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Friday, January 29, 2016

Daily update 1/29

Thanks to the BOJ the bulls saved the day (for the moment). 

The 20 SMA target was hit and then some.  It was a buying spree as the breadth was +88%.  New highs picked up considerably to 65.  New lows dropped a bit to 41, but that is still high for such a strong day.  What really happened today?  Well, people that were still short pulled their hair out and probably dropped an F bomb or two.  People that were long were cheering like crazy.  People that are bearish, but waiting for higher prices to short were also cheering.  The last group of people will likely end up being the happiest when all is said and done.  More on that later.

The futures got a lift overnight when the BOJ announced negative rates in Japan.  I will have more to say on that later also.  People should not be cheering.  Here we are slightly above the upper Keltner channel which seems likely to provide some resistance.  We should see some give back early next week.  If the market can keep going higher the 100 SMA becomes the next target. 

The McClellan oscillator reached wildly overbought today.  Notice the 10 DMA lines are barely crossed.  This is similar to last Oct. marked by the yellow arrow.  In that instance we had a double bottom formation and price was already close to the 50 SMA.  We have a much different situation this time.  I would not expect this rally to last near as long as that one did.

Now the green count has reached overbought levels.  We are officially short term overbought technically.  In a downtrend that can be trouble.

The VIX closed at 20.20, but was well under 20 intraday.  You might recall last fall I noted that the VIX dropping under 20 with SPX below the 200 SMA was a very good bear market signal.  We now have a second instance.  Expect new lows after this bounce ends.  The higher we go the better the short setup will be.  Over the last few months central bank induced rallies have not lasted very long.  I don't know what the longevity of this one will be.  It could be a one day affair for all we know.  We are overbought enough now the sellers may come right back out in force next week.  Its kind of hard to say after a day like today.  Sometimes it inspires more buying and sometimes it doesn't.  We are going to have to watch and see what develops.

Sometimes I really just plain do not understand the world we live in.  One basic tenet of economics is that savings equals investment.  I think everybody would agree that anybody that spends everything they make and never saves any money will never be truly rich.  Investment is what builds future wealth.  The central bank policy first employed in Europe and now in Japan of negative interest rates discourages saving.  This is an insane policy.  I can't even think of words to describe how stupid it is.  What are central bankers smoking these days?  I am pretty sure that any person with even a little common sense would know this is bad policy.  One interesting thing about economics is that they often talk about a depression but there is no definition of what a depression is.  I firmly believe that both Europe and Japan are in a depression.  China is a basket case.  Things in the global economy are going to get worse from here.  Lets keep our fingers crossed that when things start to get really bad in the U.S. the FED will have better sense then Europe and Japan. 
Today turned the short term trend up across the board. 

Here are a couple of interesting articles for your weekend reading.
This Stock Market is Really Sick, and Big Institutional Investors are Bailing out
Will Record January Stock Volatility Produce Long-Term Tremors?

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


Thursday, January 28, 2016

Daily update 1/28 Factory orders

We got the expected up day based on the alternating pattern mentioned last night. 

Despite breadth being strong all day (closed at +65%) the futures ended the day 8 points below the 9:30 open price.  It felt like people were just hitting the bids constantly.  Volume even increased considerably today.  It was clearly a distribution day as investors took advantage of the up open to unload.  New highs came in at 30 (paltry) while new lows more then doubled to 110.  Despite the up close it was not a good day for the bulls.

The futures dipped below the 20 SMA this morning, but the bulls stepped in to support the market.  However, they really seemed to struggle just to hold them above the MA all afternoon.  This is really close to turning down again.  A confirmed break of the 20 SMA would probably bring out the sellers in force.  That could happen overnight if the futures head south tonight.

The green count popped up to 53 today.  While this is not overbought yet it clearly has worked off the oversold condition. 

The McClellan oscillator is approaching overbought levels.  The 10 DMA breadth lines crossed positive today completely working off their oversold condition.

