87.  I don't think this was just a blip and it is a return to the bull market.  Maybe they just rang the bell.

Bob

Tuesday, August 25, 2015

Daily update 8/25

Inside day.  That is pretty odd considering SPY started with a nearly $6 gap up.  You don't see that every day.


SPY opened on its high so the selling started right away.  The sellers really got traction in the afternoon.  SPX ended up testing yesterday's low by the close.  The breadth was -52% which was not really in line with the amount SPX was down.  Breadth started the day +88% so the selling was pretty intense.  New highs were a whopping 2 while new lows dropped way down to 248.  The TRIN closed over 3 which may help bring out some buyers.  However, we closed so close to the lows again I can't really say whether the selling is exhausted yet.


The futures show some signs of stabilization.  Not enough here to tell if they will form a bottom in this area yet though.  Maybe they will, maybe they won't.

The very high number of new lows yesterday has some people thinking it was a capitulation day.  It didn't feel like that to me.  I think it more likely the selling is just beginning.  I don't know exactly how this will play out.  However, I have never seen the market in a weaker condition at the highs then we had this time around.  It is possible bounces are muted.  This market made it difficult quite often over the last few years for people to get on board with all the V bottoms.  I have to wonder if it won't make it equally difficult to let people out.  A mature trader commented that he could find no law that says you must be invested all the time.  I think it a very wise remark about now.  The NYSE composite, the Dow, and the transports closed below their Oct. lows which turns their primary trends down.  While SPX, R2000, and the COMPX have not done that yet is it really likely they will be able to hold on?  The odds we are in a bear market seem to get higher every day.

Bob

Monday, August 24, 2015

Daily update 8/24

Even bigger splat.  Synchronized global sell off.  Expect lots of volatility.


Now that was a high volume day.  Breadth ended at -94%.  That is the worst day since the 2011 mini meltdown.  New lows came in at 1312 which was even worse then in 2011.  New highs dropped down to 7.  Needless to say the technical damage is quite significant. 


The futures hit the overnight limit and after the open they went right to daily limit down, but trading didn't get halted.  There was very little interest in selling into that big gap down so traders were able to spark a rally.  Later in the day some sellers returned. 

In Daily update 6/4 Low volatility periods I showed multiple three year periods of low volatility and noted that it was about time for volatility to pick up again.  I think that just happened.  I expect higher volatility the rest of the decade.

The market is extremely oversold short term.  However, that does not mean it will bounce significantly. The volume was very heavy today, but it did not seem like a selling climax.  I am certain people will be selling rallies.  SPX finally managed to close off the low.  That means a gap up would not have particularly high odds of retesting the low.  It could be time for a bounce day.  I don't know that we could expect a bounce to last any longer then that.  I am sure there will be a lot of margin calls now.  This will take a while to shake out and we can still go significantly lower on this first leg down. 

Today turned the intermediate trends down across the board.  I don't see any need to rush into longer term long positions.  SPX's 200 DMA has turned down the last two days.  Many people look at that for trend direction and they will be thinking down.  Everything that has happened over the last year is consistent with a bull market top.  Odds are high we are entering a bear market and it could be quite severe.  Until the market does something that gives us a signal it was just kidding about that and the bull market is going to get reestablished caution is in order.

Bob

Friday, August 21, 2015

Daily update 8/21 McClellan on 20% bear market definition

Splat.


I had to back the chart out a bit to see where the support levels SPX stopped at came from.  The breadth came in at -83%.  The down volume today was almost 94% of total volume.  That is some heavy selling.  New highs were 10 while new lows spiked up to 619.  The elephants were running for the exits today.


That was some move.  I think it is safe to say the market is oversold now.

The TRIN closed at 3 today.  That is often good for a bounce.  The down volume over 90% is also often good for a bounce.  SPX  stopped at a potential support area.  This seems like a reasonable place to stage a bounce.  Since SPX closed on its low a gap up is likely to retest the low.  Just because we are oversold at support it does not mean we will bounce.  At this point I have no way of telling if the selling is exhausted yet or not.  Oversold markets can become more oversold.  This market is broken.  Any rally from here is likely to be a selling op. 

