Daily update 6/30

I think we finally found some resistance.  SPY got up to the 6/24 gap close level and stopped for the last couple hours of the day.  There was a late day push to get through that resistance, but as we know those last minute moves are not reliable indicators of future direction.

What a boomerang move.  SPX closed less then 2 points below the key 2100 level.  That is quite a three day panic buying spree.  Breadth was strong once again at +77%.  New highs soared to 396.  As I suspected there were a number of the beaten down commodity stocks making new 52 week highs, but not new all time highs.  Volume was above average all three days.  So in the long run who is right, the sellers or the buyers?

The futures ran right up to the upper channel line.  Quite the chart.

The green count crossed above the red line today, but remains below 50.  Considering SPX is back to key resistance at 2100 this could be indicating a serious negative divergence.

All three bull pressure lines have positive crosses, but all three are just barely there.  Like the red/green count chart this might be showing some significant negative divergences.

The NYSE bullish percent chart shows the technical damage on the downdraft was not undone on this rally.  This is the weakest this chart has been with SPX at 2100 all year.

After the brexit vote stocks tanked.  On the other hand gold, bonds, and the dollar all rallied.  Of those four assets only stocks retraced the move.  While the pundits are out screaming brexit is no big deal I don't think it is safe to assume that.  Shouldn't some of those other assets have retraced a good bit of the move as well?  Here we sit with SPX just shy of 2100 and market internals are the weakest they have been all year with SPX in this area.  If the market can break out to new highs from this condition I would consider it a miracle.

In recent years the last day of the month has been down most of the time.  Today it was up strong.  In either case the first day of the next month often goes the other direction.  If it follows that pattern tomorrow will be down.  The last three days have seen very small intraday pullbacks as sellers were not aggressive at all.  With the SPY gap closed sellers may come out of the wood work.

SPX turned its short term trend to neutral, but the other indexes did not quite make it.

Bob

Daily update 6/29

This may be a little too far too fast.  I guess we will see.

SPX came within a few points of the 50 and 100 SMAs.  The breadth was strong again at +82%.  New highs spiked up to 302.  That is the highest since Jan. 2015.  It was just above the 299 level reached in March of 2015.  It would be interesting to know how many of those were common stocks at all time highs.  I think a lot of commodity stocks have been beaten down for so long some of them are making 52 week highs now, but are still well off all time highs.  There were probably a lot of closed end funds as well.  If SPX breaks out to new highs and keeps going this will be looked back on as a bullish sign.  If the market fails again it will be forgotten.  I don't see any sign the clouds that have kept the market in check for more then a year are clearing.  One could say the brexit result is yet another cloud.  I suspect it will be another failure.

The futures were just above the 200 SMA at the 4 PM close.  They shot up again after the close and ended the day above the 50 and 100 SMAs.  There is no confirmation of a break of any of those MAs yet.  I have no idea what the excitement was about. 

The red count has come back to neutral so the oversold condition has been worked off.  The bulls have more work to do to get the market in a positive state though.

A lot of people piled in before the brexit vote expecting a remain vote and the markets would rejoice.  They woke up to a huge gap down.  If that was not bad enough they woke up the next day to another big gap down.  I sense there was a reluctance to sell into the weakness both days.  I believe the overnight pumps in the futures are an attempt to get price back up near where it was so they can exit long positions.  It does not take all that much volume to move the futures overnight.  Especially if a lot of people are in the same boat and want to see prices move in their desired direction.  SPY got back to the 6/24 high.  Sometimes the edges of those gaps can be stiff resistance.  They have moved the futures on up into the gap overnight.  I have no idea where they will be in the morning.  I suspect a lot of the buying the last two days was short covering, but there is no way to prove that.  I don't know exactly where the trapped longs will start selling again.  Somewhere between here and the high the day before the brexit vote.  I think the odds are pretty good there will be many sellers.  I guess we will see.

Bob

Daily update 6/28

Bulls show up right on cue.

