If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Trend table status

Trend

SP-500

R2000

COMPX

Primary

? 3/31/20

?- 3/31/20

? 3/31/20

Intermediate

Dn 4/3/20

Dn 3/20/20

? 5/8/20

Sub-Intermediate

Up 4/20/20

Up 4/22/20

Up 4/17/20

Short term

Up 5/20/20

Up 5/20/20

Up 5/20/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Friday, July 29, 2016

Daily update 7/29 NAAIM survey and American Entrepreneurship in Decline

The BOJ stimulus plan was already discounted by the market as the futures were down slightly on the open.  However, a much worse then expected GDP report provided some buying interest. 


SPX made a new intraday high today, but failed to close at a new high.  Breadth was +61% which was much stronger then normal for the little bit the indexes were up.  Several indexes were actually down.  This is nibbling at stocks.  New highs camein  at 318 the highest since 7/11.  Volume was heavy for the little bit of upside.  This was an odd day.


The futures spent some time above 2168 today during market hours.  However, the 4:00 close was 2167.5.  They surged some after hours.  No break out of the trading range yet.  I heard this is the second tightest 10 day range in the history of SPX.  Not the kind of history that is good for traders.


The green count crossed above the red today, but remains below 50.  This is still neutral, but upside follow through on Monday should be a kickoff to another leg up. 

This market feels surreal to me.  I think this is the most complacent the market has ever seemed to me the entire time I have been a trader.  Today's GDP report came in at 1.2% well below the expected 2.6%.  The GDP is highly revised so it is normally useless in real time.  However, this is the 4th quarter in a row under 2%.  Even if it gets revised higher it could still be under 2%.  I took a look at the GDP chart and there is no instance of 3 quarters below 2% not associated with a recession much less 4.  Recessions are hard to identify early on because often the relevant data gets revised downward dramatically later on.  It is still possible the recent quarters of GDP get revised higher and everything is ok.  On the other hand, we could already be in a recession.  The risk is there which is why it is so odd to see the market so complacent. 

The monthly charts in the market status pages are almost all green now.  This break out is either a kick off to blue skies and beyond or the biggest bull trap in history that seems likely to crash and burn.  The last couple of weeks SPX has held up because selling pressure stops anytime a prior day's low is tested.  However, the sellers always show up when the futures get above 2168.  That looks like methodical distribution to me.  I guess we will see. 

Four of the last six Augusts have been down.  The smallest decline was 4.3%.  The sample size is small, but with the market overbought another down August is possible.  A 4% decline would be a failed break out.  If you head off to the Hamptons next month you might want to check in on things.

This week the NAAIM sentiment survey hit 101.2.

Source

The NAAIM number only got above 100 three other times in this bull market.  Those were once in late Jan. of 2013 and twice in Dec. that year.  There were two occurrences in early 2007 before a pullback that March.  In every instance the market was lower then when the reading occurred sometime in the next few weeks.  None of those readings were bull market tops.  However,  none of those readings came with so many major indexes not at new bull market highs.  One thing is for sure money managers are fully long.  No respondent was net short which is very rare.  While the sample size of readings over 100 is small it would seem likely there will be a pullback down the road that will take price lower then it is here if we continue up.  As for this not likely being a bull market top that is a bit tougher to say.  For money managers to have this much confidence in the market going higher we always have had all the major indexes playing along.  The transports and financials are clearly not playing along at the moment.  While the COMPX and R2000 have been rallying they still have not reached new highs.  I think I can safely say that a failed break out (SPX falling back below 2130 area) would likely bring on a lot of selling.  Money managers are bullish and clearly believe the market is going higher.  Knowing earnings are falling and the economy is shaky just makes that kind of confidence hard for me to understand.  There has been very little selling pressure to test the break out.  With XLF still below its May high and the transports below their April high it is really tough to give the market a clean bill of health.  This looks like a good time to pay attention, but also have a little patience.

