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Trend table status

Trend

SP-500

R2000

COMPX

Primary

?+ 6/30/20

?- 3/31/20

Up 5/29/20

Intermediate

? 6/5/20

? 6/5/20

Up 6/5/20

Sub-Intermediate

?+ 7/6/20

?- 7/7/20

Up 7/2/20

Short term

Up 7/6/20

? 6/11/20

Up 7/2/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Monday, October 31, 2016

Daily update 10/31

Quiet day.


The market waffled around a little bit today, but not much action.  Breadth was just slightly positive.  New highs were 43 while new lows were 59.  Weak internals. 


The futures rallied a bit in the night, but failed to find any significant buying after the open.  They are still holding support for the moment.


The red count slipped a bit as the green count perked up.  Both remain below 50.  Indecision here.


The bull pressure chart continues to show all time frames are negative.  If the bulls don't show up pretty soon there is risk the market takes a tumble. 

In Daily update 10/24 I wrote "Since Oct. 1 the dollar index has been straight up.  Unless the FED comes out and removes the rate hike expectations for Dec. the index is likely to continue to the 100 area to test the prior highs.  This will lower earnings for SPX in Q4.  Since the prevailing wisdom on Wall Street was for the dollar to decline I doubt many companies did enough currency hedging to handle this big move up.  The move up has hit gold some.  It has not hit oil yet.  I believe that is simply because of the deal talk about a production freeze at the late Nov. OPEC meeting.  When that deal falls apart oil is likely to head down sharply.  The commercial hedgers (part of the Commitment of traders report) have put on the biggest short position in WTI futures since mid 2014 just before the big oil crash started.  That will keep the oil flowing and probably put pressure on price above and beyond a rising dollar."

Oil was down 4% today as the deal appears to be falling apart.  I think the oil price could fall for the next several months.  That could be a drag on SPX.

Politics and the FBI move on the Clinton email situation dominated a lot of the news today.  There could be more revelations coming, or not.  Who knows.  The market expects a Clinton victory anything that casts doubt on that could bring out some selling in the short term.

There is a FED meeting this Wed.  In recent years the market has gapped up the day before instead of the day of.  Due to all the news going on its hard to say if that pattern will repeat or not.  The only thing I know is that 2120 still appears to be key.  The bulls need to show up fairly soon or SPX is likely to fall through it.

Bob 

Friday, October 28, 2016

Daily update 10/28

Complicated mess.


GDP came out better then expected which seemed to entice some buying.  That had SPX up on the day (breadth was narrow though) when news hit that the FBI had more Hillary emails to go over.  That sent SPX down to the key 2120 level.  The selling came to a screeching halt there and the market bounced a bit the rest of the afternoon with some unusual up and down moves.  This technically put both SPX and COMPX in short term down trends.  However, we are still above key support and in mid Oct. when the trends turned down the market immediately bounced.  To complicate things further, news induced moves like this afternoon's sell off are often retraced.  If the market were to do that this time it would go higher from here.  Breadth was -58%.  New highs were 47 while new lows increased considerably to 71.


The futures show the big move down and considerable bounce off the low.  They are clearly still above support.


Despite the down day the red count dropped slightly and so it remains below 50.  One might say there is a positive divergence with the mid Oct. low since SPX closed fractionally below the low close then.  Of course, one could say we are no where near oversold so we could fall through support and drop a good ways further.  I don't know which will play out.  Price will dictate that.

One thing I know for sure is that the market did not like the idea that Hillary might not be the next president.  What the market does between now and the election might be news driven especially with the FBI involved again.  While we will not likely find out any details about these new emails before the election there could be some relevant comments made.

SPX ended the day with a bounce off of support.  It is in position to break or bounce next week.  The VIX is not as high as it was in mid Oct. when we were last here.  There has not been a particularly notable high TRIN reading in this pullback either.  From a short term oversold evaluation there seems to be less reason to buy here now then in mid Oct.  That does not preclude the bulls from showing up on Monday and buying with both fists, but it could mean any bounce from here does not carry all that far.  I think we really need a crystal ball to figure out what happens next.

