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Trend table status

Trend

SP-500

R2000

COMPX

Primary

? 3/31/20

?- 3/31/20

Up 5/29/20

Intermediate

?- 5/29/20

?- 5/29/20

?+ 5/29/20

Sub-Intermediate

Up 4/20/20

Up 4/22/20

Up 4/17/20

Short term

Up 5/20/20

Up 5/20/20

Up 5/20/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Tuesday, May 31, 2016

Daily update 5/31

Quiet end of May.


SPX tested Friday's high early in the day and sold off.  It got slightly below Friday's low and bounced back toward the middle of the daily range.  This is not exactly a hanging man bar with the upper wick being quite visible.  However, it is kind of similar and coming after a bounce to a short term overbought condition it might have similar meaning.  A close tomorrow below today's low would be a slight negative.  Breadth was +51% as the market was pretty mixed today.  New highs got over 100 to 105.  That is the best they have been on this bounce.  Still, that is only half of what they were back at the April high. 


The futures may be starting to roll over a bit.  The ADX has turned down indicating the uptrend has ended for now.  Whether we get consolidation to go higher or a reversal remains to be seen.


The green count slipped a bit today.  That would seem to confirm what the futures are saying that the uptrend is over for now and a consolidation/pullback phase has started.


The bull pressure chart is showing negative divergences in all time frames on this retest of the high.  There is a reasonable risk this is a double top forming here.

SPX tested above 2100 today, but found nothing but sellers.  That is easy to understand for me.  Nothing fundamentally has improved since the last time we were here.  One change is the FED is seriously talking about a rate hike at one of the next two meetings.  It seems to me it will be difficult for the market to break out on the upside.

Bob

Friday, May 27, 2016

Daily update 5/27 Factory orders

A little more up.  There has been zero selling pressure this week.  I heard them talking on CNBC about a lot of people headed to the Hamptons.  That got me wondering if the rally this week might have been caused by the big boys to get the market to the upper end of the trading range.  That would allow them to take next week off without having to worry about the market breaking down.  Just a thought. 


I cleaned up the daily chart a bit.  SPX closed just 3 points below the highest close for this rally.  The breadth was strong again at +61%.  New highs came in near yesterday's number at 84.  Being under 100 is not particularly good. 


The futures broke out above resistance this afternoon after most people were gone for the weekend.  Time will tell if that is a move that holds up.  Pretty straight up move huh. 


The green count reached minor overbought status today.  The last time it was this high SPX started a multi week pullback.  Lets look at the weekly version.


On the weekly chart the green count is still below 50 on this retest of the high.  Quite a divergence. 

Next week is likely to be thin and choppy with many big boys on the beach.  No telling what happens.

Yellen caused a bit of a dip intraday when she seemed to indicate things looked pretty good for a rate hike soon.  That sparked a lot of discussion whether a rate hike in June or July was priced into the market.  The general consensus was the rally this week indicated it was.  Based on what happened after the last hike I would say there is no way to know.  While the market did not sell off immediately after the hike a few weeks later SPX was down 10%.  The initial reaction might not be the final reaction.  I feel like the market is more vulnerable this time.  It is clear that a lot of people piled into the market after the Feb. low.  The rally off the Oct. low was more about short covering.  If there is a significant negative reaction now there are a lot more fresh longs to panic out.  The FED has set the table for a hike at one of the next two meetings.  Unless the markets tank or the economic data takes a serious dip in the mean time there will be a hike. 

To AAPL holders.  The news that Buffet's group was buying AAPL stock sparked a decent rally in all tech.  That news may actually be part of the reason for the general bounce we saw.  Buffet did not pick this stock.  The new chief investment officer did.  The same person that picked the only other tech stock Buffet has ever invested in IBM.  The last I heard Buffet was down more then $2 billion on IBM.  It looks to me the smart phone market is getting saturated and AAPL is a one trick pony at the moment.  While Buffet is piling in, long time AAPL holders Icahn and Tepper bailed out after making billions.  This stock is a hedge fund darling so there could easily be many more money managers wanting out.  They seem to follow Tepper like he is the magic man.  This stock may have seen its better days for quite a while.

