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Wednesday, September 30, 2015

Daily update 9/30 Poor manufacturing data

Nice bounce.  Unfortunately the last day of the month is not a very good predictor of future price action.  Quite often the market reverses the next day.

SPX climbed above the 6 SMA.  Notice how much lower the volume is then the big bounce day off the Aug. low.  That does not scream conviction to me.  The breadth was a decent +73%.  New highs were a pitiful 7 while new lows came in at a still elevated 213.  Not very inspiring.

The futures rallied enough to get a green price bar, but we did not get a higher close to confirm a short term change of direction.  The bulls are going to need more upside tomorrow to prove their case.

The green/red bar chart shows some improvement, but 52% of the stocks still have a red price bar.  Both breadth indicators are still negative as well.

This next chart shows the significant technical damage done to the market.

This is 25 years of a count of the number of stocks in SPX that have their weekly 13EMA above their 34EMA.  The current reading of 19% is below all other occurrences since 1989 except for 1990 and 2008.  The U.S. had a recession both times.   In March of 2008 it got down to 21.5 before the market bounced a couple of months then crashed.  In 1990 the market bottomed and went on to new highs.  This area might be key to whether we crash again like 2008 or more like 1990.  At this time we do not have any technical indication we are making a major bottom.  All we have is a deep oversold condition.  It could always get more oversold.

The buying that started yesterday when SPX got close to its Aug. low continued today.  The bulls still need to prove themselves.  Will they come back again tomorrow?  Maybe, but I am not convinced they will.  If SPX continues up I guess the 20 DMA (1945) would make a reasonable target.  We could just as easily turn back down tomorrow.  

I have talked for months that the increase in inventories was going to cause production cuts if sales did not pick up.  While the FED is running around talking about a good economy and the need to raise rates the reality is quite different.  All regional manufacturing surveys were negative this month for the first time  since 2009.   Here are a couple of charts from Zero Hedge 6 Out Of 6 Fed Surveys Say US Is In Recession

They almost got all negative in 2012, but never did.  This next chart shows how the regional surveys affect the national ISM number.

They tend to track pretty closely.  If the national number tomorrow is above 50 it probably won't be by much.  A key difference between now and 2012 is how the industrial production is behaving.  It never turned down in 2012 like it has this time.  Here is the chart to refresh your memory.

The last 10 months clearly look different then 2012.  The Sept. data is likely to show a drop with the way the manufacturing data came in.  We are perilously close to a recession.

As far as I am concerned the FED is trying to pull the wool over people's eyes by talking about economic strength and raising rates.  If rates were normalized they would probably be talking about easing.  Of course they don't have any room to ease.  I guess the next best thing is to try and convince people everything is good.  I am sure that will work just as well.


Tuesday, September 29, 2015

Daily update 9/29

The plot thickens.

SPX took a little dip below yesterday's low this morning.  It came within 5 points of the Aug. low.  It suddenly took off to the upside with a rather spirited rally.  Here is a look at the 15 minute futures chart.

Look at the upside volume on that first bounce.  There was good volume again at the end of the day as well.  This is the first sign on this decline of buyers waiting to step in.  This pattern looks like it could form a short term bottom. 

The ADX continues to be low.  That is what it should look like on a retest. 

I hate when price almost gets to an important number and reverses.  Sometimes it ends up getting there anyway and sometimes it doesn't.  There are some divergences in the internals.  There is a rather obvious VIX divergence.  This looks like a reasonable setup for a successful test of the low.  All we need is for the bulls to show up in force in the next couple of days.  We may still test the 1867 low first.  Should SPX fall through that low instead of bottoming 1820 is the next key support level.  Lets see if the bulls want to burn some of that dry powder.


Monday, September 28, 2015

Daily update 9/28 Biotechs crash more

Wow, IBB down another 6%.   In Daily update 3/20 Biotech bubble and Fisher says stocks hyper overpriced  I wrote

"The trouble with parabolic moves up like IBB has made is they always seem to end in a crash.  Everybody piles in slowly, but they all want out at the same time.  There are some fine companies in the biotech space along with the junk.  During a crash they throw the baby out with the bath water.  If history is any guide many of those fine companies will see their stocks seriously hurt.  The junk will end up going out of business.

If the biotech sector is about to top and crash will it take the broad market down like NDX did in 2000-02?  It certainly has the potential.  Last spring when the sector had a correction there were quite a few times when it dragged SPX down with it.  I even commented on it in the blog on numerous occasions.  I think I will have to keep an eye on this one for a while to see what happens."