The market is working off the extreme oversold condition in a sideways fashion.  That is usually a bearish sign.  Tomorrow is a scheduled down day based on the alternating pattern.  I am not sure this market can stand a down day without breaking down and heading for a retest of the recent low.  I don't see any sign a retest would be successful at this time.  This looks like an incredibly weak pattern developing.  If the bulls can't muster some more strength this market is in trouble.  For years every time it looked like the market was getting into a precarious position the bulls would show up and save the day.  This is a very precarious position.  Will this be the time they fail to show up?

The factory orders came in much worse then expected.

Yet another month of negative YOY core durable goods data.  Nothing positive here yet.  The core capex is even worse looking.

The major cutbacks in the energy industry capex are really smacking the data.  With oil staying low this seems unlikely to improve in the near term.  It looks like the economy is in quick sand with its head barely above ground.  It seems like layoff announcements have picked up.  The initial claims have definitely turned up a bit.  We need another month or two to see if it is a lasting trend or a short term blip.  I still see no sign the economy is improving.  It looks more like the pace of the slowdown is picking up.


Wednesday, January 27, 2016

Daily update 1/27 Davos quotes

The old different direction every other day routine.  Clearly consolidation.

That was a bit of a negative reaction to the FED announcement.  My how times have changed.  Used to be when central banks talked people bought stocks.  The breadth was -58%.  That was a strong reversal from the +66% reading we had mid day.  If the pattern repeats tomorrow will be up.  That would also be consistent with reversing whatever happens on FED day.  I suspect we still have a date with the 20 SMA before continuing down.  If tomorrow should be down then the bounce is probably over.

The futures took another stab at going below the 20 SMA, but found support again.  Although the bounce appears to be very weak it is still alive at the moment.

So far western markets have not noticed China crashed down below the Aug. low.  There is certainly a risk that we wake up one morning and see western investors have noticed.  The current bounce may not be over yet, but I don't see anything to indicate this is the start of a big move up.  It looks a lot more like consolidation at the lows in preparation for a break down.  As oversold as we were this pattern could easily last a few more days.  Be aware a really bad January usually leads to a negative February.  Barring a miracle rally this will go down as a bad January.

This is an interesting article.  36 WTF Quotes From The Davos Bubble Chamber  Some of the quotes are quite amusing.  Others are a little scary if the people actually believe what they said.  I guess stupidity knows no bounds even among the rich and famous.


Tuesday, January 26, 2016

GLD and GDX 1/26

I have not written about gold in a very long time.  Things may finally be getting interesting.

GLD got down to the lowest support line I had drawn on the chart years ago.  This would be a very good place to bottom.  I have seen very little mention of gold lately.  It seems like the bear market has worn most traders out.  This seems like a reasonable sentiment condition to make a long lasting bottom.

This looks like a classic accumulation type basing structure.  The break down a few days ago took out all the stops from weak longs.  The recovery back into the base sets the stage for a rally.  Its too soon to tell if this is the final bottom, but this is a very pretty looking bottom pattern.  I would expect some more chopping around.  Making a bottom does not mean going right into a strong uptrend.  If one wanted to invest in gold stocks for a long term position the risk reward here is very good.  One could start scaling in with a stop below the recent low.  If I am right about this being a bottoming pattern GDX will not see that low any time soon. 

I have no idea if gold will resume its bull market and head back to the 2011 high or not.  It seems due for a bull market even if it ends up making a lower high.  That could easily cause GDX to double from here. 


Daily update 1/26

Oil up, stocks up.

SPX closed inside the Keltner channel.  That is a small positive.  Breadth was a very strong +80%.  The oversold bounce stays alive for now.

The futures followed oil lower in the overnight hours then rallied when oil recovered.   The micro uptrend stays alive, but is pretty weak so far.  As I write this oil is down 2% and the futures are also lower. 

The green count rose above the red count.  The McClellan oscillator went positive today.  The market continues to work off the oversold condition. 

The market has moved back to a neutral condition.  Tomorrow is FED day again.  While they are unlikely to change policy the statement could be market moving.  Will they continue with their recent hawkish stance of more hikes to come or sound more dovish?  How do they do a 180 without losing credibility.  While they might imply rate hikes will be slow to come I don't see how they can turn right around and lay the groundwork for easing.  Between the FED wildcard and the oil wildcard I have no idea what happens tomorrow. 

Today turned the short term trend to neutral across all indexes.