Yesterday the latest factory order data came out way better then expected.  However, it was because of massive airplane orders.  Boeing screws up the data so much the headline number is useless for analysis.


A look at the consumer durable goods data shows it is still neg. YOY.  No real upturn here yet.  If you want to see that the government has trouble counting check out US Government Quietly Cuts Historical Capex Data By Billions Of Dollars

The market and sector status pages have been updated.  Have a great weekend and remember those that have fallen to preserve our freedom.

Bob

Thursday, May 26, 2016

Daily update 5/26 Earnings

Pause day.  Is it the pause that refreshes or reverses?


That was a very narrow range today.  I would say the market earned a rest.  Besides  nobody know what to do here anyway.  The breadth was slightly positive, but 56% of the volume was in down stocks.  That would indicate a touch of distribution.  The volume was light as most people were sitting around waiting to see what happens.  New highs dropped down considerably to 82.  Not exactly a sign of confidence by the bulls.


The resistance line held the market in check today.  The futures are still pretty extended from the 20 SMA.  Will the bulls be ready to push prices higher tomorrow?


The green count increased a tad today, but remains below overbought.

There is more room above for testing the April high.  However, at this time I don't see anything that suggests the market is getting ready to burst forth on the upside.  The FED is out shouting from the roof tops they might raise rates soon.  At the same time billionaire investors Gross, Gundlach, Soros, Icahn, and Druckenmiller are all shouting from the roof tops the &*^% may be about to hit the fan.  The economy is clearly struggling and could easily fall into a recession in the next few months without a rate hike.  Valuations are sky high and earnings are awful.  Who exactly is going to pile in here to push stock prices to new highs and beyond?

Interesting article on earnings. Mind The Gap: How The Bull Market Lost Sight Of Earnings

Since October 1, 2011, the S&P 500 has risen 82% on the heels of strong earnings growth.  Let’s start over. Since October 1, 2011, the S&P 500 has risen 82% on the heels of a 0.75% decline in earnings. The price to earnings ratio over that time period has risen 83%, with price gains contributing 99% to the increase.

So prices have risen substantially, while earnings have actually fallen. The chart below highlights the growing gap between earnings growth (or lack there of) and the S&P 500.
Growth of the S&P 500 P/E and its Components since 2011

That is not exactly the normal Wall Street line is it.  I have even seen some pundits proclaiming valuation is not high at all.  Yeah, and I have a great piece of land you might be interested in.

This one has some data on the latest quarter now that most earnings are in.  Earnings fall at fastest rate since the Great Recession

A full 98.4% of S&P 500 companies have now reported through early Thursday, and profit measured by earnings per share is down 7% from a year ago, according to FactSet. On the heels of a 3.2% decline in the fourth quarter, that marks the fourth straight quarter of year-over-year earnings declines, and it was the biggest drop since the third quarter of 2009.

Against a background of low oil prices, energy was the worst performer, with a staggering 108% decline for the quarter, according to FactSet. Many energy companies posted heavy losses for the quarter, several defaulted on their debt, and some were forced into bankruptcy. The materials subsector was second weakest with a 14.5 % decline, followed by the financial sector, which was down 12.2%.

There is a lot more information in that article.  That 12% drop in financial sector earnings is very important.  Credit standards have been tightening for a while now.  The drop in earnings suggest that will continue.  Tightening credit is usually the trigger for recessions.  The recession warning flag is still flying.  I see no data suggesting the need to take it down.  I will keep watching though.