The bubble has popped and it appears to be taking SPX and the rest of the market with it.  Yesterday's volume looked very big in IBB until today's bar was added.

Today was the first day of this decline that it looked like people were really anxious to sell.  The downside volume was 95% of the total volume.  Volume was not particularly high though.  Buyers put their hands in their pockets today.  The 1885 support level stems from an area of resistance back in the spring of 2014.  Will it hold or will it fold?

The futures were actually up 9 points in the night from the 4 PM Friday close.  Once Europe opened and sold off it was all over for the U.S. bulls.  We are getting close to the Aug. lows.  Curiously the ADX is staying low.  That is different then other declines we have seen this year.  That might help the bulls get a successful retest.

Most of the time the down volume being over 90% makes a short term bottom.  However, we had 94% on 8/21 and it was followed up on Monday with the futures limit down.  If we don't bounce tomorrow then another big down day is likely.  The TRIN closed at 2.17 which is often good for a bounce.  It was not high enough to signify major panic.  Was today another mini capitulation that leads to a multi day bounce or the beginning of a mini crash?  The first hour tomorrow will be important.  It could be either one from what I can see.

While I don't know exactly how this retest will play out.  I do know one thing.  So far we have not had enough strength to signal that we are in the process of making a bottom that will lead to new highs in SPX.  However, there seem to be a lot of people just waiting for the retest of the low to start buying.  Many people are convinced this is yet another pullback in a bull market.  That could lead to a significant bounce on a full retest of the low even if it does not end up being a major bottom.


Friday, September 25, 2015

Daily update 9/25 Biotech crash

The bounce setup produced the gap up as expexcted, but biotech stocks ruined the bull party.

There are a lot of lower tails on these bars.  There is clearly an attempt by the bulls to support the market here.  Will they be successful?  The breadth was slightly negative.  New highs increased to 27 while new lows dropped to 149. 

The futures got turned back at the 20 and 50 SMAs.  They are still above recent lows so I guess the potential short term bottom pattern could still play out.

Biotech stocks started selling off right from the open.  That selling put pressure on QQQ and IWM as both those ETFs have quite a few bios in them.  Despite them heading down all day SPY managed to make a new intraday high in the afternoon.  After 2 PM people noticed the biotech sell off and started selling everything.  IBB ended up down over 5%.   I did not hear of any specific sector news.  I wonder if a big fund decided to use the gap up to liquidate some positions and the selling just fed on itself during the day.

I think the bounce idea is still alive.  IBB had huge volume today so it is possible it had a short term volume climax low.  If buyers swoop in that could help the broad market.  Europe sure enjoyed the Yellen speech.  Maybe they won't be selling off on Monday to start the U.S. off on a bad note.  Lets see if the bulls have any dry powder burning a hole in their pocket.

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


Thursday, September 24, 2015

Daily update 9/24 Durable goods

Bounce setup.

We had another news induced big gap down.  In the 11:00 hour SPX hit the lower Keltner channel and selling pressure dried up.  The dip buyers eventually came to the rescue.  This is a good place to bounce from and we have had a sizable move straight down. 

The futures are showing a potential short term double bottom.  The price action looked good today for a bounce.  They just need overnight news to cooperate.  Yellen speaks tonight.  Maybe she will say something the market likes.  The futures are up a bit from the 4 PM close.  So far so good. 

This last swing down seems to have convinced most people we are headed to retest the low.  However, there are some things about this move that just don't quite look like we are headed straight there.  Now that so many are convinced it would be just like the market to bounce.  That would likely squeeze many shorts.  It also could convince some bulls that the retest is over and suck in new longs.  Then the next mostly likely thing to happen would be for the market to roll over and test the low for real.  Thereby pissing off just about everybody.  This market has been very good at filling downside gaps in fairly short order.  It is certainly within reason the market goes on a gap fill mission over the next few days.  A close above today's high could set that in motion.

The durable goods orders came in showing continuing weakness.

This is now seven months in a row the core durable goods YOY change has been negative.  While we had a similar streak in 2012 we avoided a recession.  Many believe it was QE.  I believe it was hurricane Sandy destroying 250k cars and plenty of buildings.  We might not avoid it this time.  No sign the economy is picking up yet.  No wonder Yellen did not want to raise rates.


Wednesday, September 23, 2015

Daily update 9/23 Bull market in cash

Consolidation day.