Have a great weekend.

Bob

Thursday, October 27, 2016

Daily update 10/27

They could hardly wait to get the market open so they could sell today.  No waiting until 10:10.


The gap up this morning took SPX up to the 20 SMA.  The sellers started immediately after the open though.  That sent SPX back below the 100 SMA.  This looks headed back to the 2120 support area again to me.  Breadth was -70%.  New highs and new lows were 68.  That is the most new lows since the low day of the brexit sell off.  The prior occurrence of that many lows was way back in Feb. That seems significant.


The futures shot up once again on merger news.  They got above the trendline and the 20, 50 and 100 SMAs, but found nothing but sellers.  A strong looking rejection by the bears.


The red count almost got to 50 today.  Close enough to give the edge to the bears now.


The mid Oct. bounce from 2120 got the short term bull pressure lines to have a positive cross, but not the longer lines.  The short term lines crossed back negative today.  They are all bearish once again.

All the merger news ($133 billion of deals) this week helped to bring in buyers.  Otherwise, I think the market would be lower then it is.  There have been deals every day this week.  However, they rarely announce deals on Friday.  AMZN missed earnings and was down 5% which won't help either.  The internals look like the bears have taken control so tomorrow could be a bit of a downer.

Today turned the short term trend of R2000 down.  SPX and COMPX didn't quite do enough so they remain neutral.

Bob

Wednesday, October 26, 2016

Daily update 10/26

Interesting day.


The market opened up a little lower and there was no rally in the first 30  minutes.  The 10:10 sellers did not show up.  At 10:30 the oil inventory came out with a surprise draw which spiked oil higher.  SPX began to rally sharply.  It came to a screeching halt at 11:07 as sellers suddenly showed up.  Not that they were selling hard.  They were just hitting the bids and price drifted lower.  SPX eventually hit a technical point and had a little mini flush before the selling stopped.  I have been saying 10:10 but there have been several days where the exact high was at 10:07.  So when I saw the high was at 11:07 it made me chuckle just a bit.  Markets are totally random.  There can be no doubt.  At any rate the sellers were clearly looking for strength to sell into.  They are distributing stock while trying not to break the market.  Breath was -62%.  New highs dropped way down to 45 while new lows increased to 44.  The sellers are having an effect as the market appears to be weakening. 


The futures confirmed a break of the 20 SMA.  They broke below the uptrend line then went back to it by the end of the day.  This is not a clean break of the line and if the bulls show up tomorrow we would be back above it.  If the bears show up again the futures are likely to test that 10/13 low.


The red count crossed above the green, but remains below 50.  This is still neutral.

The sellers are still active.  The question is how big a hammer do they have.  At this point they have shown no desire to sell into weakness.  That is certainly the sign of professionals.  It could be as simple as people raising some cash before the election.  However, it could be much more serious.  The fact the selling starts on time and has been going on for many weeks is a bit troubling.  While selling morning strength was a common occurrence in the last two bear markets the selling did not start on time.  It was much more random.  Here is another thought.  Remember all those bounces off the 100 DMA that started in 2013.  History shows the 100 DMA to be rarely important to SPX.  That was definitely some kind of market manipulation.  What if the group responsible for that upward manipulation is now trying to get their profits out.  I feel like I am getting into the realm of a conspiracy theory here.  I am usually the person debunking conspiracy theories, not creating them.  I can only guess at what is going on as I am not in the loop.  The only thing I can be sure of is that this market is not going significantly higher until they stop the persistent selling.  There is obviously downside risk if we start breaking key support levels. 

A close below today's low tomorrow would turn the short term trend down on SPX.

Bob

Tuesday, October 25, 2016

Daily update 10/25

Morning high and afternoon low once again.


