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Wednesday, September 14, 2016

Daily update 9/14 CASH: The Most Hated Asset Class On The Planet

No bounce.  AAPL did well on Samsung phones burning up.  If not for that I think things might have been a bit worse then they were.

SPX tested the 100 SMA again today and held.  The market attempted to rally this morning climbing above the key 2130 number multiple times today.  However, it was unable to hold it.  In effect 2130 was resistance.  Clearly the selling that started on Friday has not been exhausted yet.  Whether it gets exhausted before we run out of dip buyers in this area remains to be seen.  The breadth was slightly negative.  New highs were 16 and new lows were 22. 

The bounce in the futures early in the day took them above the 200 SMA, but they failed to hold it.  They were only up there a few minutes before the selling started.  Not good for bulls.

The market is clearly oversold short term and at key support and yet every bounce attempt was sold.  Maybe I am crazy, but this seems like a critical juncture here.  I think the break out to new highs was purely technical not fundamental.  The VIX got elevated because of the brexit vote.  That brought buyers in sending some indexes to new highs.  Without the brexit vote I don't know that the new highs would have happened.  Many people were seeing that as an all clear sign and piled in.  The trouble is we do not have an all clear from the economic data or the transports.  The transports have not made a new high since late 2014.  No new high in the Dow since then has been confirmed by the transports.  The economic data has shown a gradual slow down since early 2015.  I read last summer that break out failures by SPX after more then one year of no new highs  is 1 in 10.  I am sure that SPX usually continues higher because the market broke out for fundamental reasons.  A situation we do not have.  A break out failure here would be a rare event.  Since this is the season of major pullback risk it seems likely such a failure could be viewed pretty negatively.  This is no time to fall asleep at the wheel.

This is an interesting read especially the part about how Warren Buffet thinks about cash.  CASH: The Most Hated Asset Class On The Planet


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