The futures tanked overnight on poor manufacturing data out of China, but buyers stepped in and had them positive by the open.  SPY got a bit above yesterday's high before sellers showed up and knocked it back to negative.  However, sellers were not very aggressive and yesterday's low was never challenged.  Volume was very light as  neither buyers or sellers were very motivated.

The dip and retrace in the night is evident on the chart.  Bad data out of China failed to have any lasting effect.  I am not sure how long that will last.  At any rate the end result was that the futures closed below the lower Keltner channel then immediately came back in.  That is often a good sign of a short term bottom.  I am not sure what that might mean in this situation.  Bulls have not shown any enthusiasm will they step up now and buy?  I don't have a clue.  News flow might have a lot to do with it.

This market has been mostly unpredictable for many months as it gets whipped around by news.  While the bears appear to be in control they only seem to be motivated to sell when there is negative news that causes a big gap down.  The rest of the time they sit back and wait for a bounce.  Once they knock it back down a bit they stop selling.  Since I don't have a crystal ball I have no idea what will happen tomorrow.  

I got a kick out of this article.  The Bull Market in Cash Is On  Check out this chart.

Those are the facts.  Last April I showed  this chart from GMO.

GMO was expecting low or negative returns across a lot of assets.  So far so good. At some price there is always an alternative (ASPTIAAA).  Pronounced asp tee ahh.  How do you like my new acronym to replace TINA (there is no alternative).


Tuesday, September 22, 2015

Daily update 9/22


Nothing like a little overnight sell off in Europe to send the futures down.  However, at the end of the day they closed where they opened the regular session.  I guess most people weren't motivated to sell into the weakness.  The breadth was -77% about inline with the move.  The new highs dropped way down to 4 while new lows popped up to 214.  That is the most new lows since the 8/25 low close of the mini crash.  The internals suggest we are indeed on the way to a retest of the low.

The futures seemed to be finding support at the lower Keltner channel.  That might be enough to cause a bounce.  Both indicators have negative crossovers.  We have a confirmed down move now.

The red bars crossed above the 50 threshold today.  That should confirm the bears are back in control. 

SPX closed below the lower trend line and below the 20 SMA.  The futures chart confirms the bears in control along with the green/red bar chart.  That is a lot of negativity for the bulls to overcome.  However, it is tough to say how a retest will play out.  These mini crashes can leave the market pretty choppy.  There could be a few ups and downs on the way to the Aug. low.  Of course we could just accelerate down again.  There are historical instances both ways.  If things continue to fall apart overseas it is likely to be the more straight down affair.

The short term trends are now down across the board.


Monday, September 21, 2015

Daily updat 9/21

The elevated TRIN brought out a few buyers.

After a gap up there was a little bit of buying that took SPX up to the upper trend line.  That corresponded with SPY getting a little above Friday's high.  The sellers put an end to the move though and sent prices back down toward the break even point.  A few buyers showed up and kept most indexes positive.  Due to sector specific news the biotech sector had a very bad day.  SPX managed to stay above the lower trend line, but not by much.  Breadth was +59% about inline with the move.

Once again the red price bars on the futures were not confirmed with a lower close.  Once again they closed back above the 20 SMA.  Still not an inspiring price pattern.

The green/red bar chart is showing a decreasing number of greens and increasing number of reds.  Both are below the 50% level.  Kind of in limbo here.

The main thing we learned today was that the Friday high in SPY was resistance.  However, the sellers were not aggressive enough to take prices below Friday's low.  If tomorrow is down then the odds that we are embarking on the retest of the low should increase considerably.  Buyers clearly lacked enthusiasm today so that is a possibility.  However, in the absence of bad news they could always bid the futures up again overnight.  Sellers also lacked enthusiasm today and I still believe there may be a lot of investors hoping for higher prices to sell at.  If no real selling catalyst comes along we might get somewhat higher yet. 


Friday, September 18, 2015

Daily update 9/18 Michigan University stock market sentiment

Downside follow through.

There is some volume for you.  Breadth was -68%  so selling was broad based.  New lows increased to 110.  The TRIN closed over 3 so there was a bit of panic in the air.  SPX closed in the area of the uptrend line.  With TRIN so high a bounce on Monday morning would not be surprising.

The futures came to a stop on the 50 SMA.  Possible support there.  Neither of the indicators have negative crosses yet.  No confirmation here the market is rolling over yet.