SPX closes back above the 200 SMA.  Volume dropped off considerably.  Breadth was a strong +81%,  New highs came in at 183.  I am not sure how meaningful that is though with all the closed end funds making highs.  I wonder how long the bounce lasts.  Contact with the 20 SMA could be in the works.

 
The futures are up a bit as I write this.  With any luck the bounce will continue tomorrow.  A bounce back to the 200 SMA would take another 30 points.  That could be considerable resistance.

The red count is still in the oversold zone.  A continuation of the bounce seems likely.

There was a lot of technical damage done in this sell off, but there was no panic.  Normally that means at least a retest of the low is in order.  However, the bulls have been pushing SPX back to 2100 after every pullback for the last 16 months.  I don't know if we can rule that out.  This market has been very good at closing downside gaps in SPY.  That would be a trip up to 209.27 this time.  How far up we go depends a lot on whether investor psychology has changed or not.  Since the Feb. low investors have been of the mindset that everything is fine.  Q2 will be the earnings trough and it will be onward and upward.  I think it is possible that psychology might have changed.  However, we can't know that yet.  How this bounce plays out should tell us a lot.

Bob

Daily update 6/27

More non panic selling.  This feels a lot different then last Aug.  People were scared to death.  Now everybody seems to be pretty calm.  That is not usually a good thing for bulls.

That is a lot of volume.  SPX closed below the 200 SMA.  Breadth was -79%.  New lows spiked up to 140.  Quite a few stocks must be breaking down again.  Not good for bulls.  That looks like consummation of a top to me.  SPX is back to early March price levels.  There are a lot of buyers underwater.  While people are getting on TV and saying not to panic their offices are probably trying to unload as much stock as they can. 

Quite a chart.  That looks oversold to me.  Whether its enough for a bounce remains to be seen.

The red count is clearly in the oversold area now. 

The long term bull pressure lines got a slight negative cross today.  Selling pressure is starting to mount. 

While SPX was down 1.8% the VIX was oddly down 7.4%.  There was no panic put buying to hedge long positions for sure.  I wonder if people were loading up shorts and buying calls to hedge them.  That would be bear market behavior. 

SPX closed below the 200 DMA, but we do not have a confirmed break yet.  The market may be oversold enough for a bounce.  Will the bulls make a stand here for the 200.  Of course they may all be too busy trying to get out of Dodge at the moment.  There was a lot of talk about recession worries in Europe today.  There is ample data showing people should have already been worried before the brexit vote.  While the vote may get blamed if things fall apart in Europe the truth is European stock markets were already 15-25% off their highs.  The vote did not cause that.  However, it is possible the vote has now woken investors up to the risks of a global recession.  They have been very busy ignoring all risks the last several months.  We have an oversold condition and a good place to bounce from.  Lets see if any bulls take the bait.  I don't see anything here that looks like an important bottom.  I would expect any bounce to eventually fail.

Bob

Daily update 6/24

Devastating day for the bulls.  I will show what I mean.

While SPX is above my support line it was the first close below 2040 since 3/28.  It has also formed another head and shoulders top and is working on a break of the neckline.  Remember we had a failed head and shoulders pattern back in May.  All the market could do was form another one.  That seems unlikely to be a good thing.  Breadth was -82%.  New highs were strong at 155.  It is likely a lot of those were closed end funds and gold miners.  New lows came in at 54, the highest since back in Feb.  I think the holding of support is only temporary.

That is some futures chart huh.  Gotta buy, gotta buy, gotta buy.  Oh no, they voted to exit.  Gotta sell, gotta sell, gotta sell.  Like I said, the polls were way to close to call and within the margin of error.  Right now there is a bunch of people trapped long.  There was a reluctance to sell into the weakness so they will be looking to exit on strength.  No doubt in my mind.

The red count sky rocketed today as you can imagine.  It almost made it to oversold.  The bears are in control here.  Lets look at the weekly chart.

The red count crossed above the green, but is still short of 50.  The first red cross was enough to end the rally off the Oct. low last year.  This likely means the rally of the Feb. low is over.

Both the short and intermediate lines had a negative cross today.  The long term lines are getting ever closer together.  It won't take much to do the job now.

