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Tuesday, November 3, 2015

Daily update 11/3 Factory orders

Upside follow through after a thrust day.  Those have been rare this year.

The red line is at the today's high.  As you can see SPX has struggled with this area since Feb.  While it was able to spend a few days above the line over the summer it was unable to stay there.  There seems to be a lot of people out raising year end targets now.  I suggest everybody notice where the 50 SMA is.  We all know the market can stay over bought or over sold for fairly long periods of time.  However, we have arrived at what looks like major resistance in a really, really, extreme over bought condition.  Dave Landry likes to say it is hard to run a race when you've just run a race.  SPX raced back to the highs and got a lot of people very bullish.  Exactly who is going to put new money to work here to keep it going?  We certainly do not have good fundamentals at the moment.  Just saying.

That was a pretty good bounce off the 20 SMA.  The futures are more then 100 points above the 100 SMA.  Extreme over bought.

The green count is up to 66 now.  In studying this chart I have noticed the smoothest runs happen when one of the lines stays below 20.  The red count did that for several days off the low.  Once a line starts spending time above 20 the move tends to slow down.  This works with both up and down moves.  The red count has been above 20 now for seven straight days.  That likely indicates upward progress will be more difficult from here.  That fits pretty well with the major resistance we are at.

Do we make a new high or stall somewhere below it?  Beats me.  We are so stretched in the short term it is hard to say if people will keep chasing or not.  I will continue to watch the 20 SMA on the futures for a sign we are reversing.

The factory orders came in poor once again.

Durable goods continue to be quite negative year over year.  This is definitely recession like.  We survived the weakness in 2012 without going into a recession.  Can we do it again?  I thought this chart from Bespoke was pretty interesting.

They looked at the FED regional surveys going back to 2005.  Over the last ten years the only time all five surveys were negative at the same time was during the great recession.  Even as weak as the economy was in 2012 it never happened.  Close but not quite.  They now have been all negative for two months in a row.  On top of that the leading economic indexes have been negative lately.  That makes it somewhat difficult to expect the economy to turn up in the short run.  The odds of a recession still seem to be rising.


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