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Friday, July 1, 2016

Daily update 7/1 Corporate debt

SPX closes above 2100 yet again.

This is the 4th swing up and over 2100 this year.  I think it is do or die time now.  The breadth was +60%.  This is the first time we had light volume on this bounce.  That may have been caused by people taking off early for the long weekend.  New highs increased again to 412.  I suspect the list would have a lot of defensive issues as the consumer staples, healthcare and utilities sectors are doing well.  Not normally the stuff of new legs higher.  This is going to be interesting.

Straight down.  Straight up.  You just don't see that on the futures chart.  Odd.

Here we are at a key juncture.  SPX has closed above 2100 on a monthly basis three times.  The last time was last July.  Each of those months were followed by sell offs the next month.  This year SPX has been unable to be above 2100 on the last day of the month.  It almost made it in June. This was my upper target for this move.  I think it is pretty simple from here.  The last three times SPX closed above 2100 a close back below 2098 started a pullback.  I think it is new highs or bust.  The market internals look the weakest of any trip up here this year.  A failure seems likely to bring out a lot more sellers this time.

I found this chart pretty interesting.

I often hear the pundits say corporate balance sheets are in the best shape ever.  However, that is based on the claim there is somewhere around $2 trillion dollars of cash.  As we learned by looking at the AAPL balance sheet in Daily update 5/17 AAPL cash the cash numbers are blatant lies. At best Apple's cash is about 25% of the reported value.  If the ratio is similar for other companies the true cash level could be around $500 billion.  The debt is over $6 trillion and rising.  I don't think corporate balance sheets are nearly as healthy as Wall Street is leading us to believe.  The ramp up in debt coincides with profits falling.  How much longer can that go on?

The COMPX and R2000 turned their short term trends to neutral.

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


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