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Monday, September 19, 2016

Daily update 9/19 Industrial Production (IP)

Strong start, weak finish.  This is correction/bear market type action.  It has been happening quite a bit the last several weeks.

The market started with a gap up and 80% of stocks positive, but found its high within 45 minutes of trading.  The breadth ended at +66%.  New highs perked up a bit to 57.  The action is a disappointment to the bulls.  SPX ended the day well off its high and well below the day's mid point.  This chart continues to look like a consolidation at the lows.

The futures got above the upper trend line of the triangle this morning, but failed to stay there.  False break outs usually lead to break outs the other side.  We already had higher odds of breaking down because of the triangle.  Now it would appear today might have increased those odds somewhat.

The red count dropped out of oversold today.  That happened without much of a bounce to speak of.  The market is burning off the oversold condition in consolidation which normally means we break down from here eventually. 

The equal weighted SPX has already failed its summer break out.  Is this a warning sign for the cap weighted index? 

The charts look like the market wants to go down more from here.  However, we have the FED and the BOJ to make some noise on Wed.  Do the sellers take it down before that or do we sit and spin?  Will one of those central banks do or say something that ignites a global stock rally?  Now where did I put that crystal ball.  We have resistance at 2147 and support at 2120. 

The latest IP data did not follow through on recent increases.

IP took a sizable drop and is back below the 12 month MA.  This is a very unusual pattern of ups and downs.  It normally does not do that for so long.  It is too early to say if weakness is returning or if it is just a 1 month pullback.  However, IP has been trending down for over 18 months so odds probably favor more weakness.  At any rate the economy did not continue in the positive direction it had in late spring and early summer.

The YOY chart shows we have never had this many months being negative without being in a recession.  This is extremely odd.  The services part of the economy has been holding things up, but remember the latest ISM non-manufacturing number took a tumble this month.  It is possible things are about to get worse.


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