Monday, January 25, 2016

Daily update 1/25


Something sent oil spiraling down today and in the afternoon SPX decided it needed to go with it.  Breadth was -77% showing broad based selling.  It is pretty clear the market is still beholden to whatever oil does.  The volume diminished considerably today.  That means the bulls put their hands in their pockets.  A common problem in bear markets. 

The futures stopped right at the 20 SMA.  The bulls could show up and continue the bounce from here.  If we are still above that 20 SMA in the morning that is probably what will happen.

I think the bounce attempt is still alive, but on life support.  The bulls need to come out to play tomorrow or a retest of the recent low seems likely.  It probably all depends on what oil does and I don't have a crystal ball for that.


Friday, January 22, 2016

Daily update 1/22 ECRI coincident index growth rate

The bulls finally got a break with oil rallying.

The world's problems were clearly solved overnight so traders bid futures up.  The breadth was a very strong 88%.   The volume declined from yesterday.  Not particularly good when coming off a deep oversold low.  The futures only closed about 7 points above the open so the majority of the gains were overnight.  The normal target for such a bounce is the 20 SMA which is quite a bit higher, but is falling rapidly.  The caveat is that when price has been outside the Keltner channel for quite some time the channel edge can provide resistance.  Notice price stopped there today.  A close inside the channel would greatly increase odds of reaching the 20 SMA.

The futures got a confirmed break of the 20 SMA this morning.  They are in bounce mode now.  The 20 SMA might provide support should the market pull back a bit on Monday.  If we break that MA real quick then look out below.

The red count dropped precipitously today.  The market has worked off the oversold condition on breadth as well.  That means should the overnight news be very negative this market could roll back over and make new lows.  I expect we will get more bounce, but we don't always get what we expect do we.  Just be aware of the fragile nature of this market.

The futures indicate we have a micro uptrend so the bulls have a tentative grip on the market.  Lets see if they come back out to play next week.  A down day on Monday will not necessarily kill the bounce attempt as long as it is relatively minor.  However, keep in mind that more and more people are figuring out we are in a bear market.  It might not take all that much bad news to bring out the sellers again.

The growth rate of the ECRI coincident index has been falling since Jan. 2015.  It turns out this indicator does a really good job of showing whether the economy is getting stronger or weaker.  Too bad the FED does not use it!   The latest reading (Dec.) came in at 2.0 a drop from 2.4 in Nov.  The key number is 1.5.  This indicator will often hit 1.5 or less in the first month of a recession.  However, it is subject to revision.  That means after a 1.5 reading we need to wait until the next month to see if it stays there.  There clearly is no sign the economy is picking up at this point in time.  It may in fact be getting worse faster.  That probably explains why we are seeing more and more layoff notices this month. 

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


Thursday, January 21, 2016

Daily update 1/21 SPX monthly ADX says bear market on

The 20% rule of thumb for a bear market Wall Street uses is really an insane definition.  My definition is "a period of falling prices generally lasting 12 months or longer."  The actual amount of the decline is irrelevant for my purposes.  If stocks see a 15% draw down over two years it is a bear market isn't it? Yesterday SPX made a new closing low since the May high.  Nearly all bull market corrections (including the 87 crash) made their closing lows within six months of the price high.  Because of the brevity of the move down I don't consider 87 a true bear market.  It took a long time to get back to the highs, but prices were steadily rising.  Making a new low more then six months from the price high greatly raises the odds of being in a bear market. 

SPX stuck its head above yesterday's high, but found some sellers and could not stay there.  Given the oversold nature of this market that is probably not a good sign.  Breadth was +64% which was in the realm of a dead cat bounce.  One positive was that SPX closed above the Aug. low even it if was only by one point. 

The futures got above the 20 SMA once again today, but found nothing but sellers up there.  So far no strength goes unsold.  The bulls will have to do better then this to get a decent bounce going.

Yesterday USO printed a doji bar and today a strong move up on increasing volume.  It is possible oil has made a short term bottom.  A short covering bounce is not out of the question given the magnitude of the decline.  That should help stock bulls if that were to happen.  I would not expect this to be the ultimate price low no matter what happens here.  Nobody is cutting production while Iran is going to be putting more on the market.  Saudi Arabia said today the kingdom can stand low oil prices for a long time.  That was a strong warning. 