I spent a lot of time in the business world at IBM.  Complacency is the bane of any company.  Totally new products are extremely rare.  However, almost every existing product can be made better.  How is that done.  The single best way is to identify what is wrong with the product or the weakest trait and work to make it better.  This same methodology can be applied to anything even society.  I think some people believe I am a negative person because I often point out problems.  Nothing could be further from the truth.  I simply believe the best way to make things better is to understand what is wrong and fix it.  Sweeping problems under the rug fixes nothing and often makes things even worse in the long run.  With that said this is a very interesting article.  American Entrepreneurship in Decline

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

Bob

Thursday, July 28, 2016

Daily update 7/28 Why MainStreet Isn’t Buying Obama’s Economic Story

ZZZZZZZZZZZZZZZZ.


If the range was not small enough already today was an inside day.  Breadth was slightly negative.  New highs came in at 216 near where they have been lately.



The futures spiked up to 2168.5 right after the European open and started down right through to the NY open.  They found their low slightly above yesterday's low.  The market mounted a slow grind higher until just before the close.  The futures hit 2167.5 and sold off into the close.  Just a reminder that the 2168 resistance level came from the 7/14 overnight high.  It has held for two weeks now.  This has gone on long enough it will probably take an overnight gap up and over the resistance to defeat it.

Tonight the BOJ announces their next stimulus plan.  You might recall it was speculation about helicopter money from the BOJ that caused the break out in SPX in the first place.  The BOJ later said that was not going to happen, but did talk about some more stimulus.  If the announcement pleases the market enough that might cause the gap up and over resistance.  If it falls short of expectations then we might start a pullback.  I suspect that announcement is the reason for this current sideways action.  It might break lose one way or the other tomorrow.

Today turned the short term trend in SPX to neutral.  The other indexes remain in uptrends.

This is a pretty good article.  I don't agree with the statement under housing section that the government spent trillions on the housing market.  Most of the rest of it is pretty good and lots of great charts.  Why MainStreet Isn’t Buying Obama’s Economic Story

Bob

Wednesday, July 27, 2016

Daily update 7/27 Factory orders

The narrow range continues.


While AAPL helped the COMPX it did not seem to do much for SPX.  This looks like churning here.  Some people buying, some people selling.  That can be a reversal pattern.  Breadth was -52%.  New highs were good once again at 226.


The futures opened the regular session right at 2168 and the sellers went to work immediately.  After the FED meeting there was a brief spike down below yesterday's low and the selling stopped.  Curious pattern.  Clearly somebody is trying to sell stuff without taking the market down as they stop selling at the prior day's low.  Then the dip buyers come in and lift prices off the low.  However, the last three days the bulls have not shown much ambition.


The red line crossed above the green line today.  However, it is still below 50.  If the bulls have the desire this would be a good time to show it.  A failure to get through resistance soon will lead to a rare slow roll over top. 


The short term bull pressure lines have come together.  Like the green/red count this would be a good time for the bulls to show up.

The song remains the same until this narrow range consolidation is broken. 

Here is a look a the latest consumer durable goods data.

The string of negative YOY prints continues.  There is still no sign of a pick up in the economy.  As long as this data has been negative it is actually amazing we are not in a recession yet.

Bob

Tuesday, July 26, 2016

Daily udpate 7/26 Faith in Central Banks Today is Stronger Than Faith in the Internet in 1999

Odd day.


After testing yesterday's high this morning the market suddenly sold off hard for a few minutes.  It tested yesterday's low and the selling stopped.  After the market lazily retraced the down move there was another bout of selling in the afternoon.  I would guess a big fund was doing some kind of portfolio adjustment.  The breadth was +58%.  New highs were pretty good at 216.  The volume was higher today, but a lot of it came during the sell off.  Did somebody take advantage of the tendency to be an up day before the FED meeting to dump some inventory?


The market started up out of the chute.  However, as soon as the futures hit 2168 to the tick selling began.  That 2168 level may be getting tougher instead of softening up.  That remains to be seen though.  There were several tests below the 20 SMA in the last few bars.  Either that line will break or the 2168 level will be conquered to set up the next short term move.  Maybe the FED meeting tomorrow will break the consolidation.