I have searched far and wide and I have to say there is no method that is 100% accurate in signaling a new bear market.  However, I have found several early warning signs that occur infrequently.  They are all signaling now.  After this massive sell off we now have 346 of 500 (69%) SPX stocks down 20% or more from their 52 week high.  Needless to say the technical damage is severe and even if this is just a short lived correction the market will need some time to repair itself.  We have not seen this kind of damage since the mini crash in 2011.  The sell off is global in nature.  Combined with the sell off in commodities it looks very much like a global recession is here.  I don't see how the U.S. can avoid getting dragged down into recession as weak as we are already.  I believe we have started a bear market. There are several ways to help confirm that opinion, but it will take time and more downside for them to occur.  This market has been falling apart stock by stock for months.  This is typically how longer lasting down moves start out.  The last few days the high flyers have gotten crushed.  In the end they get them all. 

I have always thought the 20% definition of a bear market is one of the stupidest things Wall Street says.  I thought these thoughts from McClellan summed it up much better then I did on the 401k/IRA blog.

Final Thought: I get asked a lot by media types whether the decline I see coming is going to be a “bear market” or just a “correction”. These people have fully bought into the myth that “10% is correction, and 20% is a bear market”.  We even hear TV announcers saying things like “XYZ (stock) is now officially in bear market territory”.  

This 10%/20% distinction is one of the silliest and most useless pieces of market “wisdom” that Wall Street has ever created.  Every decline that has gone down 20% has first passed through 10%. So a person who sees the 10% number and says it is just a correction is about like the guy who jumps off of a 20-story building, and as he passes the 10th floor is heard to say “so far so good”. The magnitude of a drop so far does not tell you what to do next, which is the only thing that is important.  

So let me make an effort to set things right. A “correction” is any price movement which is against the prevailing trend direction, and the magnitude is immaterial. If the trend is downward, then you can have an upward “correction” against that trend. A bear market is when the trend is downward for a sustained period. The direction of the trend is far less dependent on the magnitude of how far prices go, and more dependent on other factors.

Let me cite a great example: In August-September 1998, there was a price drop that amounted to 20% for the SP500 over a period of just 6 weeks. Was that a “bear market”? Of course not. But it was a dip worth missing (which we did, by the way). So the use of these silly 10% and 20% thresholds is a practice which everyone should abandon.  And anyone who ever utters the phrase “officially in bear market territory” ought to have to put $5 in the fine jar.

©2015, McClellan Financial Publications, Inc.


McClellan has been steadfastly bullish for years and is just now expecting a significant down move.

Updated the market and sector status pages.  Have a great weekend.
 
Bob

Thursday, August 20, 2015

Daily update 8/20 Dow Theory sell signal

The Dow broke key support today.


This confirms the break down we saw in the transports back in May.  Market internals look like we have already been in a bear market for a while now.  I think this break down is for real and should be taken seriously.  I believe the odds are we are in a full blown bear market now. 


SPX closed below key support from back in March.  Breadth was -83%.  New highs dropped down to 10 while new lows increased to 365.  No doubt about that triangle break down.  Despite the high volume and very negative breadth the TRIN was only 1.4.  That does not give us any edge on upside tomorrow.


The futures broke key support early in the day and sellers just kept coming.  While the futures are now stretched to the downside this really looks like a true break down in the market rather then a capitulation type low.  While we will likely bounce some in the days ahead I suspect sellers will come out and keep the bounces from going very far.

Today reminds me of that old saying "it don't matter til it matters".  There have been bad things going on around the world for months that the U.S. stock market just ignored.  Today there was lots of talk about all those things.  I heard Cramer on TV multiple times saying the break down in Disney woke up a lot of people.  While he is not a good market timer, he does talk to lots of money managers.  That stock was considered one of the safest stocks in the market.  Between that and the AAPL break down confidence has been weakened if not broken.  Commodity prices have crashed.  I saw an article the other day that talked about 23 or 24 different stock markets around the world that are tanking.  There is a lot of evidence the global economy could be in serious trouble.  I think that is starting to hit home with U.S. investors. 

SPX closed right on its low today.  That means a gap up would have high odds of at least a retest of today's low.  A sizable gap down might not find many more sellers which could allow for a gap fill.  Other then that a choppy continuation day seems likely.

Today turned the short and sub-intermediate trends down across the board.  This is actually the first time since I started the trend table we have had that condition.  Needless to say the bears are in control for now.

Bob

Wednesday, August 19, 2015

Daily update 8/19 Intenisity picking up again

There was a significant surge in volume today. 


