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Thursday, June 2, 2016

Daily update 6/2 The Death Of The Virtuous Cycle

Dip buyers get SPX to close above 2100.

That makes a new closing high for the rally off the Feb. low.  SPX still has a few more points to go to get to the intraday high.  Breadth was +57%.  New highs increased a bit again to 127.  Still nothing to write home about.  Upside progress is tough to come by, but it is still chugging along.

The futures made it up to the upper red resistance line.  Do they break out or fall back?

Despite the up day in SPX the green count slipped a bit.  There must have been a little bit of profit taking in some stocks today.  Sometimes SPX pushes higher while the green count falls.  That usually ends up with a pullback in the future back to where the divergence started.  If SPX were to keep going up while the green count continued to fall a pullback to 2100 in the future would be likely.

The VIX had a closing low a few days back of 13.12.  It closed today at 13.63.  Since the beginning of 2015 going long when the VIX hit 13 has not paid off.  Has anything changed that would make it different this time?  The big boys were probably off all week with the nice weather in the north east.  There was really no selling pressure this week.  They probably left instructions with the junior traders manning the desks not to sell and not to let the market go down.  Mission accomplished so far.  I don't know if the employment report will shake things up tomorrow or not.  Since Yellen seems to pay attention to that data (for some reason that totally escapes me as it is useless in real time) tomorrow's report might shift the odds of a rate hike in June.  Much stronger or much weaker could cause some volatility up or down.  Status quo could leave us with another sleepy day.  When the boys get back next week we will find out how they feel about the 2100 level.

This is a very good article from an economist that has not been brainwashed by central bankers.  Well worth a few minutes of your time.  The Death Of The Virtuous Cycle   The problem with the global economy is actually very simple.  There is too much debt and we have an aging population.  There is ample economic research that this should be obvious to all central bankers.  Why they appear so clueless is beyond me.  Why anybody would listen to Paul Krugman is also beyond me.  This almost sounds like a rant.  Sorry about that. 


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