The market gapped down a little bit and rallied from the open.  Guess what happened at 10:10.  Yep, it happened again.  SPX closed back below the 20 and 100 SMAs.  Breadth was -59%.  New highs dropped down to 74 and new lows picked up a bit to 31.  Yesterday's second kiss of the bottom of the uptrend line from the Feb. low resulted in a second rejection.  That could set up another test of the 2120 area.  SPX has bounced twice from that level this fall with the second bounce being weaker then the first.  It seems likely if we test down there again it might fall through this time.


The futures are down a few points after hours.  They ended the day above the 20 SMA, but are now below it.  The futures are down to an uptrend line from the recent low.  Maybe they bounce here.   


The green count turned down today, but remains above the red count.  Still neutral.

The bulls have clearly been trying to support the market here.   However, their task is very difficult because the sellers keep showing up at 10:10.  I don't know where the futures will be in the morning, but for now rallies just can't be trusted.  At the same time key support (2120) is holding for the moment.  Eventually 2120 is going to break or the bulls will manage to get SPX back above the 50 DMA.  Until one of those things happen the price action may continue to be pretty choppy.

Bob

Monday, October 24, 2016

Daily update 10/24

Merger news causes global excitement in stocks.  However, the 10:10 sellers were still active.


SPX closes above the 20 SMA.  The 50 is another 8 points higher.  Notice the high today kissed the uptrend line from the Feb. low again.  The breadth ended at +57% after being +75% early in the day.  New highs were 109 while new lows were 23 (slightly elevated for the size of the gap up). 


The futures got above the 100 SMA.  This is a neutral price area. 


The green count increased a bit more today, but remains below 50.  Still neutral.

As I suspected the sellers were not finished last week.  Every day that the market sees some buying in the first 30 minutes after the open the sellers come out by 10:10.  Once again SPX made its high in the first hour and its low after noon.  This has become the prevalent pattern for weeks now.  I have never seen it persistent like this outside of a bear market.  While it happens some days during pullbacks and the bigger corrections it does not happen nearly every day like this in a bull market.  The bulls are clearly trying to support the market.  I just don't think they will succeed unless the selling stops.  Apparently earnings so far are not good enough.  The dollar may also be causing a bit of a problem.


In Daily update 9/29 IMF's SDR change on Oct. 1 I wrote:

The announcement caused a big move down in the dollar the first trading day.  The market has had plenty of time to adjust.  I suspect this adjustment is what has been holding the dollar index down.  I think this could be a case of sell the rumor and buy the fact.

Since Oct. 1 the dollar index has been straight up.  Unless the FED comes out and removes the rate hike expectations for Dec. the index is likely to continue to the 100 area to test the prior highs.  This will lower earnings for SPX in Q4.  Since the prevailing wisdom on Wall Street was for the dollar to decline I doubt many companies did enough currency hedging to handle this big move up.  The move up has hit gold some.  It has not hit oil yet.  I believe that is simply because of the deal talk about a production freeze at the late Nov. OPEC meeting.  When that deal falls apart oil is likely to head down sharply.  The commercial hedgers (part of the Commitment of traders report) have put on the biggest short position in WTI futures since mid 2014 just before the big oil crash started.  That will keep the oil flowing and probably put pressure on price above and beyond a rising dollar.

Here we are with SPX back between the 20 and 50 DMAs.  The MAs are only 12 points apart so we won't stay here long.  I would guess it is the 20 that gets broken and SPX tests the 2120 area again.  The technical condition is poor and the VIX is already down to 12.  That is not really a dream buying setup.  The bulls are going to have to push prices higher after the first hour to really get the market going up.  I don't see the will to do that at the moment.

Today turned the short term trends neutral across the board.

Bob

Friday, October 21, 2016

Daily update 10/21

Pinned.  SPX lost .18 points.