This is an interesting read.  Faith in Central Banks Today is Stronger Than Faith in the Internet in 1999  Pretty interesting chart.


Rather than investing in a legitimate growth story where higher profits justify higher prices, investors have been willing to accept lower returns over “risk free” US Treasuries and they’ve been paying increasingly more for a shrinking earnings base.

Best quote heard in relation to politics lately.  "Neither candidate is electable, but one of them will be the next president".

Bob

Monday, July 25, 2016

Daily update 7/25 Bond market related articles

Another slight down day.


It is starting to look like we have an every other day a different direction pattern taking shape.  If that continues then tomorrow should be up.  Breadth was -60%.  New highs came in at 170. 


The equally weighted version of SPX made it to a new all time high, but has not pulled very far away yet.  It remains to be seen if the break out sticks or not.


The futures got above the 2168 resistance level again overnight, but failed to stay there.  This has proved to be a tough nut to crack so far.  The futures tested below the 20 SMA again today, but held.  A good place to rally from. 


The green count is holding steady so far.  A cross back above 50 should signal a new leg up. 

The FED meets on Wed. and the day before has been up most of the time in recent years.  The alternating day pattern also suggests tomorrow should be up.  Maybe the bulls will push through resistance this time. 

Here are some interesting articles on the bond market.
US Credit Conditions Drop to Worst Level since Q3 2009, Markets Soar
Is “Crexit” the Next Crisis?
Why this Spike Will Perforate Yield Chasers

Bob

Friday, July 22, 2016

Daily update 7/22 Net worth vs disposable income

Launch, but.


SPX made a new closing high by 2 points.  Breadth was strong again at +63%.  New highs increased to 212.  Not a very strong launch considering the setup.  SPX did not even close above the 7/20 high.  The next two charts are where the but is though.


While SPX made a new closing high the futures failed to clear the 7/14 overnight high.  This is a good example of how those overnight extremes sometimes become strong support or resistance.  Another part of the but is the futures did not do enough to get a green price bar.


The green count barely moved and remains below 50.  That is another part of the but.


The dollar index followed through on the break out the other day.  This looks headed to test the highs at 100 to me.

The bull case of the dollar going down and oil up is falling apart.  The other part of the story was earnings are beating expectations.  While operating earnings are probably going to do just that some high profile companies have missed badly on GAAP earnings.  You know the actual real earnings, not the fictional made up stuff.  What happens next week?  I guess that would depend on whether the resistance in the futures is still there.  The technical strength has waned so much this could be a short term top without particularly high odds of a retest.  If we get a pullback from around here I would still expect support in the 2130-35 area. 

This is a rather interesting chart.

Source

The last two bull markets got well ahead of what the economy could support and ended up in 50% meltdowns.  It looks like we are there again.  Will it be any different this time?

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

Bob

Thursday, July 21, 2016

Daily update 7/21 VIX

Interesting day. We had the first real selling pressure since the break out.  All morning the market was just muddling around.  I heard somebody on TV say that European airline stocks were down significantly because one of them said bookings were down and blamed it on terrorism.  Within minutes both stocks and oil started down and gold and bonds started up.  Was there a connection?  I don't really know.  A late day bounce reduced the damage in stocks considerably.  Since 2001 my greatest fear in regards to terrorism was lone wolf attacks by people willing to die to hurt others.  How do you stop them?  Civilization exists by people living by a set of rules.  You know the don't lie, cheat or steal kind of thing.  The most important rule of all is not killing each other.  While the percentage of deranged individuals in the world is small their numbers are large because of the shear number of humans on the planet.  I call this the law of large numbers.  This applies to everything.  For instance, left handed people are about 10% of the population.  With 7 billion people on the planet that is 700 million lefties.  A lot of lone wolf attacks would change civilization as we know it.  The organized attacks we have seen for many years that came fairly far apart in frequency have not hurt the economy.  High frequency lone wolf attacks might.  I don't really know if that thought was what spooked the market today or not.  Maybe it was just coincidence with the news report.


While SPX traded below yesterday's low it was able to close above it (just barely).  The breadth was -56%.  New highs slipped some to 165. 


