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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.


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