It is possible a good bit of selling today was related to options.  All those puts at the 200 strike were underwater this morning.  That can cause some delta hedge selling.  While it is possible the market is rolling over to retest the low I don't have anything I can point to that indicates that is the case.  The bears need another down day.  With the high TRIN that might not happen.  Lets see if the bulls show up on Monday to take advantage of bargain prices.

I have never seen the Michigan sentiment stock market question in a chart like this.

Given what has happened since June and what happened after June 2007 this is an interesting chart.  This is one view of sentiment worthy of a bull market top. 

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


Thursday, September 17, 2015

Daily update 9/17 Martin Pring - A Turn of the Tide Revisited

Both bulls and bears liked the FED results.

Despite ending in the red the breadth was +61%.  Quite a few indexes were positive.  New highs popped up to 45 as post FED buying was quite strong.  New lows dropped slightly to 32.  Kind of an ugly candlestick there.  SPX got up near the upper Keltner channel which puts it slightly into the over bought category.  It is still outside the triangle so the break out remains, but was not confirmed today with the lower close.

The futures crossed the 100 SMA, but failed to stay there.  This indicates we have worked off the over sold condition.  ADX remains low just as on all other rallies over the last few months.  It is starting to turn up, but that has been a good indication the market was ready to sell off.  The market must continue higher to wrest longer term control from the bears.

The McClellan oscillator is very over bought.  At 172 it is still below a level that would greatly increase the odds a retest of the low would be successful.  The bulls need to come out again tomorrow and push this indicator over 200.  If this turns out to be the peak the bulls could be in trouble.

The green/red bar chart showed some strength, but may have started to roll over already.  If this drops back below 50% we are probably starting the retest move down.  Lets look at how the 2011 bottom was made.

The yellow arrow marks day 16 of the bounce just like where we are at now.  At that point the green bar count got up to 94% as opposed to our peak so far of 73%.  The buying on this oversold bounce has not been as strong.

The SPY option configuration suggests they will try to pin SPY around 200 tomorrow.  It might  be next week before we know the true feelings of the market on the no rate hike scenario.  Both the bulls and bears took turns in the market after the announcement.  

I can find no sell off with this much technical damage that did not retest the low in some fashion.  Therefore odds are high that will happen.  How that plays out depends on how strong the bounce is before it rolls over.  At this point we do not have the strength to suggest a retest will be successful.  I find it curious that the bounce off the Aug. 2011 low peaked on day 16 and here we are on day 16 with a big reversal candle.  It may just be a coincidence, but it bears watching to see if we roll over in the next few days.

This is a great article from the infamous technical analyst Martin Pring.  A Turn of the Tide Revisited  It has this interesting chart and many others.

Martin Pring happens to agree with me that we are still in a secular bear market.  I am a nobody so don't believe me.  However, his opinion might be worth considering.  It will only take a few minutes to read it.


Wednesday, September 16, 2015

Daily update 9/16 Odd option configuration

More up.  I guess a sizable number of people were willing to bet the market will continue higher no matter what the FED does.  There certainly is a very broad spectrum of people's opinions.  I can't think of a single meeting ever like this in my time.  The FED has purposely been extraordinarily vague.  I wonder why.

SPX stuck its head up above the upper triangle line.  While this is a break out, triangle patterns are not all that reliable.  There are way to many false breaks.  Breadth was +73% which is quite strong.   However, the formerly hot biotech sector ended in the red.  The formerly trashed energy and basic materials sectors were the strongest.  This looked like a defensive move of selling high flyers and buying beat down stocks.

The futures reached the upper Keltner channel again.  That sparked a pullback the last time they did that.  They are approaching the 100 SMA so they have pretty much worked off the oversold condition. 

I have no idea what will happen tomorrow.   It seems odd after years of knowing exactly what the FED was going to do at every meeting to be in the position of having no clue.  We have seen a few wild moves when they did what was expected.  What is going to happen when nobody knows what to expect?  I suspect it will be interesting.

Shaeffer's research periodically puts out charts with SPY open interest at various strikes.  I don't see them every month, but over the years I have seen a lot of them.  Check out the one for Sept. expiration.


The largest open interest for both puts and calls is at the 200 strike.  I can't remember ever seeing that before.  Normally there is several dollars between the strikes.  My guess is that regardless of what happens tomorrow we will be back around 200 by Friday close.


Tuesday, September 15, 2015

Daily update 9/15 Industrial production/Empire survey

Nothing like poor economic data to bring out the buyers.