The futures tested below the 20 SMA, but bounced back to close above it.  This is the first pullback to that MA since the break out to new highs.


The green count slipped back below 50.

Now we are talking.  The market has worked off the overbought condition a bit.  It should either launch a new leg up or break below the 20 SMA on the futures and put us in pullback mode. 

Here is some interesting research on the VIX.  Indicator of the Week: What Happens After an S&P Snap-Back Rally?

VIX Makes New High Then Low: The CBOE Volatility Index (VIX) measures expected volatility of option prices on S&P 500 options, and it tends to move in the opposite direction as stocks. So it's not a huge surprise that a similar signal, except backwards, occurred for the VIX just a week ago.
Specifically, I'm looking at times when the VIX spiked to a three-month high, and then within a month was down to a three-month low. The VIX is generally thought of as a "fear gauge," so it suggests that traders panicked for a brief moment, and then the panic quickly dwindled into complacency. The table below shows how the SPX performed after these occurrences since 1990 (as far back as we have VIX data).

You can see the 13 previous signals tended to occur just before a weak market. The average return and percent positive after these occurrences are lower across all time frames, compared to the typical market returns since 1990. It's typically not a good sign when market players become complacent.




After 6 months the percent positive was only 53.8% as opposed to anytime of 72.2%.  Lots of people are trumpeting the break out as a very bullish event.  We will only know in the fullness of time, but.the VIX says it may not be all that bullish.

Bob

Wednesday, July 20, 2016

Daily update 7/20

Slight new high close.


SPX rallied above the last few days resistance by 11:30, then traded sideways all afternoon.  Breadth was strong again at +63%.  More nibbling of stocks.  New highs increased considerably to 193.  How far can the rubber band stretch?


The futures tested the 7/14 overnight high today.  That is where they came to a stop.  On occasion the overnight extremes can provide strong support or resistance.  It remains to be seen if this extreme point will be stiff resistance or not.


The green count slipped again today despite the upward move in the index.  Upward momentum is waning some.  That does not mean we can't go higher though. 

Buyers keep showing up so far.  Maybe the futures have hit a resistance point, but maybe they haven't.  Lets see how far the bulls are willing to push it.

Bob

Tuesday, July 19, 2016

Daily update 7/19 Dollar break out

Another sleepy day.


SPX tested yesterday's low multiple times today.  Each time we got down there dip buyers showed up.  However, they never pushed it up to test the recent highs.  Volume was light once again as we are in wait and see mode.  Breadth was -56%.  New highs dropped again down to 154.  The last few days had a really, really tiny range.  That type of action can mark a short term top.  It may take some news to get an upside range expansion move. 


That is a very narrow range overnight as well as the day session.  We have paused almost long enough for the 20 SMA to catch up.  It is close enough to test it now.  Then we will see if we launch a new leg higher or end up breaking below it and starting a pullback.


The green count is out of overbought and getting close to neutral.  A lot of times it will cross below the 50 threshold before the next launch. 

The futures have not touched the 20 SMA and the green count has not gotten down to 50 yet.  I don't know if we have consolidated enough to launch a new leg yet.  Another sleepy day tomorrow could do it.  The last two days the bulls defended the prior day's low.  Until they stop doing that the bears are going to be out of luck.


The dollar broke out of its consolidation it had been forming the last three weeks just below its 200 DMA.  It came in contact with the downtrend line that has formed since last fall.  A pause here would be normal, but I expect it will eventually break that trend line and head up to test its bull market highs.  That would be unexpected by a lot of people.  I have talked about this enough that none of you all should be surprised.

Bob

Monday, July 18, 2016

Daily update 7/18 Hoisington quarterly review

Sleepy day.


There was a little dip right after the open that the dip buyers came rushing in on.  However, once they got SPX back up to 2168 the market stopped and traded sideways all day.  For three days in a row we have had resistance in this area.  Breadth was strong again at +61% which was high for the amount of upside we had.  That suggests bulls are just nibbling on stocks.  New highs came just slightly below yesterday's count at 178.  SPY volume was just about half of yesterday.  Buying enthusiasm has waned some.  That is understandable given the extended nature of the market short term.