An aggressive retest is a term I made up so maybe I should explain it a little.  After a big move there is a counter trend move that lasts long enough to call into question whether the prior trend is still in force.  Then there is a rapid move back to the prior support or resistance area.  A large part of the rapid move is caused by traders that were fading the prior trend getting stopped out.  Since traders are unsure whether the prior trend is still in force they are not all that excited about chasing price in the direction of the prior trend.   The indecision usually causes the market to stop and often reverse.  Simple psychology.

Bob

Wednesday, May 25, 2016

Daily update 5/25 Worse then we think?

Test of April high.


SPX got within 8 points of the rally high close from back in April.  That qualifies as a retest of that high whether we go any higher or not.  This is what I call an aggressive retest.  That is when the market moves very quickly to retest a prior high or low.  They are prone to failure.  SPX is also at the downward sloping upper channel line which might provide some resistance.  The breadth was +63% considerably lower then yesterday, but still reasonably strong.  New highs increased a bit to 103 which is not a particularly high number.  We had some days over 200 back at that April high, but a number of those were closed end funds.   I can't really say if the divergence in new highs here is meaningful or not.  The market is going to need to generate many more stocks making new highs to progress upwards from here though.  The potential head and shoulders top has morphed into a potential rare W top. 


Interestingly the futures progressed up to the red resistance line and stopped.  That line became clear resistance in the days after the April top was made.  Will it still provide stiff resistance?


Today got the green count above 50.  It is still well short of an overbought reading.  There is more room on the upside.


Aggressive retests have lots of divergences with them by their very nature.  The market goes so fast it does not have time to build up some momentum to continue the move.  The 10 DMA breadth lines are showing a sizable negative divergence similar to what developed in a positive way back in Feb.  Even if the market goes higher these lines will still show a divergence for a while.  This is just an example.  There are lots of them.  Divergences do not tell us if something is going to reverse, but they do indicate that a reversal could be sharp.  That is what happened back in Feb. with all the positive divergences we had.

SPX arrived at previous resistance on a fast move for no apparent fundamental reason.  Doesn't that make it seem like this move has the potential to be nothing but a fake out?  I guess we will see.  SPX falling back below the 5/10 high (2085) would be the first warning of potential trouble.  That would indicate the break out over that high failed.  That might bring out some sellers.  As I said last night a close back below the 50 DMA (2064) will certainly bring out many more sellers.  I think it will be tough sledding on the upside above 2100.

Today turned the short term trend up across the board.  I am a little suspicious there won't be much if any follow through.  We saw that many times last year.  A trend would just get established then the market would reverse.

I saw this interesting article in the USA Today.  Why U.S. companies aren't as rich as you think

U.S. companies are sitting on a record $1.8 trillion in cash and investments. One problem. They also are on the hook for $6.6 trillion in debt.

Talk about being cash rich but debt poor. U.S. companies only hold 28 cents in cash for every dollar they must repay in debt, the lowest cash-to-debt ratio since the financial crisis wound down in 2009. It's even uglier situation if you exclude the 1% richest companies, The other 99% of the less fortunate companies only have 15 cents in cash for every $1 in debt they owe. That is "the lowest we've seen in the past decade, including the years preceding the Great Recession," according to the report co-authored by Andrew Chang and David Tesher of S&P Global.

You might have thought it would be about companies not have as much cash as Wall street indicates.  Not the case.  It was all about the large amount of debt.  Now think about the fact that it is highly likely Apple is not the only company that Wall Street is lying about when it comes to cash.  I think it very likely there is much less cash especially in the so called richest 1% of companies.  That means that article is likely too optimistic.

This was another good article from the USA Today.  Confusion is name of game on Wall Street

Rant on:

Several states have filed law suits against the Federal government because of Pres. Obama's bathroom rules.  Here is what I don't understand.  Something as simple as what bathroom to use causes a huge firestorm on social media.  At the same time the POTUS can flat out lie to the American people and dead silence.  The same applies to media outlets that have "forgotten" to check the facts before spewing forth articles filled with misinformation or flat out lies.  Nothing on social media.  Sometimes I wonder if I actually live in a dictatorship and just don't know it.  I cannot trust the government or the media to tell me the truth.  A situation I find very disturbing.

