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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.


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