The market opened up on the downside, but the buyers stepped in pretty quickly.  SPX rallied modestly through most of the day to get a little green before settling back to slightly red.  That keeps SPX below the 100 SMA.  The breadth was nearly even.  New highs were 73 while new lows increased a bit to 27. 


The futures tested the 20 SMA overnight and rebounded after the open.  They ended the day right at the resistance line. 



The green count got a slight positive cross today, but is well below 50.  This is still neutral.

The options that kept the market pinned this week have expired.  Early next week we should find out what the market really wants to do.  If the sellers still have work to do the market is in a good place for them to show up again.  With the down open the 10:10 sellers did not show up today.  Since they showed up yesterday there is still a pretty good chance they will return next week on any strength.  The bulls still need to get SPX back above the 50 DMA to make an attempt to take control back.

Have a great weekend all.

Bob  

Thursday, October 20, 2016

Daily update 10/20

Odd intraday volatility, but in the end we went nowhere.


SPX tested the horizontal line again today and stopped.  I changed the color to red since it does appear to be resistance now.  Volume was heavy considering we did not go anywhere.  Interestingly, the sellers showed up right at 10:10 again.  They only sold for about 50 minutes though.  The market drifted back up to retrace most of the down move.  Breadth was -56%.  New highs were 73.  New lows picked up a bit to 19.   SPX closed below the 100 SMA after one day above.  The 20 SMA is just 3 points above today's high so it is coming ever closer.  The 50 SMA has rolled over and is sloping down adding a bit to the negativity.  The price action looks like it may be getting pinned because of option expiration.  If so SPX might not get very far from here tomorrow.   Maybe Monday SPX will get back on its journey. 


The futures tested above the 200 SMA again this morning and sold off sharply to test the 20 SMA.  It bounced from the 20 and ended the day right at the resistance line.  The 50 and 100 SMAs are coming down quickly.  They pressure the market lower if the futures can't get above them and stay there.


The green count shot up considerably today, but the red count also increased.  This is still neutral. 

The move down into the 10/13 low did not get much of a VIX spike.  We never got a high TRIN reading either.  There wasn't a nice oversold condition to entice buyers with.  There is no real technical reason for it to be an important low.  That would only happen with a news event.  I think it is likely the market bounced because of option support.  It is possible the resistance is option related also leading to the pin of price.  Unless we get some positive news to bring in the buyers early next week I believe SPX will head back down to test that 10/13 low (at least the 2120 area).  A breakdown there should target the 200 DMA.  SPX really needs to get a confirmed break above the 50 DMA.  With that MA sloping down that is becoming more and more important for bulls to achieve.

Bob

Wednesday, October 19, 2016

Daily update 10/19 China real estate bubble

A little more up.


SPX ran into the juncture of prior support which might be resistance now and the bottom of the uptrend line from the Feb. low (possible kiss goodbye).  Those last two bars into resistance are not the strongest looking bars I have ever seen before.  Breadth came in at +68%.  Once again that was very strong for the little bit the major indexes were up.  More nibbling which suggests a lot of the buying might be retail investors.  New highs increased a bit to 84.  New lows dropped way down to 9.  SPX managed a close above the 100 SMA, but remains below the 20 and 50 SMAs.


The futures tested above the 200 EMA again, but failed to stay there.  They closed above the red resistance line, but just barely.  It will be interesting to see if they can stay there tomorrow.


The red count dropped dramatically, but remains above the green line.  What little bit of oversold condition has been worked off.  This is neutral now. 

The sellers waited until the end of the day today.  SPX is sitting just below what could be important resistance in a neutral condition (neither oversold nor overbought short term).  Do the bulls keep pushing?  The 20 and 50 DMAs are 8 and 17 points higher respectively.  Does the confluence of resistance lines keep the market in check?  The answer may depend on earnings over the next few days.  The financials came in much better then expected.  I heard Bob Pisani say financials were expected to grow earnings 1% and so far they are on track for a 6% increase.  I don't know how much of the difference was trading revenue, but I heard that mentioned a number of times as being much higher then expected.  I saw a story about one Goldman Sachs trader that made more then $100 million.  That might not be repeatable quarter after quarter.  There is still a long ways to go in this earnings season and a lot could happen.  Unfortunately my crystal ball seems to be malfunctioning again.  I guess we will have to wait and see what develops.