Volume was very light so there was an absence of sellers today.  Breadth came in at +67%.  Decent but not great.  New highs flew up to 20 (sorry for the sarcasm).  New lows dropped a bit to 88.  That is another sign the sellers took the day off.  SPX ended the day in the resistance zone and near the upper trend line.  Do we break out or turn back down?

The last time the futures got up in this area they sold off sharply.  Is resistance still here?

The McClellan oscillator turned back positive today, but the 10 DMA lines are still negative.  The green/red bar chart is interesting tonight.

We have the highest reading of green bars since back in March.  Is that good or bad?  Since March high readings have brought out the sellers.  I don't know if things will be different this time or not.

I realized today the FED meeting is on Thursday this week instead of Wed.  Buyers were not shy today, but now we are in resistance.  The TRIN was unusually low again at .51.  With the high reading on the green/red bar chart this could all add up to some selling tomorrow. My guess is we will stay in the triangle until after the FED announcement.  The light volume suggests that most people are sitting on the sidelines.

The latest IP data came out and it was in the negative column again.

The economy could not build on last months increase in IP.  It fell back below the 12 month SMA.  The 3 and 6 month MAs are also below the 12.  It has fallen 6 out of the last 8 months.  It is certainly not painting the picture of strength normally associated with a rate hike.

This was likely the biggest miss on record.  The data came in at -14.67 against expectations of -.75,  That is by far the worst reading in this recovery.  It looks like the build in inventories I have been talking about for a few months is likely starting to hit production.  This is really not good.

These two pieces of data paint a picture of economic weakness. I have to wonder if the rally today was not caused by a number of people believing this data killed any chances of a rate hike this week.  It is clear there is no economic justification for raising rates.  We will have to wait and see if they do it anyway or not.


Monday, September 14, 2015

Daily update 9/14

Volatility and volume quieting down intraday.  I guess most people are content with their positions going into the FED meeting on Wed.  Since  nobody knows what they will do my guess is both longs and shorts have hedged themselves.  This feels like the quiet before the storm.

People were selling intraday pops more then they did the last couple of days.  However, people were still not interested in selling into weakness.  Until that happens the bounce is still alive.  The breadth was -65% which seems a bit strong for the little bit we were down.  New highs remain low at 13.  New lows were over 100 again today at 112. 

Price oscillations are clearly dampening out including the overnight sessions.  That could easily continue until the meeting results are announced.  Lets look at some market internals.

The green/red bar chart and the breadth indicators all had fresh negative crosses today.  That may be a warning that the triangle is going to end on the down side.  It is definitely possible the bears took control of the market again today.  We need downside follow through to confirm that though.  The bulls are definitely pooping out.  Maybe few people are willing to buy at this level in front of the FED.  Maybe the dip buying fuel from the crash has been exhausted.  It could be either one or a combination of both.  So we wait to see what the FED does or doesn't do and how the market reacts.

Personally I can't wait to get this meeting over with so we can begin to fret about what will happen at the next meeting.


Friday, September 11, 2015

Daily update 9/11

Another weak bounce day.

SPX was up almost as much today as it was yesterday.  Yet the breadth came in at -51%.  Somewhat weaker then yesterday.  New highs came in about the same at 10 while new lows increased again to 143.  It appears the oversold bounce from the crash low is running out of steam.  That big reversal from two days ago looms large.  When we have a day like that it is extremely important to conquer that high.  Until we do there is a shadow upon the market.  We have a clear resistance zone and the last time price got there the sellers were quite ambitious.  That can make bulls hesitant to push prices up that far for fear of getting clubbed again.  There is no sign selling is exhausted here.  It looks like people are just hoping and waiting (praying) on a higher price to unload.  If we don't get there they will lower the sell price eventually.

I mentioned last night it might be slightly bullish when the futures closed below the 20 SMA, but did not stay there.  They dipped below that line again last night, but once again they bounced back.  This is certainly a sloppy chart.

Next Wed. is the much anticipated FED meeting.  This is the most talked about meeting in many years.  Will they or won't they make a move.  Nobody knows.  For many years we knew what they were going to do before the meeting.  They have purposely inserted uncertainty.  It is going to be interesting with many countries and international central banks pretty much begging them to stand pat.  This is a high risk environment to make a move.  If things go south they will get some blame if they do something.  The intraday volatility is starting to die down which is normal as we approach the apex of the daily triangle pattern.  It may continue that way until after the meeting unless the dip buyers have exhausted their dry powder.

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



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