Rant off:

Bob

Tuesday, May 24, 2016

Daily update 5/24

Bull explosion again.


Near as I could figure out there was no real reason Europe started the day with a buying frenzy.  That frenzy carried over to the U.S. open.  SPX closed above the 20 and 50 SMAs.  The breadth ended at +74% so it was a strong day.  Did this break the pattern I was talking about?  Maybe, but the last bounce died right after closing above  the 20 SMA.  The 20 SMA crossed below the 50 today.  A lot of people follow that pair as buy and sell signals.  If SPX falls back below the 50 SMA there could be considerably more selling pressure this time. 


The futures are back up to the upper channel line.  They also have blue bars so they are above the upper Bollinger band as well.  That was enough to stop the last bounce. 


The green count crossed above the red, but is still slightly below 50.  The bulls need to keep the upside pressure on.

It was kind of funny listening to the people on TV trying to explain why the market was up today.  Nobody came up with a satisfactory explanation.  We have seen big bounces on no fundamental data recently and they have all failed.  Will it be different this time?  I don't know the answer to that yet, but I think it will be quite bearish if this bounce also fails.  We may test the 5/10 high first though.

We have seen a lot of V bottoms and strong rallies after pullbacks in this bull market.  The one thing that always happened first was a deep short term oversold condition.  This bull market was unusually consistent in doing that.  Can this market rally strongly from a multi week pullback that did not generate a deep short term oversold condition?  It would be much easier to say yes if the fundamental data showed some improvement.  While the economic data in April looked somewhat better the global manufacturing data so far this month has actually taken a step backward. Japan was actually abysmal.  As SPX approaches the top of the range people will have to decide has anything really changed enough to hold on rather then take profits.  I believe the answer most people will come up with is no. 

Today turned the short term trends neutral across the board.  I have no idea what happens tomorrow.  If there is more up a test of the 5/10 high should be on tap.  If we get down instead the bounce could be over.  The bulls need to keep SPX above the 50 DMA.  A failed bounce here is a big negative.  I will detail why in a future post if the market rolls over again.

Bob

Monday, May 23, 2016

Daily update 5/23 My Scary Chart (article not my chart)

No upside follow through.


The bulls tried to rally the market pretty much all day.  They were busy buying dips, but nobody was interested in chasing price higher.  Some sellers came into the market late in the day.  Most likely because it became apparent there would be no upside follow through from Friday's bounce.  The breadth was slightly positive, but the volume was largely in down stocks.  New highs were low once again at 52.  New lows were also low at 13.  So far this bounce has fallen short of both the 20 and 50 SMAs.


The futures closed back below the 20 SMA, but have not confirmed the break yet.  Is that it for the bounce?


The red count slipped again today, but is still above the green.  It is now well away from getting an oversold reading.

According to the pattern in SPX since the high (3 down days and bounce) the bounce should have ended with today's down move.  If that pattern repeats we should see two more down days in a row.  SPX is barely above the key 2040 level.  Two down days would surely cause a serious break down.  While dip buyers have been rushing in to buy the down moves, the bulls have clearly been unwilling to chase price higher.  Until that changes we will go lower.  The FED is threatening to raise rates and there is a lack of an oversold condition.  Both of those things are probably putting a damper on buying enthusiasm.  If tomorrow is up we would have a pattern change, but I still doubt a bounce here goes very far.

This is an interesting article from an ex FED person.  My Scary Chart  There are several interesting charts in that article  Well worth a few minutes.

Bob

Friday, May 20, 2016

Daily update 5/20

The bear market is one year old now.  Not many people that I hear or read are saying we are in a bear.  However, it has been one year since SPX made its all time high.  It also made a new low more then 6 months from that high.  Not to mention we have an actual lower high and lower low.  All that fits my definition of a bear market.  The 20% rule Wall Street uses is idiotic.


