If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

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.


No comments:


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