The bulls tried to build on yesterday's reversal, but fumbled the ball. Traders on TV seemed to be really disheartened by today's price action.  Draghi pretty much promised more action in March, oil rallied significantly after its inventory report and yet stocks floundered.  That is because we are in a global bear market for stocks.  Plain and simple.  However, it is not out of the question that the market bounces from here (maybe more likely with dejected traders).  We are very oversold and oil might actually have put in a short term bottom.  If oil rallies again tomorrow stock bulls might get a little more traction. 

Here is a look at the monthly SPX chart with ADX.

This month shows the ADX turning up with the -DI line above the +DI line.  For the last 100 years that has been a great indicator of being in a secular bear market.  I have maintained all along I thought we had not crossed into secular bull territory despite so many on Wall Street proclaiming such.  While this month's bar has not closed yet ADX uses the price high and low in the calculations so even a massive rally into month end is unlikely to change it much.  For a little more bear market confirmation the 6 SMA has clearly crossed below the 20.  There is no way of telling how long this cyclical bear market will last or how low prices will go, but there is no denying we are in a bear market.


Wednesday, January 20, 2016

Daily update 1/20

Test of Oct. 2014 low.

SPX gapped down below our support arwa this morning and proceeded down to the next support.  That 1820 level came from Oct. 2014.  Mid day the market bounced strongly off the lows.  I heard someone say that might have been some short covering in front of the ECB meeting tomorrow.  I guess I need to pay more attention to those as we have seen rallies in front of those meetings before.  I did not realize they had a meeting tomorrow.  Such is the world we live in now.  The breadth was -96% early in the day which looked like climax selling kind of action.  It ended the day -73%.  New lows spiked up to 1358.  That is a selling climax kind of number.  Volume was heavy which could be climatic. 

The last several days shows ADX falling.  The downtrend has been weakening some.  It just looks like the market is trying to find support around here.  We will have to see if it accomplishes that or not.

There is a slight positive divergence in the red count.  Not enough to really get excited about, but as oversold as we are a bounce would not be surprising.  This could be the sign of one developing.

We have had a lot of big gaps up and down lately.  The overnight news flow is really driving the market crazy.  It also makes predicting the next day pretty tough.  The situation is that we are extremely oversold short term in an extremely important support zone.  That means there could be a tug of war between the bulls and bears.  So far the bulls have not been doing much tugging.  Maybe they will get a little more gumption now that we hit 1820.   The next support below here is 1730-1737, but I think that is minor.  The next really strong support below is 1552 to 1576 (the 2000 and 2007 highs).  I would be surprised if this bear market ends before we get there.  The ECB meeting tomorrow is a bit of a wild card tonight.  We will have to wait and see if there is any market impact.  I think the bulls have a chance to pull off a bounce.  Do they have the desire?


Tuesday, January 19, 2016

Daily update 1/19 More on Idustrial Production

Another big gap up, another sell off.

The gap up brought out sellers right away.  The dip buyers showed up a couple of times in the morning, but the sellers were relentless.  In the afternoon SPX broke down and tested the Aug. low again.  There the bulls came to the rescue and mounted enough of a rally to get SPX slightly positive at the close.  Breadth was -65% which is definitely out of line with price.  Money clearly moved into big cap stocks.  New highs were 7 while new lows came in very high at 693.  The more these rallies fade the weaker the dip buyers are likely to become.  At the moment SPX is holding support.

The futures sold off in the overnight session and are now testing today's intraday low.  The sellers show up every time the futures get up to the 20 SMA.  Not good for the bulls until that changes.

The bulls are trying to support SPX 1867.  However, they don't seem to have much enthusiasm so far.  Oil probably needs to stop going down for that to happen.  Of course oil is oversold as well so a bounce is not out of the question.  However, oversold can easily become more oversold.  The bears are in control for now.

