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Friday, October 9, 2015

Daily update 10/9 Wholesale sales

Pause day at resistance.

SPX tested the 9/17 high a few times today, but could not overcome it.  There is clearly resistance here.  It may take a bit to decide whether to top or plow on through.  We are very overbought short term.  It is a lot to ask of bulls to push prices higher from here.  We will have to wait and see if they are up to the task.

The futures closed a few bars above the 200 SMA, but have not confirmed a break.  This line can be formidable support and resistance.  It is interesting that it happened to coincide with the 9/17 high.  A pullback would not be a surprise.

Next week is option expiration.  That historically has an upside bias.  However, that is because most of the time the market sells off the week before.  Since it rallied strongly into expiration the upside is might be muted.  If we keep plowing higher I would have to view that as a sign of significant strength.  Bear market rallies are usually fast and furious, but burn out quickly.  They can really get the bulls excited.  An awful lot of people are now convinced a major bottom is in.  The trouble is the primary trend has turned down.  The bulls need to do more work this time then they did in Oct. 2014.  What will determine the outcome here is whether we go into a recession or not.  This market is not going to race back to new highs from this much technical damage unless investors are convinced there will be no recession.  That is how 2011 played out.  SPX did not get across the 200 DMA for good until the end of Dec. even though the final low was in Oct.  People became convinced the economy was ok and away we went.  Since this rally was built on poor economic data that hardly seems like it is onward and upward through the 200 at this time.  That does not mean we can't get there, just that I would be very shocked if we broke through and kept going.  The data is currently not good and I am starting to hear people talk about recession odds rising.  This is not the normal environment for a big bull run.  That's my story and I am sticking to it.  At least until I decide to change it.

The wholesale sales data came out today worse then expected once again.

The YOY  change continues to show severe weakness usually seen in a recession.  This is not going to help the manufacturing data at all.  The last national ISM number was barely above 50 while the regional reports were all negative.  This data seems likely to continue to put downward pressure on production.  We are starting to see more and more layoff announcements lately.  That could easily continue.

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


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