Quite the odd day.  SPX gapped down and traded below the lower trend line.  The selling suddenly stopped and a rally broke out.  The FED meeting minutes came out early and touched off a big spike which completely closed the big gap down.  Then the sellers took over once again.  Intraday volatility seems to be picking up.  The breadth was -73% indicating broad based selling.  New highs dropped way down to 33 from the 90s the last couple of days.  New lows spiked up to 283.  SPX closed below the 50 and 100 SMAs, but slightly above the 200.  We are still in the triangle for the moment, but there isn't much wiggle room left.  A decision is imminent.  The decision on the triangle may also end up being the deciding factor on the long narrow trading we have experienced this year. 


The futures have confirmed red price bars again.  Both indicators are negative.  Notice the ADX line is already turning up.  We are back below all key moving averages yet again. 

Both breadth indicators are negative.  The green/red price bar chart is negative.  SPX has a red price bar.  The way things have gone all year is that when everything gets into gear to go down the market bounces.  It may be different this time.  There are hardly any stocks left to hold the market up.  Should we break the bottom of the triangle 2040 is the first major support area. 

With all indications negative I am changing the bias on the short term trends down across the board.

Bob

Tuesday, August 18, 2015

Daily update 8/18

No follow through.


The bulls are not exactly tripping over themselves to buy.  The breadth was -63% which makes today slightly weaker then it looked on the surface.  It looks like SPX closed back inside the triangle, but just barely.  I guess that makes a lot of sense.  SPX has been trying not to go anywhere all year.  Why change now? 


The futures came up just a tad short of touching the resistance line.  They are still above the key moving averages.  However, when trying to break out of a long trading range like we have here the market must show some strength to make people believe it is headed higher.  That ain't happening so far.  This just looks like more of the same directionless action.  Notice the ADX line is on the floor again like every other rally attempt the last few months.  The market has no energy whatsoever.

I think this next chart shows the lack of energy pretty well.


Yesterday we had 55% of SPX stocks with green daily price bars, but today we dropped down to just 27%.  The bears pulled back ahead with a 30% reading.  Is this little bounce over already.  I can't say yet, but it is definitely not inspiring on the upside. 

If there is downside follow through tomorrow SPX will clearly be back in the triangle and probably headed for the bottom trend line with a fairly high risk of breaking it.  While dip buyers keep showing up there is clearly no impetus for bulls to push prices higher.  I don't see how we will just keep holding up forever.  The internals are crumbling.  The dip buyers are likely to lose their enthusiasm if they don't get some reward soon. 

Bob

Monday, August 17, 2015

Daily update 8/17 Commodity crash repurcussions

That was a good trick.  The gap down this morning caused a spike in the VIX.  Even though SPX ended the day up nicely the VIX is higher then it was Friday at the close.  That gives the bulls a bit more breathing room now.


SPX stuck its head above the upper trend line.  Breadth was +58%.  That is not particularly strong for breaking out of the triangle.  The new highs were 95, but once again were beaten by new lows at 154.  Volume was light.  That indicates today's bounce was mostly a lack of sellers.  Most of them are probably in the Hamptons for the rest of the month.  Maybe SPX can test the high again while they are away.  I just noticed today the 50 SMA has crossed below the 100 for the first time since 2012.  We have been going sideways so long the 200 has almost caught up to those MAs.  The end of the trading range might be coming soon.  We are going to either break out to new highs and beyond or end up breaking below the 200.


The futures are back above all key MAs.  They still have the red resistance line to deal with, but they might get through it this time. 

It looks like the bulls have a weak grasp on the market.  They might be able to push it up for another test of the high.  Internally the market is a mess and if we get that high the divergences will be even bigger then the last time.  I don't see anything yet that looks like lift off.  I think it will take some very good fundamental news to make that happen.  That seems to be in short supply these days.  Lets see what the bulls do with the ball now that they have it.

This is an interesting article and chart.  Commodity Prices vs. Corporate Earnings

Will collapsing commodity prices clobber U.S. earnings? In six out of seven cases since 1970, commodity crashes exceeding 20% year-over-year have corresponded with earnings contractions exceeding 10% year-over-year. The lone exception occurred in 1998 when earnings decelerated to zero growth without actually contracting.

Given this track record, a cautious outlook toward second-half earnings is advised. While it’s true that correlation is not causation, history has a funny way or repeating. The current consensus for flat calendar-year operating results seems overly optimistic in the present environment.