The weekly SPX chart shows an outside reversal bar to the downside.  This kind of bar at prior resistance is likely a very bearish signal. 

There is a lot of technical evidence the rally from the Feb. low is probably over.  Remember the VIX crossed below 20 before SPX crossed above the 200 DMA.  That signal has always meant lower lows were coming.  I see no reason for this instance to be any different.  People piled into this market after the Feb. low on the thesis that Q2 would be the trough in earnings.  The brexit vote calls that into question now.  This could end up being pretty bullish for the dollar.  I think it was bottoming anyway.  Lets look at the daily chart again.

After tapping the 500 SMA a few times it launched today.  It does not like being below 94.  I also read some comments about a global dollar shortage today.  Makes sense to me.  I have talked about the built in dollar demand due to the foreign dollar denominated debt.  This is probably going to start working its way to new highs now.

I heard numerous comments on TV today about the lack of panic.  They all talked like that was a good thing.  I have been around quite a while now and I have yet to see a 3% down day on no panic a good thing.  My guess is there lots of panic in money managers that piled into stocks this year expecting new highs.  I know for a fact they are overweight Europe which got rocked today of course. 

That brings up the potential for margin calls.  You know what they say about that right.  Sell what you can, not what you have to.  In this case that could be U.S. equities, but we will see.

There may have been no panic evident in the market, but I can assure you behind the scenes there are many money managers in full panic mode now.  It is time to sell rallies.  Expect higher volatility and lower prices to come.  I expect central banks and governments will be working overtime this weekend to calm the markets.  Hopefully that leads to a bounce early next week.  Any strength should be used to sell, hedge, or flat out short if you do that.  I think it extremely unlikely this is a one day event.

Today turned the short term trends down across the board.  Unusual pattern.

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

Bob

Daily update 6/23

Finally the vote is over.  SPX had a big ramp up at the end of the day.  Markets clearly expect the remain crowd to win.  The question is really by how much.  A close vote will hang over Britain like a cloud.  I heard them say on CNBC that polling companies told them some hedge funds had hired them to do exit polls.  There were no publicly available exit poll results.  That certainly seems fair to me!  I am wondering if the late day ramp in the U.S. was because the hedge funds got enough data to suggest a remain vote, but European markets were already closed.  While markets sometimes get things wrong this one would be a colossal error if the exit crowd wins.

Here we are with another test of the highs.  Breadth was +80%.  People were piling in for sure.  New highs popped up to 206.  When breadth is this strong near highs there is always a risk of a buying climax.  You can't really tell until afterwards though.  If the market ends up reversing hard in the next few days that is what it was.

The futures kept on running another 15 points after the 4 PM close.  Very strange move.  Certainly smells like insider info.  In after hours trading they have given that big move all back.  Very strange indeed.

The green count is almost back to overbought, but not quite.  There is more room here.

As I write this at 8 PM the remain vote is winning 52.8 to 47.2 with 1.6% of precincts reporting.  That is probably enough to indicate remain will win as expected, but by what margin.  With SPX testing the highs there is probably some risk of a sell the news event tomorrow.  I will just be glad to get on with things and see what the market plans to do.

The ramp into the close turned the short term trends in SPX and R2000 up and COMPX to neutral.

Addendum:  At 8:30 with 2.6% leave is ahead 51.4 to 48.6%.  That probably explains why the futures gave back all the gains after hours.  If that result holds through the night tomorrow will be very interesting.

Bob

Daily update 6/22

Yet another poll.

SPX was sitting just under the key 2100 level consolidating.  I was real curious to see what happened.  Suddenly it spiked to the downside.  I found out later there was yet another brexit poll and this one came in 45% exit, 44% remain.  That was enough to get the market to close in the red.  Today left an ugly looking candle pattern over the last few days, but today's candle might not really be reliable.  I really would  have liked to have known if SPX would have been rejected at 2100 again or not on its own.  Oh well.  The breadth was -53% after being up +66% at the peak of the day.  New highs were close to yesterday at 117. 

