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Wednesday, August 3, 2016

Daily update 8/3 Foreign central bank reserves deposited at the FED

The dip buyers ride to the rescue.

SPX closed back up into the recent trading range.  It looks like support of the 20 SMA held.  Breadth was strong again at +63%.  Pretty strong for the little move in the indexes which suggests more nibbling on stocks.  New highs came in near yesterday's level at 96.  If this market continues to rally it will be interesting to see what happens with new highs. 

The futures did not confirm a break of the 50 SMA.  So far they are holding the lower channel line. 

The bulls came to the rescue as oil had a strong bounce from a deep oversold condition.  Looking at the USO chart it is not hard to imagine more bounce to go.  That could help stocks retest the recent highs.  The normal market reaction to breaking the bottom of a trading range and coming right back in is to at least test the highs and often breaking out the topside.  It remains to be seen if this little pullback will provide enough thrust to truly break what appears to be significant resistance overhead.  Should the bears show up tomorrow they still need a close below yesterday's low (2147) to turn the short term trend down.

Here are a couple of interesting charts.  The first one is an older version with some interesting comments.

It is clear when these deposits go negative (banks withdrawing money from the FED) some bad things have happened.  During the great recession in 2008 the deposits remained positive.   In the years before the great recession the high commodity prices helped emerging markets a lot.  They were actually roaring along economically when the crisis hit.  This chart shows that pretty clearly.  That helps explain why the global economy picked up again as soon as the central banks applied enough liquidity to the global economy to free the gears to move again.  The lower commodity prices are taking a toll on these same economies now.  Here is a look at the latest chart.

 I have to agree with the ??  Notice the OECD industrial production is declining.  It is not just the U.S.  Another crisis may be brewing.  The longer oil and other commodity prices stay low the higher the odds something will "blow up".


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