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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.


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.


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