As I write this the futures are up about 10 points from the 4 PM close.  I don't know why.  Probably yet another poll.  At any rate they are currently above the 50 SMA they have been trapped under.  No confirmation of a break yet. 

 The green count dipped a bit today.  The bulls still have not reached out and grabbed the power. 

The short term bull pressure lines have a positive cross now.  That is one positive for the bulls. 

It is not hard to imagine the market retraces the news induced move down and SPX tests 2100 tomorrow.  It may be a tough nut to crack with the brexit vote going on.  We won't know the results until well after the U.S. close.  Downside follow through tomorrow will leave a pretty bearish looking daily SPX chart.  I would not expect that without some significant negative news.

I have no idea how the vote is going to go.  The polls are close.  A close vote to stay will not eliminate the talk.  The stay camp really needs a big victory and that just does not seem to be in the cards.  I predict Britain will eventually leave the EU.  The ECB is killing the EU economy with negative rates and it is only a matter of time before that is generally recognized.  I think plenty of people are already figuring it out.  Once the European economy crumbles they will not be able to threaten voters with the economic threat they are using now.  There will be no justification to stay.  Britain is a proud country and accepting all the crap from the EU is probably a tough pill to swallow.  I can't blame them a bit.  The U.S. would not do well in that situation either.  It is not a question of if they will leave, but when.

Bob

Daily update 6/21 Tightening CRE lending standards

Wait mode.  This is going to be short.

The futures are stuck between the 20 and 50 MAs.  They are tightening up for a big move one way or the other.

The green count got a positive cross today.  This signifies the oversold condition has now been completely eliminated.  Now it is a question of whether the bulls want to show up and push prices higher or not.

With the big brexit vote on Thursday it is possible tomorrow is another do nothing day.  It looks like the markets have discounted a remain vote so the only big move would likely be down in case of an exit vote.  With SPX near the upper end of the trading range it is possible the vote itself is a sell the news event regardless of the outcome.  I guess we will see.  The vote can't get here soon enough for me.

I ran across this interesting chart.

Source

There are only 3 other times in the 26 years of data that standards tightened this much.  All three instances were associated with recessions.  This does not mean a recession is imminent.  Just that in the next year or so a recession is high odds.

Bob

Daily update 6/20 Global bear markets.

Hmm.

Global stocks started out with big upside gaps especially in Europe.  After some initial short covering that drove SPX up to 2100 it was downhill all day.  The sellers came out on every rally attempt and sent SPX to new lows.  The breadth was strong all day starting out at +83% and ending at +74%.  The big boys were busy hitting the bids all day.  No panic though.  New highs came in at 176 which was up considerably from the last few days. 

The futures hit the upper channel line and turned back down.  They ended the day back below the 50 SMA after being above it early on.  This may end up being a rejection at the 50, but it is too soon to tell.  We have a confirmed upside break of the 20.  Mixed signals at the moment on this chart.

The red count dropped precipitously, but the green count only came up a little.  Bears still have the edge on this chart.

Today's bounce alleviated the slight oversold condition we had.  It didn'\t do much to make a bullish case here.  I find the rejection at 2100 pretty interesting.  At the time the VIX was well over 16 so unlike other times when we hit 2100 a low VIX was not the problem.  Either something besides brexit is bothering U.S. stocks or investors here are just not as sure about the vote as they are in Europe.  I can understand that.  The polls may show bremain with a slight lead, but most polls I saw were within the margin of error.  It seems too close to call to me even if currency markets seem sure.  Markets have been known to get things wrong sometimes so we will just have to wait and see what happens. 

Yellen testifies in front of the Senate tomorrow.  Maybe she says something that moves the market.  People did not take the last announcement and talk very well.  She might try to patch things up a bit.  I think we are in limbo here until after the brexit vote.  I suspect people will be hesitant to put on big positions either way in front of that.

