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Tuesday, December 8, 2015

Daily update 12/8

Another strange day.  The lagging Biotech index was strong while the transports got crushed.  Most indexes were only moderately lower.

SPX closed slightly below the 200 SMA once again.  We started with a big gap down, but there was little desire to sell into the weakness.  That allowed the bulls to come in and rally the market enough to completely close the gap in SPY.  After that the sellers returned and kept hitting the bids all day.  The bulls made a few attempts in the afternoon to get SPX back above the 200, but failed at the end of the day.  Breadth was very negative once again at -66%.  New highs dropped way down to 28 while new lows increased to 359.  Once again no panic as the TRIN came in at 1.27.

The futures confirmed breaks of the 20, 50 and 100 SMAs today.  The next major support on this chart is the 200 down another 40 points.  If the bulls show up for a bounce it won't be because of an oversold condition. 

The red count moved up to 50 today.  The bears are starting to growl a little. 

The transports are testing their late Sept. low.  The persistent relative weakness this index has shown for well over a year now can hardly be a good thing.  I am certain this has everything to do with the weakness in the global economy.

With the choppiness of the market it is rather hard to say day to day what will happen.  While SPX might be headed lower the red count is only at 50%.  The bulls could still show up tomorrow
and they probably need to.  With SPX back below the 200 DMA once again another down day could bring on more selling pressure.

I am hearing a lot of talk about oil prices being lower for longer.  It is about time people realize it.  In Daily update 2/20 Oil inventory and production  I wrote:

"I actually had to read that twice.  They are cutting capex by 20% while increasing production 20-25% this year.  What they are losing on the price decline they want to make up in volume I guess.  That seems to be what everybody is trying to do.  I remember back a few years ago when natural gas started crashing as fracking really started to increase supply.  It got way extended on the downside and everybody was bearish on it.  I kept think it had to be bottoming.  No dice.  It kept on crashing for years.  The reason was that people just kept on pumping.  They pumped as much as they could to make up for the price decline.  Of course that kept the price declining.  I am very sure we are not at the bottom yet."

Pretty prophetic huh.  Oil is not going to bottom as long as everybody keeps pumping as much as they can.  No sign of anybody flinching with cutbacks yet.  Meanwhile storage tanks around the world keep on filling up.  What really amazes me is how people like Boone Pickens and many others in the industry were all predicting it was only going to be a short correction and we would be back to higher prices.  While I know nothing about the oil business it was obvious to me that was not going to be the case.  This is a good example of why I have trouble with markets sometimes.  I often am way ahead of the pack in knowing what is going to happen, but the market will not reflect it until a majority of participants come around to the same idea.  As we all know timing is everything.  Such is life.


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