Will this be the exception like 1998 or is there a significant risk of a bigger earnings contraction?

Bob

Friday, August 14, 2015

Daily update 8/14 Industrial produciton (IP)

I screwed up.  I was thinking option expiration was this week, but it is next week.  In that scenario the action Wed. and Thursday was likely to be bullish.  True to form the bears could not capitalize on overnight weakness.


SPX ended with a green price bar.  While it did not close above yesterday's high it did close above the prior day's high.  The volume was light indicating sellers were not ambitious rather then excited buyers.  Breadth was +64%.  The new highs actually dropped to 49.  New lows also dropped to 109.  This looks positive to me (I know this is a flip flop, but the facts changed).



The futures gave us a confirmed break of the 18 SMA.  We are still below the 200, but above the other key MAs.  This also looks positive.

There was another development today.  Here are the daily and weekly bull/bear count charts.


Both the daily and weekly charts had positive crossovers.  This might be good enough for some upside next week.  The question is what happens in that scenario when VIX gets under 12.  That has been a good sell signal the last couple of months.  It closed at 12.83 today.  That is only one good rally day away from an 11 handle.  We look setup for an up Monday.  I guess we will have to just see what happens after that.

Here is a look at the latest IP data.


IP popped up considerably last month.  This is a positive if it does not get revised away and if we get another bump next month.  However, there may be an issue.  Check out this chart of auto production.

Source

That was the biggest surge in auto production since 2009.  Does anybody see a possible problem with this keeping in mind the data was for July?  Quite often they shutdown plants in July for vacation and retooling.  If they did less shutdowns then usual the excess production could be a by product of seasonal adjustments.  If that is not the case then we might have a problem the other way.  Remember the chart I showed of increasing auto inventories?  If they are really ramping up production it will only make that problem worse.  The bottom line is that while the surge in IP may be a good sign we can't really determine if that is the case yet.  We will have to see if next month's data continues higher.

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

Bob

Thursday, August 13, 2015

Daily update 8/13 Retail sales

I thought these comments reported by Bloomberg were interesting.

The Goldman Sachs Group Inc. unit that executes share buybacks for clients had its busiest day since 2011 on Wednesday, according to a note from the firm’s corporate agency desk. Based on the value of equities repurchased, volume handled by the bank set a record. The note was confirmed by spokeswoman Tiffany Galvin.

Corporations have emerged as one of the biggest sources of fresh cash in the stock market, eclipsing even mutual funds with more than half a trillion dollars spent last year, according to data compiled by S&P Dow Jones Indices. They swooped in and bought again on Wednesday as the Standard & Poor’s 500 Index flirted with its largest two-day selloff since January.  

I guess the big turnaround was largely sparked by companies buying their stock back.  That does not seem like a good foundation for a lasting low.


The bulls tried for the Thursday push up.  Price hit the 8/11 high which is where the big unfilled gap down is.  Sellers showed up there and put a stop to the bull's plans.  The volume was very light.  Breadth was -58%.  The new highs came in at 63 with new lows 117.


The futures pushed all the way up to the 200 SMA.  However, they turned around there and ended the day back below all the key moving averages.   That seems negative doesn't it?


The bull/bear count chart and both breadth indicators had negative crosses today.  Today was a clear failure of the bulls to capitalize on yesterday's reversal.  That quick cross and reversal on the 10 DMA lines usually has considerable follow through.  You can see that happened at the end of June before an 80 point drop.  This looks ready to go down to me.  We have already penetrated the 200 DMA on SPX four times since early July.  It seems unlikely to hold if we test down there again.  The key 2040 level would be in play in that case.

There seemed to be some excitement about the retail sales data.  I even heard comments that it cleared the way for rate hikes in Sept.  Here is a look at the data on a YOY basis.

Source

That still looks pretty damn weak to me.  When combined with building inventories we have an environment that could lead to production cuts.   Retailers are starting to report problems now.  Even high end Macy's is having difficulties.  Not good.

Bob

Wednesday, August 12, 2015

Daily update 8/12 Dow industrials death cross

Strong rebound from support.


In keeping with the theme of not going anywhere this year, SPX tried to break the lower trend line.  The bulls would have none of that though.  Volume was heavy.  The selling this morning stopped when Europe closed.  The bulls took charge after that.  We haven't seen a move like that in a long time.


