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Friday, February 5, 2016

Daily update 2/5 Credit standards tightening

Support held for today.

The bears started selling right from the start after yesterday's close at 1915 resistance.  Breadth was -75%.  New highs increased a bit to 60 while new lows increased a lot to 164.  The TRIN was a low 1.03.  No panic there.  SPX held the key support at 1875 I noted last night.  However, the COMPX and the R2000 indexes did not. 

The futures confirmed a break of the 20 SMA.  This is a micro downtrend, but they ended the day right at the lower Keltner channel.  That could be support at least temporarily.

The green count dropped below 50, but is still above the red count.  Another down day could easily give a negative crossover.

Neither of the breadth indicators have a negative crossover yet.  Another down day could change that.

Both the R2000 and the COMPX turned their short term trends down today.  However, SPX held key support.  Market internals are not confirming a down move yet.  Monday should be very interesting.  The bulls probably have one last chance to save this oversold bounce.  It seems likely to bounce strongly back towards 1915 resistance or break down strongly toward 1820.  What happens may be dependent on what is going on around the world before the open.  One would think down based on all the trends, but those Monday flip flops happen now and again.  The bulls have pulled a lot of rabbits out of their hats over the last few years.  There is still a slight chance they have another.

This is an interesting article even if the title is a bit misleading.  How The Fed Unwittingly Confirmed A Recession And A Default Cycle Are Now Inevitable

This is problematic because as DB's Jim Reid writes, two consecutive quarters of tightening standards "has never happened before without it signalling an eventual move into recession and a notable default cycle. Once we have 2 such quarters lending standards don't net loosen again until the start of the next cycle."

We may not be in a recession yet, but the clock is ticking.

The sector and market 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.