As I mentioned last night more downside today was to be expected. Breadth was only -51%. New highs slipped to 93 while new lows increased to 65. Still not good numbers there. SPX traded below yesterday's low, but the selling pressure dried up down there. That allowed the bulls to close it back above that low. Resistance is obvious here, but so far the sellers have not been anxious and only sell into strength.
The futures traded below the 20 SMA today, but bounced back. The last two consolidation periods ended with a close below the MA. While we have the same number of days in the current pause the pattern is slightly different. Should the futures sell off in the night we could still get that close below the MA.
If the recent pattern repeats again tomorrow should be a thrust up. However, the employment report is a bit of a wild card. Last month's report was weak and the buyers came out in force. Now we have the situation where Yellen made it clear they are looking at Dec. to raise rates. How weak does the report have to be to squash that action? A strong report is certainly not going to be received well. No crystal ball for tomorrow.
I ran across some interesting trade data that clearly shows weakness. This chart is for South Korea.
We have always maintained that South Korean export powerhouse is a great barometer of the overall global economic activity. That is because this Asian economy is segmented between both the new and the old sectors. While on one hand major exports include semiconductors, LCD and wireless communication devices; on the other hand exports also include petrochemicals, machinery, automobiles, ships and steel. Furthermore, cardinal trading partners are China (25 percent of total exports), ASEAN (14 percent), the United States (10 percent) and the European Union (9 percent).
Then I ran across this chart of the U.S. data.
Both imports and exports are crashing like they did in the last two recessions. We are normally already in recession by the time the data gets this bad. I have shown lots of troubling data already and things just seem to be getting worse. That is why the comment from Yellen yesterday that the U.S. economy was doing pretty well is quite surprising. Either she intentionally lied or she has no idea what the state of the economy is. Both of those options seem a bit scary to me. While the data is not showing a recession yet it is clearly creeping closer and closer. Negative revisions in the months ahead could indicate we are in even worse shape then we think we are now. Sorry Janet, the economy is not doing well at all.
I got a curious email from Google about a new "service". Check this out.
.Introducing Contributor: A new source of revenue for your site
Contributor is a new source of revenue for your site, funded directly by site visitors. With Contributor, users pick a monthly contribution level (either $2, $5, or $10) and a portion of those funds are used to pay you - in place of showing ads. The result is that users see fewer ads and you still get paid. Learn more and help us promote contributor.
Am I reading this right? Google expects to get people to pay to not have as many ads shown to them. Seriously. This seems kind of desperate to me. I wonder if ad blockers are giving them real trouble these days. When I started this blog I would get around $20 a month. A year ago it was down to $8-10. Now days it is more like $2-3. Maybe this has become a widespread problem for Google. I can't imagine many people are going to pay not to see ads myself. This is obviously an extremely popular stock and is one of the few stocks at its high right now. If you own this one I would advise keeping a close eye on the revenue and earnings just in case this is a sign of trouble down the road.
Bob
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