I found this interesting chart in An Imminent Likelihood of Recession

Last week, following a long period of poor internals and weakening order surplus, we observed fresh declines in industrial production and retail sales. Industrial production has now also declined on a year-over-year basis. The weakness we presently observe is strongly associated with recession. The chart below (h/t Jeff Wilson) plots the cumulative number of month-over-month declines in Industrial Production during the preceding 12-month period, in data since 1919. Recessions are shaded. The current total of 10 (of a possible 12) month-over-month declines in Industrial Production has never been observed except in the context of a U.S. recession. Historically, as Dick Van Patten would say, eight is enough.

The manufacturing sector is clearly in recession.  How much longer can the broad economy keep growing?   We are dangerously close to a recession.


Friday, January 15, 2016

Daily update 1/15 Industrial production

I guess anybody going long yesterday and holding overnight was not very happy today.

We had a huge gap down and broke below the Aug. low during the trading session.  However, the bulls stepped up and rallied the market in the afternoon.  Breadth was -82% after being -90% the first half of the day.  However, the TRIN was only 1.68.  Early in the day it was up over 3.  It started to look like a possible volume climax with a bit of panic thrown in.  However by the end of the day it looked more like people buying the dip.  New highs were 7 again.  New lows increased dramatically to 917.    Had we closed near the lows with that very negative breadth and high TRIN it would have looked like a possible volume climax low.  Now we are left with something other then that.  Not sure what.

The futures started the day down big.  You can't see it here, but they ended the trading day higher then they opened.  Another sign this was not a true capitulation day. 

The bulls put up a fight today to hold the key support zone.  I am sure there are a lot of long only money managers with a vested interest in seeing this market hold up.  They are likely to make an attempt to save the day.  We will just have to let the bulls and bears fight it out and see who wins.  In the long run I believe we will break down, but is that a few days or a couple of weeks.  I don't know.  If oil keeps falling it will be very soon.  All eyes seem to be on oil.  I heard several people saying they don't see how people would be comfortable buying stocks until oil at least stabilizes.  I can't predict when that will happen.  I think I can predict a mini crash if we break down here.  Even though we are extremely oversold the biggest crashes in history came from already oversold conditions.  I cannot rule that out happening.  I also hear a lot of comments that it is too late to sell.  Better to wait for a bounce.  In general that is good advice because most of the time the market does bounce.  What if this time is different?  It happened in 29 and 87.  There is no way to assign odds to such an event.  We have a lot of sovereign wealth funds from commodity producing countries that have been investing in assets all around the world.  They have seen their country's revenue go to hell and now they are watching their investments collapse.  There is literally no telling how that might work out.  I can't predict a major rapid crash, but I can see how it could happen this year.  Be careful.

IP is now below all of last year.  This is not good.  Lets look at the YOY chart.

IP came in at -1.7% YOY.  It has never been that negative outside of a recession.  We will have to see if it gets revised higher next month.  If not recession odds will be rising dramatically.

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


Thursday, January 14, 2016

Daily update 1/14

Bulls strike back.

Finally got an oversold bounce.  SPX dipped down into the support zone this morning and rebounded strongly.  Breadth was +65%.  That was pretty good, but not really good enough to suggest a lasting bounce.  Volume increased so I would guess a lot of shorts covered.  New highs dropped down to 7.  Yes, 7.  New lows came in at 699.  Price is still stretched.  Will the bulls come back again to play?

The futures came within 1 point of the 20 SMA before selling off a bit at the end of the day.  At the moment we appear to be consolidating at lows.  This could continue to be a bit jiggly here.

The green count got pretty low.  The red count indicates we are clearly oversold.  The market can stay that way for days though.  At any rate the bulls would have some work to do to get control back.

I suspect yesterday had a lot to do with margin call selling.  However, the magnitude of the move down might have triggered even more margin calls.  I have no way of knowing that.  If that is the case then the sellers may come out tomorrow to sell into today's bounce (especially if we gap up).  If there was no big surge in margin calls the buy the dip crowd may show up thinking the bottom is in.  I suspect the odds are with the sellers showing up because they showed up a bit at the end of the day.  Pretty hard to predict in this volatility though. 

I cannot stress enough how important this test of the Aug. low is.  Making new lows more then six months from the high is usually not good for bulls.  A number of important indexes have already done so.  In this particular case the market was so straight up in 2013 there is little in the way of support below here.  As they say all hell could break lose.  My guess is a break down would end up sending SPX down to the area of the 2000 and 2007 tops (1550-70 area).  There should be good support there for a bounce.  Because this is such an important test I would think the bulls would put up a fight.  We could see some back and forth as the battle wages on.


