Daily update 12/10 Wholesale sales

Ugly up day.

SPX rallied enough in the middle of the day to get above the 200 SMA.  However, the sellers showed up and started unloading once again.  SPX ended the day well below the 200 and slightly below the 50.  Despite the positive day the breadth ended up slightly negative.  New highs continue to drop and came in at only 17.  New lows dropped a bit to 146.  Not a very pretty up day to say the least.  The TRIN was oddly very low again at .66..  We have negative breadth days and low TRIN.  I am not sure what is going on with that

I added the 200 EMA to the futures chart as price is paying attention to it lately.  I usually don't show it because price usually ignores it.  There is rarely this much spread between them which might help to explain it.  At any rate it has been providing support on this pullback.  How much longer can it hold up if the bulls don't come to the rescue?

The red count declined a bit today, but the bears are still in control.  It has not reached levels that have sparked a rally in recent months. 

I read this morning that the FED funds futures are now pointing to a 79% chance of a rate hike next week.  The recent speakers have all been in unison on that.  I would say it is a done deal barring some catastrophe.  What the market does between now and then is an open question.  Next week is option expiration which has a strong positive bias.  However, sellers have been very aggressive selling into strength.  Until that selling gets exhausted or takes a break the market isn't going up.  I can't see any sign we are at that point yet.  SPX is currently in the middle of all the key daily MAs.  That complicates trying to predict what happens the next day to say the least.  At the moment the bears are in control selling rallies.  Until the bulls show up in force the path of least resistance should be down.

Wholesale sales are still coming in weak making the inventory to sales ratio continue to rise.

Source

We have definitely seen production cuts as the national ISM manufacturing number is now under 50.  However, the chart below indicates more cuts may be on the way.

The spread between inventories and sales is wider then it was during the worst of the great recession.  The spread started widening in earnest in 2013.  Ever since then it has been adding considerably to GDP.  Even with all that we are still only growing at 2%.  This is obviously not going to continue forever.  When those inventories are worked off it will be negative for GDP.  The chances of the manufacturing sector ;picking up significantly seem very small.  It looks much more likely we will continue to see production cuts and the cuts may even pick up.

Bob