The bulls showed up to continue yesterday's rally this morning.  However, the buying peaked before noon.  There was a surge in the last 30 minutes to make the day look better then it probably was.  The breadth was +76%.  They were buying a lot of stocks, but they were not pushing prices up much. New highs were a bit better then yesterday, but were only 44.  New lows dropped back considerably to 18.  That was likely because the market gapped up and never traded below the opening minutes all day.  SPX fell a couple of points short of making it up to the 50 DMA.  I guess the sellers didn't want to wait that long.


The futures hit the 50 SMA and stopped dead in their tracks.  There could be some resistance here.


The red count slipped back under 50, but is still well above the green count.  The bulls once again are keeping this indicator from getting a good over sold condition.  The bears are still in control for the moment.

The market clearly had support in this area this week.  That may have been because of the options that expired today.  I am not sure that support can be counted on next week.  Since the high the daily SPX chart shows mostly three days down then bounce.  The bounces have lasted 1-3 days.  The first bounce that lasts 4 days will change the pattern.  I don't know how long this bounce will last, but the first down day ended the other ones.  I don't see anything yet that looks like an important bottom.  A break down still seems like the higher odds scenario.

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

Bob

Thursday, May 19, 2016

Daily update 5/19

This market reminds of the story of the frog and the pot of water.  The market is going down so slow it is not scaring any bulls.  The problem is traders are a little smarter then frogs.  They will eventually realize the water is getting hot and then all jump out at the same time.


This is the lowest close since 3/28.  The water is definitely getting warmer.  SPX tested the April low and bounced back to close marginally above 2040.  The bulls are definitely supporting the market here.  The problem is rallies are getting sold.  The breadth was -67%.  New highs dropped way down to 25.  New lows increased to 40.  This is the first time new lows outnumbered new highs since coming off the Feb. low.  The market continues to weaken.


The futures hit the 200 SMA this morning and bounced the rest of the day.  Will the bears sell that bounce tomorrow or will the bulls show up to keep the bounce alive?


The red count remains over 50 and well below over sold levels.  The bears remain in control for now.


The short term red line is the highest it has been since the rally peaked.  The intermediate lines are separating and the long term lines are coming ever close together.  Nothing bullish going on in this chart yet.

The slow drip down in price is consistent with a bear market.  No worries.  Prices will come back.  Just stay the course.  In fact I heard a clip of Cramer on CNBC telling people just that.  Nothing to worry about.  Stay the course.  I have seen this rodeo a few times.  I know how it plays out.  The lack of fear when the market is going down prolongs the move down.  Then the panic ensues along with considerable losses.  SPX held key support today.  Whether that turns into a bounce in the morning is hard to say.  Until we get more over sold I would expect any bounce to be short lived.   

Interesting article with lots of charts.  3 Things: Everyone Gets A Trophy, Inflation & RCube

Nobody emailed me to explain to me how AAPL has $200 billion in cash.  I guess Wall Street has invented new math where addition and subtraction work differently then what I was taught.  They must have shared this new math with the media (since the media does not point out the error), but failed to enlighten the rest of us.  Maybe someday I will get lucky enough to learn the secret.  I would also point out that AAPL does not bother to mention they don't have that kind of cash either.  The truth does not matter these days.  It is much more important we spend oodles of time discussing what bathroom people should use.

Bob

Wednesday, May 18, 2016

Daily update 5/18 Industrial production

Sea change.


The FED speeches yesterday and the minutes from the last meeting today put June squarely on the table for a rate hike.  I believe that caught the markets by surprise.  The dollar reacted quite positively while commodities and stocks reacted negatively.  Last I heard FED funds futures had an extremely low chance of a hike in June.  That will surely change in the days ahead.  Lots of things may change.  SPX touched the neck line of the apparent head and shoulders pattern that has been developing and bounced.  It closed fractionally positive, but it was a weak day.  The breadth was -64%.  New highs dropped way down to 72 while new lows increased again to 36.  Today's bounce started when SPX tested the April low (2034).  That is key support.


