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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.


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