Wednesday, January 13, 2016

Daily update 1/13 Good China article


They started selling the gap up right from the open.  Quite a smack down.  Breadth was -87%.  New highs were very low at 11.  New lows spiked up again to 746.  The TRIN refuses to show any panic.  It was merely 1.2 today.  We blew through the retrace zone.  This is a very important test of the Aug. low. 

The futures got close to the 20 SMA overnight.  The sellers wasted  no time once the market opened.  That was a very short lived bounce. 

Here is a look at the advance/decline line and the cumulative volume index.

Both breadth and volume market internals are showing a leading downside divergences.  While this does not guarantee SPX will break down it certainly makes the odds pretty high.

The VIX is only 25.  SPX is almost back to the Aug. low when the VIX was over 50 intraday and closed at 40.  Another sign of a lack of fear. 

I heard Art Cashin talking about rumors of forced liquidations going on today.  The price action sure looked like that was the case.  That always adds a level of uncertainty.  Are they done yet?  We have had many, many signs we are already in a bear market.  A number of important indexes have already gone through their Aug. lows.  It seems inevitable SPX joins the party.  However, we are very oversold in the short term so some bounce/consolidation may happen first.  I can't think of a single pullback this big in this bull market with such a complete lack of any kind of fear.  That is normally a good confirmation we are in a bear market. 

I found this a very interesting read on China.  China’s Strategy


Tuesday, January 12, 2016

Daily update 1/12 Sell everything?

The bulls managed another positive day.

While SPX closed positive the breadth was actually -52%.  New highs were a paltry 17 while new lows came in very high once again at 568.  SPY actually closed slightly below the open.  Not exactly a strong day.  The sellers started in about 9:45 and kept hitting the bids until about 2:30.  There was a late day rally that got them a little excited on TV.  Those kind of moves are not particularly reliable for futures market direction though. 

The futures sold off right after the 4 PM close.  They have come back a little bit now, but are still lower.  They closed back inside the lower Keltner channel.  Often that means they will contact the 20 SMA next.  At the moment that is at 1954, but is dropping fairly quickly.  The futures look like they are bounce mode.  Lets see if the bulls show up again.  They might have a little better luck tomorrow if they apply bullish pressure early in the day.

Despite the extreme short term oversold condition this bounce is not getting off to a strong start.  That does not mean it won't carry higher thouugh.  We are still in the oversold category.  With any luck we can get some up this week and create a good short setup.  The risk reward on new shorts here is pretty poor. 

This story is making the rounds, but in case you missed it.  RBS: 'Sell everything'

Writing in the UK Telegraph today Ambrose Evans-Pritchard says Andrew Roberts, and the interest rate strategy team at RBS, has advised clients to, “Sell everything except high-quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”

There have been warnings from many of the big banks lately.  That is on top of a number of billionaires warning also.  In Weighing Bull And Bear Cases After Ugly Week For Markets I found this little snippet.

Bullish Case
  • Stocks are now in oversold territory based on relative strength readings and other technical metrics.
  • The CBOE VIX Volatility Index (VIX) has reached a similar area (peak) where it was turned back in December 2015.
  • The CNN Fear and Greed Index is registering extreme fear, which I can also confirm in the majority of my conversations with individual investors.
  • Labor statistics show a continued strong pace of job growth and low unemployment readings.
  • Many major banks and asset managers have come out with recent warnings to underweight or exit U.S. stocks. It is rare to see this level of concern this close to the highs.
  • Pension and mutual fund assets are sitting on some of their highest cash levels in years.

The first three bullet points are really short term in nature and are irrelevant to a long term bullish case.  The employment data is a lagging indicator so it is not really useful in real time for investment  decisions.  The last two bullet points are rather odd to have in this list.  Is a lot of pension plan investment professionals sitting on extra cash really a bullish thing?  During the last two 50% crashes most pension funds were seriously hurt.  Maybe they are being more cautious this time.  Many retail investors complained to their money managers and the major brokerages that nobody warned them of trouble.  The market is clearly in terrible technical condition.   It really is obvious the market could be in very big trouble.  Is it out of the question that those who got yelled at for not warning before are now warning?  


