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Wednesday, August 17, 2016

Daily update 8/17 Industrial production

Both the bulls and the bears took a turn today.

The bears took their turn first sending SPX below the 20 SMA.  However, the dip buyers showed up mid day and sent SPX back above the MA.  Curious that SPX hit my yellow trend line dead on before the bounce.  Probably a coincidence.  The breadth was dead even.  However, new highs dropped way down to 82.  That is the lowest number since 6/14 (which was before the brexit vote and the break out to new highs).  New lows came up a bit to 14.  This may be a sign the rally is weakening, but we will have to see if the count rebounds in the next few days.

The futures got slightly below the 50 SMA this morning before bouncing.  That bounce resulted in a bullish engulfing bar which theoretically should be bullish.

The red count dropped a bit, but is still above the green.  Still neutral here. 

This morning's low on SPX was just about where it was one month ago.  In other words this uptrend is slow.  But up is up as they say. 

There was a big bump in the latest read of IP.

The surge got IP back above its 12 month MA.  This is a very good start if it is continues to go up.  However, the surge was largely due to the hot weather and increased oil drilling.  The increase in oil drilling seems likely to be sustainable with oil prices holding up so far.  However, the hot weather is obviously going to come to an end.  It will take another couple of months to see if this level holds up through revisions and IP gets even stronger.  It has the tendency to make big moves against its current trend periodically that are not sustained.  Since it has been trending down for over a year it needs to prove itself here.

The most troublesome thing lately has been many retailers and restaurants complaining about big drops in traffic.  The business world has been in recession for a while now with multiple quarters of declining earnings.  It is possible that consumer spending is starting to roll over.  Unless it has been too hot to go out to eat and shop!  I don't think we can blame the weather this time.  The back to school shopping season did not generate any buzz so far.  If the consumer continues to weaken it would surely lead to recession at this point.


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