The futures hit the green support line and stopped dead.  Once it started to bounce short covering took over and away it went.  Price just made it back to the 18 SMA.  The futures are still below all key MAs.


The bulls are certainly trying to hold the market up.  Emotions seem to be increasing now.  While today was a strong rebound the market didn't do enough to say it is on the way higher.  Thursdays have been the strongest day of the week all year.  Maybe people were buying in ahead of that late today.  The bulls may run it up some more tomorrow, overnight news permitting.  

The first MA crossover I ever studied was the very famous 50 and 200 SMAs known as the golden cross and death cross.  On most stocks by the time a cross is formed the move is usually over.  In other words I found them mostly useless.  However, according to this article there is some validity to the death cross on the Dow.  A closer look at the death cross

There are several studies in the article going back to 1900.  All show 12 month under performance versus any time returns.  Even more curious is the two studies that most closely resemble the current situation.


The Dow is positive just 40% of the time 1 year out when the death cross occurs 500 or more days since the last cross.  We are more then 900 days.  The next one is even worse.


The Dow is positive just 33% of the time 1 year out when the death cross occurs within 7.5% of an all time high.

The odds say the current price formation is more likely some kind of top rather then a consolidation to go higher.  The utilities and the transports have also had death crosses.  I don't know if that makes the odds any higher for the bears or not.  It seems likely it would.  The market continues to weaker and weaker.

Bob

Tuesday, August 11, 2015

Daily update Wholesale sales

About face.  Yesterday they were buying stocks because poor economic data in China was likely to induce more stimulus.  Today they sold stocks because that stimulus was in the form of a currency devaluation. 


SPX did not give back all of yesterday's gains.  It is also still in the triangle.  Breadth was only -63% after starting out -79%.  There was some buying of the weakness.  New highs dropped to 45 and new lows picked up to 159.   Volume increased over yesterday, but we ended well off the lows.  Somebody was out doing some buying.


The futures dropped back below all key MAs once again.  What a choppy mess.

I have written about economic weakness in China for many months now.  The pundits have ignored problems there completely.  I guess they won't be able to ignore them now.  The Chinese economy is in serious trouble.  Nobody devalues their currency because things are good.  This really should not surprise anybody with the way commodity prices have been falling.  There were plenty of warning signs.  This may change people's perception of the global economy.  I have showed plenty of things that showed the economy was not good, but I don't think most investors realized that.  Today was certainly a wake up call.  Will it dampen the dip buyers enthusiasm?  Time will tell.

Once again wholesale sales were weak.  That led to an inventory build again.

Source

I would not say we are in a recession yet.  However, there is clearly an increased risk of production cuts.  This next chart is a bit more troublesome actually.


Since the government went to the big banks in March of 2013 and told them to lower the credit standards for an auto loan down to a breathing human sales have been quite robust.  However, we are now starting to see signs of a potential inventory build the last few months.  Are sales starting to tail off?  As weak as the economy is that would not be good.

Bob

Monday, August 10, 2015

Daily update 8/10

Bulls fight back.


The bulls showed up right on que.  We had the 200 SMA and lower Keltner channel for a springboard.  The breadth was a strong +73%.  New highs came in at 84 with new lows at 82.  It looks like we have a little triangle forming over the last few weeks.  Since it is symmetrical it does not give any hints on which way it might break.  Volume was light.


The futures blew through potential moving average resistance.  They are almost back up to major resistance though.  Will it hold again? 

Today had an interesting change to some internals.  Check out these two charts.


So both breadth indicators had positive crossovers as did the bull/bear price chart.  In fact bulls eclipsed the 50% mark this time. 

What does all this mean?  We are back to neutral in the short term trends.  We have some positive internals.  That all seems potentially bullish.  Now the problem may be the VIX.  It closed at 12.23.  The VIX dropping under 12 has been a good sell signal the last couple of months.  Obviously if we continue higher it will get under 12 again.  Will they sell it yet again? 

This market is acting just like 2000 except the volatility is lower.  It was changing direction constantly.  However, the moves up and down were considerably bigger in size then they are now.  I have no idea what is going to happen next.  The positive internals might be signaling a chance SPX makes a new high.  However, the sellers may come out again when VIX gets under 12.  The number of SPX stocks down 20% or more from their 52 week highs has increased to 25% of the index now.  I am positive a new high in SPX will get sold.  It is just a question of do they sell before we get there or not. 

Bob

Important

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