The bulls are clearly supporting the market.  However, the bears keep selling rallies.  I can't imagine that will change with the FED talking about a rate hike in June.  A break down still seems likely.


The red count crossed above 50.  The bears getting a little more serious now.  Tomorrow will be interesting with the market just above key support.  Break or bounce time.

The latest IP data showed a bump up in April.


The question is whether that pop will be sustained or not.  If you notice the uptrend back in 2012-15 there were periodic dips, but no downside follow through.  We have already seen a couple of pops that fizzled.  Unless this data gets revised much lower it is unlikely we entered into a recession in April.  That is about all I can say for now.  If IP can establish an uptrend then the worst might be over for now.  I will be watching for that.

Bob

Tuesday, May 17, 2016

Daily update 5/17 AAPL cash

Splat.


SPX completely retraced yesterday's pop this afternoon.  The selling stopped 1 point above the 5/6 low.  There was a bit of a bounce late in the day, but it still closed below the 50 SMA.  Volume increased over yesterday.  It looks like conviction is with the bears.  The breadth was -63%.  The bulls tried early in the day to rally the troops after a gap down.  However, the bears won out mid day.  New highs dropped down to 102.  New lows increased some to 32.  Same result as the last big up day.  The selling into strength continues.


The futures have another confirmed break below the 20 SMA.  That was a pretty sound rejection of the 50 and 100 MAs.  Will support be able to hold again?


The red line crossed above again.  This is a bit of an odd pattern.  This indicator does not get a braided look like this very often.  The green count dropped to a new low for this pullback though.  That can't be good.  Still nothing close to an over sold condition.

The bulls are putting up a fight here for sure.  However, their actions are keeping the market from developing an oversold condition that might entice stronger buying.  A break down of the daily head and shoulders pattern seems inevitable to me.  A measured move of that pattern gets SPX down around 1960-70 area.  That would be well below the 200 DMA.  While SPX closed below the 50 DMA again, we still do not have a confirmed break.  I don't know if the bulls will try again tomorrow or not.  I guess we can't rule it out yet.

Some days I can't quite wrap my head around the number of lies I hear on a daily basis in the media.  Here is a look at Apple's balance shee.  I took finance in college and I guess modern finance is completely different.  Could some kind reader please show me how this balance sheet says Apple has $200 billion in cash.  Based on what I learned I would say about $41.5 billion in cash.  However, that is not even close to the figure Wall Street keeps shouting from the tree tops.  It looks like pure fiction to me.  I find it a little odd the total liabilities line has more then doubled in the last two years.   Lying seems to be a general course of action in today's world.  I find it quite disturbing myself.

Bob

Apple Inc. (AAPL)


Balance Sheet
Period EndingSep 26, 2015Sep 27, 2014Sep 28, 2013

Assets
Current Assets

Cash And Cash Equivalents21,120,000  13,844,000  14,259,000  

Short Term Investments20,481,000  11,233,000  26,287,000  

Net Receivables35,889,000  31,537,000  24,094,000  

Inventory2,349,000  2,111,000  1,764,000  

Other Current Assets9,539,000  9,806,000  6,882,000  

Total Current Assets 89,378,000   68,531,000   73,286,000  
Long Term Investments164,065,000  130,162,000  106,215,000  
Property Plant and Equipment22,471,000  20,624,000  16,597,000  
Goodwill5,116,000  4,616,000  1,577,000  
Intangible Assets3,893,000  4,142,000  4,179,000  
Accumulated Amortization-  -  -  
Other Assets5,556,000  3,764,000  5,146,000  
Deferred Long Term Asset Charges-  -  -  

