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Thursday, September 10, 2015

Daily update 9/10 Wholesale sales and inventory

Yet another bounce back.

It looks like we have a funky looking triangle forming.  If the market continues the way it has most of the year in that it tries not to go anywhere it will probably stay inside until very close to the apex.  Breadth came in at +51%.  A weak bounce to say the least.  New highs dropped to 9 while new lows picked up to 118.  Not the kind of stats bulls want to see.

The futures have been hanging pretty close to the middle of the channel since yesterday's close.  It could be slightly positive that they closed below the 20 SMA for only one bar then bounced back above. 

The market continues to chop around.  Will the bulls show up tomorrow and build on today's bounce?  There is some room up to resistance.  Will overnight news scare the bears into action once again?  No crystal ball here.

We have seen poor wholesale sales and inventory builds over the last few months.  Lets look at the latest data.

This was the first monthly drop since back in 2012.  I warned over the last few months that production cuts were going to happen unless sales picked up.  That process may have started now.  Here is another chart with more data that is very informative.

Charts source

This chart shows both sales and inventories and the gap between the two.  The gap has now eclipsed its peak from the great recession.  I wonder if people have continued to build inventories because everybody keeps saying lower fuel costs will goose consumer spending.  That has not happened and now people are getting stuck with excess stuff to sell.  I think it is likely too late for sales to pick up enough to prevent more production cuts.  If inventories continue to decline it will negatively affect GDP.


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