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Friday, June 3, 2016

Daily update 6/3

I didn't expect that.  Even with the 35K Verizon workers out on strike added in today's employment number it was still weak.  Rate hike expectations for June took a huge plunge. 

SPX could not quite manage a second close above 2100.  Frankly I am a little surprised they did not buy the weak data with both fists.  That has been how this market usually reacts.  Maybe there were just too many big boys at the beach today.  At any rate SPX did not confirm a break above 2100.  We will see what next week brings.  Breadth was slightly positive.  The bond market had a very strong day.  I think the closed end funds were behind new highs spiking up to 234. 

The futures tested the bottom of the recent range this morning and bounced once again.  The junior traders manning the desks did a good job of not letting the market sell off.  We remain stuck in the very narrow range for now.

The green count slipped considerably today, but remains slightly above 50.  SPX has worked off the overbought condition now.  I still can't tell if this is the start of a roll over or just a pause that refreshes.  That is going to depend on which way the trading range breaks.

What a sleepy week.  The market kept bouncing from gap downs in the morning, but in the end 2100 held.  When the big boys get back next week we will find out how they feel about the current situation.  I keep hearing people say they are bullish because everybody else is bearish.  A VIX at 13 clearly indicates everybody is not bearish.  People started piling back into this market off the Feb. low in hopes Q2 would be an earnings trough.  I don't think it is clear that is the case yet.  With valuations sky high a run higher probably needs some certainty that earnings are about to start growing again.  With what we know at the moment I think it will be very tough for SPX to break out on the upside.  More and more people are expecting that.  Some of there reasoning involves the advance/decline line that has made new highs.  The line based solely on common stocks has not made a new high, but is showing some strength.  This is just a reflection of what happened.  We know people piled in to stocks.  What we don't know is if they will keep pushing prices higher.  People piling in have increased the downside risk considerably.  If this rally fails this market will sell off hard as all those new longs bail out.  That seems like the more likely scenario at the moment given the state of the global economy.  That does not preclude a test of the all time high though first.  Until the current bounce rolls over there is always that chance.

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


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