Rant on:
My brain just works completely different then most people. I usually have the TV on CNBC during the day so I can hear what other people think.  While listening to the idiotic rantings of Cramer can be tough they used to have some people that really do have a brain.  Lately it seems like those people are in short supply.  They have been parading a lot of new faces lately and I hate to tell them, but they seem to have no clue what they are talking about.  Has Wall Street been taken over by a bunch of idiots?  They had some guy on there today talking about $80 oil.  He said that while global oil supplies are still building he expects drawdowns in the 2nd half of the year.  I guess he has never noticed the decades of data that show we are going through peak usage season right now and the 2nd half of the year tends to see somewhat lower demand.  Then he starts talking about oil needing to get over $70 before supply will start to increase.  I guess he has not seen any of the research that shows there is plenty of additional oil that can be pumped at $50 for profit.  Last week showed the rig count picking up again.  I think that will continue since producers have been able to sell quite a few futures to hedge production.  If oil is not lower then it is now over the next several months it will be pretty shocking to me.  Come on CNBC.  Get some people on that have a clue.
Rant off:

This is an interesting graphic.  Notice where Europe and Japan are.

Not a pretty picture globally.

Bob

Daily update 6/17

Interesting day.

Yesterday's low was formed by buyers showing up rather then selling being exhausted.  That was clear today as the sellers were back out.  While SPX made a new closing low for this pullback it ended the day in the upper half of the daily range and never got anywhere near yesterday's low.  The breadth was positive all day and ended at +58%.  Today was quarterly option expiration and index rebalancing so there were crosscurrents all day long.  The bulls are certainly trying to support the market here.  The trouble is that it may all be option related.  If that is the case the support went away at the close today. 

The bulls were unable to follow through on yesterday's reversal.  However, there was so much stuff happening at this option expiration that may not matter.  What we do know is that the futures are trying hard to hold above the 200 SMA.  That is quite a few bars now so early next week should be break or bounce.

The red count reached right to the edge of an oversold condition.  This is the highest reading since back in Feb. at the low.  That may be a bad sign for the rally overall, but could give the bulls a lift in the short term.  Lets take a look at the weekly chart.

The green count is still above the red, but well below 50.  The lines are getting so close a negative crossover would be easy now.  A negative cross does not necessarily mean an imminent collapse.  However, since the May high negative crosses have meant the rally high was in and were eventually followed by dramatic sell offs.  I don't see why it would be different this time.  The bulls need to get buying and get SPX to new highs.

The market clearly had support this week, but it might have been option related.  Meanwhile we could be affected by brexit polls over the weekend.  The Euro/dollar pair rallied sharply after yesterday's murder of the Brittish lawmaker.  The Brittish pound rallied as well and continued that bounce today.  The Brittish pound tanked considerably when the brexit news first hit on 6/10.  It has now made a fair chunk of the loss back.  It appears the currency market is saying either brexit is going to lose or it is not a big deal if it wins.  If that perception does not change between now and Monday then U.S. stocks are probably going to rally.  If the perception changes back to brexit then we could break support and head south in a big way.  I will be glad to get the vote over with so we know what we have to deal with.

It has been interesting reading and listening to comments on the FED since Wed.  My perception is that many people are losing faith in the FED can fix everything mantra that has been so prevalent.  Even Steve Liesman on CNBC gave it up.  He has been a staunch supporter.  I think this is very important.  I could be wrong, but I strongly believe what has held the market up is the belief the FED has everything under control and will not let anything bad happen to the stock market.  If that perception is lost the dip buyers that have been salivating to enter on the major pullbacks might be less inclined to do so.  This is the most questioning of the FED I have ever heard.  It will be interesting to see how the FED reacts to said questioning.

The market and sector status pages have been updated.  We had 5 red sectors this week.  That is the first red we have had since the Feb. lows.  The market is weakening.  Have a great weekend.

Bob

Daily update 6/16 Bubble News From The Nosebleed Section

Interesting day.  The sellers came out early and started up from where they left off.  However, when SPX got down to 2050 buyers started showing up.  Then came news that a Brittish lawmaker was killed.  There were rumblings about suspending campaigning for brexit.  Wall Street in its infinite search for something positive turned that into talk of suspending the brexit vote.  That caused a ramp that lasted right into the close.  That was not the only strange thing.  In the night the Euro tanked which sent the dollar index soaring.  GLD also started strong making a new high this year.  After the brexit vote getting cancelled rumor came out the Euro spiked up, the dollar index and GLD reversed.  GLD has a rather ugly reversal bar tonight.  But since all this happened basically on rumors that aren't true does it matter?