Total Assets 290,479,000   231,839,000   207,000,000  

Liabilities
Current Liabilities

Accounts Payable60,671,000  48,649,000  36,223,000  

Short/Current Long Term Debt10,999,000  6,308,000  -  

Other Current Liabilities8,940,000  8,491,000  7,435,000  

Total Current Liabilities 80,610,000   63,448,000   43,658,000  
Long Term Debt53,463,000  28,987,000  16,960,000  
Other Liabilities33,427,000  24,826,000  20,208,000  
Deferred Long Term Liability Charges3,624,000  3,031,000  2,625,000  
Minority Interest-  -  -  
Negative Goodwill-  -  -  

Total Liabilities 171,124,000   120,292,000   83,451,000  

Stockholders' Equity
Misc Stocks Options Warrants-  -  -  
Redeemable Preferred Stock-  -  -  
Preferred Stock-  -  -  
Common Stock27,416,000  23,313,000  19,764,000  
Retained Earnings92,284,000  87,152,000  104,256,000  
Treasury Stock-  -  -  
Capital Surplus-  -  -  
Other Stockholder Equity(345,000)1,082,000  (471,000)

Total Stockholder Equity 119,355,000   111,547,000   123,549,000  

Net Tangible Assets 110,346,000   102,789,000   117,793,000  

Monday, May 16, 2016

Daily uipdate 5/16

Was that a one day wonder on the upside?


The internals were strong like the 5/10 upside explosion.  Volume was similarly light.  The breadth was +72%.  New highs increased to 164.  New lows decreased some to 22.  There was a slight sell off in the last hour that caused SPX to close slightly below Friday's high.  The short term down trend remains intact for now.


The futures crossed above the 50 and 100 SMAs during the day, but the late day selloff put them back below them.  They are still above the 20, but do not have a confirmed break.


The green count crossed slightly above the red line again today.  This chart is back to neutral.

SPX is in a multi week decline.  We have yet to get a good oversold condition.  It would be rare for a decline this long to end without one (remember we are in a primary down trend).  The dip buyers keep coming to the rescue.  They could end up being bear fuel.  That type of action is what prolongs down moves.  People rush in too soon only to get stopped out and add to the selling pressure.  If the bulls can put together a second strong day then maybe we can talk about more upside.

The two main drivers of today's buying spree seemed to be oil up and reports of Buffet and Cooperman buying Apple stock last quarter.  While I do not know much of anything about Cooperman's savvy in tech stocks I know Buffet has always avoided them.  The only other purchase I am aware of was IBM.  It has done poorly since he bought it even though he hypes it up every chance he gets.  Maybe AAPL will work out better for him.  I would not be a buyer myself just because Buffet is.  Icahn and David Tepper just sold all their shares after riding it up for huge gains.  There are thousands of hedge funds that own lots of AAPL stock and might be looking to get out themselves.  It just looks like it is way to early for value investing in AAPL.  At the same time momentum has clearly been broken.  I think AAPL is better for trading then investing at this point in time.

Bob

Friday, May 13, 2016

Daily update 5/13

Slip sliding away.


SPX closed below the 50 SMA.  It is still above the 5/6 low, but made a new low close for the current pullback.  The breadth was -65% so the selling was fairly broad based.  New highs slipped some more to 106.  New lows increased a bit to 42.  The transports followed through on yesterday's break down.  Retail was also hit hard despite the beat in retail sales this morning. 


The futures have a confirmed break of the 20 SMA.  Down should be resuming.


The red count ticked up, but is still below 50.  Looks like resumption of the down move.


Both breadth indicators are negative. 

SPX resumed the short term downtrend today.  Market internals confirm the bears are in control.  I think the next target down is the 200 DMA (2012). 