Monday, January 11, 2016

Daily update 1/11 Empty Atlantic

A little more selling, then somebody big decided to cover shorts.  That caused a bit of a scramble.

That is the first sign of life in the bulls this year.  Volume increased a bit.  Breadth was -59% which is pretty negative considering SPX closed slightly green.  Most of the buying was in big cap stocks.  New highs slipped to 10 while new lows increased considerably again to 593.  On a closing basis the .786 retrace line is still holding. 

The last few bars are showing some support with lower tails.  However, it is too soon to tell if they will bounce significantly. 

While the market is certainly oversold short term there is no sign of panic.  Remember back in Aug. how the fear was so thick you could cut it with a knife.  People are heading to the exits in an orderly fashion for now.  That is bear market like action.  The market may bounce from here, but this does not look like it would make a lasting low to me.  I think we will need some sign of panic or high volume to tease bulls into loading up again.  SPX is almost 100 points from its 20 SMA.  There is lots of room to bounce without breaking the down trend.  Lets see if the bulls can generate a short squeeze rally.

This is really something notable.  Historic First: North Atlantic EMPTY of Cargo Ships in-transit - ALL anchored along coasts; none moving

Commerce between Europe and North America has literally come to a halt.  For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America.  All of them (hundreds) are either anchored offshore or in-port.  NOTHING is moving.
This has never happened before.  It is a horrific economic sign; proof that commerce is literally stopped.

I am sure traffic is normally lower this time of year, but none at all can't be good.  This is probably a result of those high inventories we have seen in the economic data.  Sales are not picking up so orders are falling.  This should cause inventories to drop which will be a negative for GDP.  Recession odds are still rising.


Friday, January 8, 2016

Daily update 1/8 Business inventories

More oversold.

Despite the gap up and both China and Europe up sellers came out in force.  Once again it was not panic selling, but consistent hitting the bids.  The TRIN spiked up a bit near the close to 1.94.  Price hit the .786 line which is the last potential support above 1885.  Volume actually declined which is not really good when trying to make a volume climax low.  That suggests any bounce next week will end up retesting today's low.  Breadth was -64%.  That is in the sweet spot for continuation.  Not low enough to suggest exhaustion and not high enough to be climactic.  New highs dropped once again to 19.  New lows increased a bit to 510.  I guess that last failed test of the 200 SMA was one tests too many for the market.

Other then price is extended there is not much more to say about this chart.

Lets take a look at the weekly ADX on SPY.

Many people were comparing the Aug. sell off to 2011.  After the initial spike in the -DI line in 2011 it made a series of lower highs and ADX turned down.  Contrast that to the current look.  The -DI line is spiking up again and that is causing the ADX to turn up once again.  In 2011 the 8 SMA (green line) was rising during the sell off in Nov. that created a higher low.  During the current pullback that MA has clearly turned down.  I believe the odds of a retest of the Aug. low being successful are not particularly high. 

While the market is oversold short term it is in runaway down mode.  Trying to predict where it will stop is a tough task.  Maybe we rally on Monday and maybe we crash more.  Next week is option expiration which is the most statistically bullish week of the month.  A bounce from here would certainly not be surprising.  However, today did not look like the kind of day likely to make a long term bottom.  I suspect any rally will end up retesting today's low. 

This is a well done chart from Inventory Overhang Looms Larger.

Houston we have a problem.  I have commented on this for many months now.  The problem is only getting worse.  That build in inventory added to GDP and made the economy look better then it truly is.  We will pay for that as production cuts come.  It does not look to me like sales are going to pick up even with lower energy prices.  That spells trouble, plain and simple.


Auto inventories have continued to build.  We saw how the rising inventories of the last few months hit the Chicago ISM number and sent it to recession like levels.  I don't think it is going to get back positive as long as inventories continue rise.  If you are looking to buy a car I think you can expect some deals in the months ahead.  However, this is really bad for the overall economy.

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



The information in this blog is provided for educational purposes only and is not to be construed as investment advice.