SPX closed back above the 50 DMA.  That is certainly a positive.  Breadth was barely negative at the end of the day.  New highs were up again to 107.  There might have been some gold  miner stocks involved there.  That daily chart looks like the bulls are trying to engineer a bounce.

How about that for a rebound bar.  The futures ended back above the 100 SMA.  No confirmation of a break yet.  The bulls need to continue the upside pressure.

Despite the rebound and positive close in SPX the red count increased a bit.  Still below oversold levels though.  Obviously it would have been better for the bulls if the red count had decreased.

I think SPX hit support with the VIX over 20 which brought in some buyers.  Those buyers were augmented by rumors of the brexit vote being cancelled.  Those rumors were false.  Where does that leave us?  Beats me.  I would say the market could bounce or roll over and tank.  Tomorrow may be interesting.

This is an interesting read.  Bubble News From The Nosebleed Section

Bob

Daily update 6/15 Industrial production

No FED meeting bounce at all!

I can't remember the last time the day before and the day of a FED meeting were both negative.  There is such a positive bias around those two days that I can't imagine it is a good thing to be down.  I guess we will see.  Despite SPX being down the breadth was +60%.  New highs picked up a bit to 92.  I think this was largely closed end fund related again as TLT is hanging around 52 week highs.
This was day 3 below the 50 SMA.  Still no confirmed break though.

The futures tried to rebound off the 100 SMA early in the day.  However, they were met with resistance and eventually sold off late in the day.  They closed below the 100, but have not confirmed a break yet.

The red count dropped slightly and remains below oversold levels. 

The market still seems to be bugged.  I don't know if there is more to it then the brexit vote or not.  The bears are in control in the short term.  The dip buyers have vanished for the moment.  The last swing low was 2025 and the 200 DMA is at 2016.  That looks like the next support area.  Obviously a break of the 200 would likely be a very bad thing at this point in time.  I really don't know what happens tomorrow.  The VIX is above 20 which could entice some buyers.  I would think the bulls have to come out of the starting gate with some strong buying to make that happen though.  The downside of the VIX above 20 is that it might be spiking up again which could send the market considerably lower from here.  A lot might depend on how overseas markets trade overnight.   

As I expected IP took a tumble again and did not build on the previous month's bounce.

While IP did not make a new low, it dropped considerably.  Still no sign the economy is turning up.  Yellen mentioned some weakness in the labor market this afternoon.  That won't help at all.

Bob

Daily update 6/13

Dip buyers came to the rescue in the afternoon.

SPX still closed below the 50 SMA despite the bounce off the low.  Since it closed below yesterday's low we have a confirmed break of the 20 SMA.  Breadth was -62%.  New highs dropped all the way down to 57.  New lows increased again to 47.  That is the highest they have been since coming off the Feb. low.  Not a very good sign for the bulls. 

The futures hit the 200 SMA and that is where the afternoon bounce came from.  They ended the day just slightly below the 100.   The 200 is where the last swing low started from back in May.  Obviously we did not get the same kind of bounce today.  At least not yet.  There is potential for some support here though.

The red count crept up a little bit more today.  Still below the oversold level.  But then again the market bounced pretty strongly without an oversold condition back in May.  I don't know if it can do that again or not.

Today turned the short term trend down in R2000 to join the other indexes.  We did not get the pre FED day bounce thanks to the negativity from Europe. They sold off pretty hard over there the last two days, but I don't know if they are ready for a bounce yet.  That makes it hard to say what might happen here even though there is usually an upside bias around FED meetings.  It seems brexit talk has captivated the market for now.  The FED is widely expected to do nothing tomorrow, but I am sure people will be parsing the statements for clues about July.  There could be market moving information there.  We will reconvene tomorrow night and see what happened and maybe get some idea of what comes next.

Bob