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Wednesday, August 10, 2016

Daily update 8/10 Prior 10% earnings drops

Resistance holds again.

The futures gapped up a little bit this morning, but the sellers went to work right away.  The bulls never really tried to push prices higher.  Breadth was -55%.  New highs dropped down to 189.  The volume remains light as neither buyers or sellers are very motivated.

The futures attempted to get above resistance overnight, but failed to stay there once the market opened up.  They are still above the prior resistance line.  This is a very narrow range.

The green count picked up a bit today, but remains below 50.

Upside progress since crossing 2170 on SPX has been pretty tough to come by.  The thrust last Friday from the employment data has seen no follow through.  Historically Aug. has seen lots of tops with pullbacks into Sept. and Oct.  The current volatility is low and everybody feels safe with the break out.  Vigilance is the key.  Maybe nothing bad happens this year, but complacency appears to be very high to me.  That is usually when things go awry.

I found this marked up chart pretty interesting.

For the last 50 years earnings drops of this magnitude have coincided with 20% or more downside in SPX.  While the TINA crowd would say the market won't fall because of low rates.  I believe it is more likely a strong belief that central banks will never ever let the market fall so there is no reason to sell.  I believe that premise will prove to be incorrect when we go into recession. 


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