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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.


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