The futures show the resistance in this area pretty clearly.  The question as usual is it insurmountable or not. 

Today lacked buying enthusiasm, but that could easily change as we get more into earnings season.  Selling pressure has been pretty minimal, but that could easily change as we get more into earnings season.  While there is some talk of TINA as usual, there is much more talk about valuation then I have heard when SPX made new highs before.  There has never been a break out to new highs by SPX after more then a year pause with valuations across the market so high. Let me make this clear.  There is no comparable historical situation.  This is an unprecedented case.  Any historical study claiming this or that (and I have heard a few) are invalid.  One of two things is going to happen.  Either SPX stays broken out long enough for the other major indexes to catch up, or the break out fails.  While the economy has picked up a little over the last couple of months it is not enough to be able to say it is getting stronger again.  It could easily relapse in the months ahead at this point.  The rest of the bull case seems to rest on the dollar going down and oil going up.  I don't think either of those things is going to happen.  Investors piled into the market starting last Feb. thinking the earnings recession would come to an end this quarter.  If that turns out to be a wrong assumption there will be considerable downside to come.  Ar this point I can't see anything that indicates that assumption is correct.  I can seen plenty of things that could cause a problem for that assumption, but none of them are for sure yet either.  I think we are in limbo for the moment, but everyone needs to realize that the market could make a decision on that assumption yes or no at any time.

This is a great read on the economy.  Quarterly Review and Outlook, Second Quarter 2016

Bob

Friday, July 15, 2016

Daily update 7/15 Industrial production (IP)

That was the 7th gap up in a row.  You don't see that very often.


Despite the small pullback breadth was slightly positive.  New highs dropped way down to 183 though.  A loss of momentum.  Not much more to say at the moment.


The futures took a bit of a dump after the close as news hit of a coup attempt in Turkey.  The only thing surprising about that is that it had not already happened.  I have been expecting something to happen over there.  That was the most openly corrupt government I have seen in my lifetime.  Anyway, back to the market.  With SPX at new highs the key here will be the -DI line on a pullback.  Unless it gets over 35 the bulls should not have anything to worry about when it comes to buying the dip.  If the -DI line gets over 35 then the door to a bigger pullback would be opened.  The market might not step through the door, but the possibility would be there.

The market remains overbought and losing a bit of steam.  With breadth being so strong on this rally one would normally expect a retest of the high after any pullback.  The complicating factor of course is the possibility of this being a blow off top.  Those can collapse very quickly.  Key support should be 2130-35 on SPX.  A test down there should find buyers unless something drastic happens.  I assume the market will not panic over a change in government in Turkey.  I could be wrong though.  I use logic and the market is prone to emotion sometimes.

I heard Bob Pisani say something kind of interesting today.  The latest data showed some signs of a pickup in inflation.  I would expect that with the price of oil doubling off its low and many other commodities having moved up.  There was also a rise in rent.  What Pisani said was that nobody was positioned for a pick up in inflation.  If that were to happen it could cause problems.  I expect the dollar to eventually rally and oil to fall again.  That should mean any inflation would be transitory.  However, there could be enough inflation in the system to show an increase for a few more months.  That might make some bond holders nervous since the 10 year rate is at all time lows.  A backup in rates could certainly cause some strife.  Money managers are overweight over valued dividend stocks.  Those stocks usually get sold when rates go up whether they are overvalued or not.  TLT is pulling back some from a very overbought condition.  The bond market occasionally has hissy fits just like stocks.  A hissy fit here would not be good for a lot of money managers,  Whether that selling would spread to other stocks or be a positive for other stocks is beyond my pay grade.  I think we need to keep an eye on TLT for a while see what happens.  As a side affect higher rates could be a positive for the dollar which might be a negative for gold.  Whew.  The more I think about this the more complicated it gets.  Maybe I better just stop.  After all it is Friday night!

Here is the latest IP data.