I think the transports breaking down and the retailers missing earnings and warning about the future are scaring some investors.  They should be scared.  Two things that are consistent when a recession takes hold is the industrial production drops precipitously and initial jobless claims start rising sharply.  Last month the IP dropped considerably.  The last couple of weeks we have seen initial claims rising pretty quickly.  It is too soon to tell if these data points are aberrations or are developing trends.  However, this is exactly what happens in a recession.  Now the retailers are seeing problems.  The economy looks like it is worsening to me.  Last month I issued a recession warning on the IP.  I did not think we were in recession yet.  I don't think I can say that now.  I can't say we are in recession, but we could be.  A recession starting around now will be like a black swan event.  I have not heard anybody besides John Hussman even remotely suggest we are close to recession.  ECRI may be scared to say anything with the way they blew the 2011-12 time period.  I can say with confidence the economy is headed in the wrong direction with no sign of an impending turn around.

Bob

Thursday, May 12, 2016

Daily update 5/12 A High-ly Unusual Breadth Milestone

The bulls gave it a try.


We started with a big gap up which the bears sold into right after the open.  SPX tumbled down to the 50 SMA where the selling magically stopped.  The bulls stepped in and took SPX off its lows and back into positive territory for the day.  However, the bears stepped in and pushed it back into the red.  The breadth was only slightly negative.  New highs were about the same as yesterday at 131.  New lows popped up considerably to 38.  That is the highest the lows have been since coming off the Feb. low.  The bears grip is tightening just a bit.


The futures dipped below the 20 SMA, but failed to stay there.  The bulls did enough to keep the market from collapsing today.  Will the futures launch from this MA or end up breaking down?


Despite being a down day the green count picked up a bit and the red count dipped.  This chart is neutral now.


The short term lines are still negative.  The intermediate lines have a negative cross tonight.  That increases the odds we have seen the peak of this rally. 

This may be the most important thing that happened today.


The transports had a very noticeable positive divergence with SPX back in Feb.  Starting in March they had a noticeable negative divergence as it formed a double top.  Today it closed below the middle low consummating the top structure.  I think this increases the odds the head and shoulders top we are watching in SPX will play out.  The bulls need this to rebound tomorrow.

We keep getting more clues the rally in SPX has peaked.  I think it is only a matter of time before it tests the 200 DMA.  The COMPX and R2000 would be well below their 200s by that time.  As this earnings season winds down it does not appear to have inspired the bulls about the future.  The path of least resistance still appears to be down.

I have mentioned the new high data recently and that I do not really understand exactly what it means.  A reader (tnx satch) pointed me to this interesting article.  Here is a look at similar instances in the past.  A High-ly Unusual Breadth Milestone

Bob

Wednesday, May 11, 2016

Daily update 5/11

About face.


SPY closed below yesterday's low so everybody that piled in and held today is underwater.  The breadth was -63%.  New highs fell off a lot to 139.  New lows picked up some to 24.  That potential head and shoulders pattern is looming large now.  The retail sector had a very tough day.  The consumer isn't coming through.  That was a pretty stiff rejection at the 20 SMA.  This looks like it wants to test the recent low. 


The futures were turned back at the 50 SMA.  The bulls need them to hold the 20 SMA.  Bears want to see a break. 


The red count held steady, but the green count dipped a bit.  The bears have a slight edge.

Today was a big disappointment for the bulls.  Yesterday the rally was on nothing really.  Not much of a surprise it didn't last.  Earnings were the main driver today.  Retail stocks got hammered and DIS was also a problem.  Up on nothing yesterday, down on fundamentals today.  The path of least resistance still looks down to me.  The bulls have one chance tomorrow to salvage the bounce.  Otherwise SPX should be headed for a test of the recent low.

Stanly Druckenmiller gave a presentation at an investor conference the other day telling people to get out of stocks and own gold.  He is a smart guy and a lot of people listen to him.  I saw a report saying Icahn is now majorly short.  I am not the only bear out there afterall.  I like being in the company of smart billionaire investors myself. 

Bob


Important

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