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