IP is trying to turn up.  However, we do not have enough data yet to say it is.  It needs to get above the 12 month SMA and stay there through revisions.  I saw this statement from the report that makes me wonder if this pickup will last though.

“The output of manufactured goods other than motor vehicles and parts was unchanged. The index for utilities rose 2.4 percent as a result of warmer weather than is typical for June boosting demand for air conditioning.”

We know auto inventory is high and sales have been struggling of late.  I saw a headline somewhere that auto sales in June rose less then expected.  I am not sure we can depend on auto manufacturing continuing to increase and production of other goods was flat.   We will just have to see what the next couple of months look like.  Maybe things are getting better, but maybe they aren't.  Can't tell yet.

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

Bob

Thursday, July 14, 2016

Daily update 7/14 NAAIM sentiment survey

More talk about helicopter money and more buying.  Despite Japanese officials saying it isn't going to happen anytime soon.  They even said today they would have to change laws to do it.  Needless to say the market does not want to let the facts get in the way of a good story.


I am sticking with SPY for now.  The gains in this market are all coming overnight.  The end of day closes have been very close to the open.  This indicates the buyers and sellers are pretty evenly matched during the day.  Breadth was only +56% .  It started out at +70% so today had the most selling into strength we have seen on this break out.  New highs were up slightly from yesterday at 236.  Buying enthusiasm might be waning just a bit.


The futures were up much higher overnight then they got during the day.  They remain extremely extended from the 200 SMA.  Will that matter?


Sentiment has not really been of much help for quite some time so I have not covered it in the blog.  Here is a look at the latest NAAIM survey.


At 96 the NAAIM number made a big jump from 65 and is at the highest level since the 99 reading on 2/25/15.  That day SPX closed at 2113 and only managed to gain another 18 points over the next two months.  It looks like the big boys are already all in.  Sentiment is not bearish anymore.

We have not had any selling pressure on the break out yet.  We just keep gapping up every day.  I am guessing that some day we will have a down day even if it is years in the future.  Then we can see what investors really think.  Listening to them talk on TV has been interesting.  It seems most of the people that have been market skeptics for a long time are turning into raging bulls.  People like Kevin O'Leary and Larry Fink that have been bullish all throughout this bull market are a bit skeptical of this break out.  Blow off tops are by their very nature very strong.  They are one last panic buying attack.  Internally they look pretty much just like initiation thrusts of new legs up.  The difference is that blow off tops fall back to earth.  That most often happens because fundamentals do not justify the break out.  The poor fundamentals usually manifest in divergences in the major indexes.  We have plenty of those divergences as I have shown.  So a little patience is needed to let the market tip its hand on whether this break out is for real or not.

Bob

Wednesday, July 13, 2016

Daily update 7/13 Helicopter money

I want to show SPY tonight so we can get a better look at the recent price bars.


The last bar is a perfect hanging man.  The prior two bars are almost another hanging man and almost a shooting star.  Both are close, but neither perfect.  None of the three bars that constitute the break out to new highs in SPX are bullish looking.  Breadth was slightly negative at -53%,  New highs tumbled down to 216.


The futures traded in a narrow range overnight and today.  ADX is up to the point where the market often retests the high on the first pullback.  Just keep in mind that it can reverse sharply sometimes.

I think the 2130 level is key for SPX.  If the bulls are truly running they should step in and buy on any dip back towards that level.  A close back below there gives us a failed break out situation.  A close back below 2100 is likely to usher in considerable selling.  The VIX dipped down below 13 again this afternoon.  It closed at 13.04.  Will the bulls keep on buying? 

This is an interesting primer on helicopter money if you are unfamiliar with it.  Why Helicopter Money Won't Push Stocks Higher  When politicians are asked about the high debt levels the usual reply is we will grow out of the debt.  When asked why we do not cut spending they say we can't because it will hurt the economy.  Being relatively versed in elementary mathematics I can say without a doubt that one can not "grow out of the debt" until one stops adding to the debt.  Helicopter money will only make the debt grow faster.  Once started it will be like government spending.  They will say we can't stop because it would hurt the economy.  In the long run it will not solve anything and will actually make the problem worse.  At some point the bond market will lose confidence.  If you don't know what happens then take a look at Greece.  No country can add to the government debt level forever without blowing up.  However, each country is different in how much debt can be added before the so called "bang moment" (popularized by the book "This Time is Different: Eight Centuries of Financial Folly).  Past history suggests it is better to cut spending and take your lumps rather then wait until it is too late.  We need leadership with the guts to make the hard choices.  Explain the situation to the citizens and take action.  Otherwise, some day it will be too late and very unpleasant.

