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Monday, April 18, 2016

Daily update 4/18 Hoisington Quarterly Review and Outlook – 1Q2016


SPX poked through the downtrend line.  Another day of light volume.  Breadth was once again strong at +69%.  New highs increased to 148 which is still below the +200 level we had a few weeks ago.  This was the upper target I had for this rally.  I guess we will see if it stops around here.

Oil and S&P futures were down in the night when there was no agreement at Doha (how could anybody see that coming).  I heard lots of calls for oil to sell off if there was no agreement.  However, the market had other intentions.  That seemed to confuse a lot of people today.  One factor might have been a strike in Kuwait that took production offline.  With oil rallying despite what seemed to be bad fundamental news stock bulls were emboldened to do some buying of their own.  Notice the futures held the 20 SMA overnight and launched off that this morning. 

The green count is approaching overbought. 

I have seen a lot of comments that the NYSE advance/decline line made a new high indicating the bull is back on.  Here is a look at the common stock only NYSE a/d line.

I believe this is the one that counts.  It still has quite a ways to go.  In fact it is so far away that SPX would most likely make a new high before it would. 

Wall Street is looking in every nook and cranny to find reasons why you should be buying stocks.  The truth is that earnings are contracting and the economy is sucking wind and may be headed for a recession in the near future.  I don't believe this rally is predicting good times are just ahead.  Now that SPX touched the downtrend line it may be tougher to gain altitude.  There has been no selling pressure on this rally at all.  It is completely untested.  Longer term investors that bought in expecting a break out on the upside have not had any stress.  I think the odds are extremely low the market just keeps going up from here.  It is when the market gets going a little on the downside that we will find out whether those bulls decide to hold or fold.  That is when the fundamental data will matter.

The short term trend turned back up across the board.  I have no idea if there is more upside to come or not.  Now that the oil shorts were flushed traders may have a change of heart in the next day or two.  Especially if the strike gets resolved soon.  We will see if the bulls want to keep on pushing it.

This is an interesting read.  Hoisington Quarterly Review and Outlook – 1Q2016


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