Bob

Tuesday, July 12, 2016

Daily update 7/12 Dollar index

More stimulus talk, more buying.


Some chart.  Breadth was strong again at +68%.  New highs dropped quite a bit to 302.  It is a little hard to see how this just keeps going in the short term.  A pullback to test the prior high (2131) would be normal even if the market is going to continue higher.


That futures chart is pretty interesting.  I didn't know physics applied to the markets, but maybe they do sometimes.  At the brexit vote low the futures were 79.5 points below the 200 SMA.  At today's high they were 79.5 points above the 200 SMA.  An equal and opposite reaction.  One of Newton's laws of motion.  It seems likely we could have a little pullback from today's high.


The green count increased today and is well into overbought territory again.  The hook to a lower high often signals a short term top.  With price this extended that makes logical sense.


Curiously the SPXEW index stopped just fractionally below its prior high.  Will it do it or not?


I marked the days the VIX dropped below 13 since the mini crash last Aug.  All three prior instances saw a sizable pullback.  The longest the market continued up was another three days last fall.   If we see a similar sized pullback this time the break out to new highs will fail. 

I still think that earnings will determine what ultimately happens with  SPX's break out.  One of the key variables I keep hearing for earnings is the dollar.  Many people think the dollar is more likely to go down then up (at least they say that).  I just don't agree.


The dollar index on the weekly chart came back to the 100 SMA and twice.  The second test resulted in a sharp rally.  It is currently consolidating right at the 50 SMA.  This chart looks positive to me.  I think a test of the highs will happen eventually.  This could still make a top after another test to the upside, but I think the odds are better that it eventually breaks out on the upside and goes higher.  Any upside will be a negative for oil and earnings.  A break out over the 50 SMA or failure here will be important.

This move is either a kick off to blue skies and a new leg up or a blow off top.  To be a new leg up investors will have to be willing to keep buying even with a very low VIX.  That is something they have been reluctant to do for nearly a year.  The trouble is that the fundamentals have not changed.  This move seems to be mostly related to expectation of further stimulus in Japan.  Is that reason enough to keep people buying?  Technically and fundamentally (at least IHMO) it seems like the odds should be for a break out failure.  I also believe the consequences of such a failure will be a dramatic sell off.  Stocks are expensive and earnings are falling.  Earnings have actually fallen back to where they were when SPX was 1400.  I wonder if it is even possible for CEO's to say enough positive things to keep investors from being disappointed.

Guy Adami (mentioned yesterday as the long time market skeptic turned bull) said today price is truth.  Really.  I guess he has never looked at a price chart.  Markets have so many head fakes it isn't funny.  If price was truth we would all be rich because making money would be simple.  Kevin O'Leary (best known for TV show Shark Tank) has been nothing but a bull for years in his appearances on CNBC.  Today he was skeptical.  He said if the market was still at new highs after a couple of weeks of earnings he would turn into a believer.  He talked about several reasons why he was skeptical such as falling earnings and revenue.  I have seen him many times over the years and never saw him skeptical that I can recall.  In the last two days a long time skeptic turned bull and a long time bull turned skeptic.  Hmm.  Curious, don't you think.

Today turned SPX's primary trend to neutral.  One could argue that yesterday did the trick, but I like to see confirmation on a break out.  The COMPX and R2000 remain down for now.  It is possible SPX's trend is still down.  In rare instances a market will test a prior high or low after a trend change and reverse to continue in the direction of the new trend.  I think this is likely what happens here, but we will see.

Bob

Important

The information in this blog is provided for educational purposes only and is not to be construed as investment advice.