This is an interesting article on China.  Chinese Property Owners are in for a Very Rude Awakening, but the Damage Will Reverberate around Globe  The more well to do people in China have been snapping up property outside of China.  You might recall Japanese people buying real estate in the U.S. in the run up to their bubble top in 1989.  If memory serves me they caused quite a stir buying assets in NYC.  If a real estate bubble was not enough of a problem, China has a very similar aging problem like Japan had because of their one child policy.

Bob

Tuesday, October 18, 2016

Daily udpate 10/18

World wide buying explosion.


SPX stuck its head above the 100 SMA, but failed to stay there.  Breadth was +74% which was quite strong relative to the amount the indexes were up.  That means more nibbling.  A lot of stocks up a little bit.  New highs increased to 65.  New lows were 22 even with the big gap up.  SPY opened right near its high of the day and closed about .50 lower.  While it looked like a strong day there were sellers active all day selling into the strength. 


The futures stuck their head above the 20 SMA and the red resistance line on both of today's bars, but failed to stay there.  This is the second time they have touched the 200 EMA and were rebuffed.  Despite today's buying frenzy resistance was still obvious.  Whether that is still the case tomorrow remains to be seen.


The red count dropped a bit today, but remains above 50.  The bulls still have some work to do.

Some people on CNBC were trying to say the market was up because of earnings.  Then Bob Pisani mentioned that might not be the case exactly.  He said Asia gapped up, then Europe gapped up and the U.S. followed.  Did the market have any real fundamental reason for the rally?  Spy opened near the high and the sellers went to work immediately.  The low was put in during the first hour, but the sellers returned when SPY got back up to the high.  It ended the day closing on the afternoon's low.  It is possible today was a one day wonder.  The bulls need to see upside follow through to get control back.  While the bulls are trying to get a bounce going off the retest of the mid Sept. low the sellers have so far thwarted them.  Who has the bigger hammer?

Bob

Monday, October 17, 2016

Daily update 10/17 Industrial production (IP)

A slow drift down today.


Today was the lowest close since 9/15.  It was fractionally above the 9/14 close.  The breadth was -56%.  New highs were 38 while new lows were 31.  Apparently there was no news worthy of making money managers make any major portfolio moves.  However, the sellers came out a bit on every intraday bounce.  The underlying bid we saw after the Feb. low through summer has clearly turned into an overhang of supply.  Apparently the earnings reports we have had so far has not changed that.  There is still no urgency to sell.  They are patiently waiting for strength at this time.


The futures tried hard not to move very far today.  The moving averages are negatively positioned and are sloping down.  Even the 200 SMA has started to turn down.  The bulls have a little work to do to turn things around.


The red count crept up a bit today, but remains below oversold levels. 

It is clear some investors are selling intraday strength.  Until they start buying the intraday dips again the path of least resistance appears to be down.  Breaking the Sept. SPX low of 2119 might make the sellers get more aggressive.  On the upside SPX needs to get a confirmed break of the 50 DMA.

One of the hosts on CNBC said all the well known investors he has talked to lately have been rather unenthusiastic about the market.  Some are outright worried.  If I have been doing my job that should not come as a surprise to anybody.  There are some serious headwinds out there at the moment.

Today turned the short term trends down across the board.

The latest IP data doesn't really tell us much.


Three of the last four months it has been right around the same area.  This probably could go either way from here.  It is very important which way it goes.  It is well off its high from 2014 so another downturn would not be good.  Bulls want to see this  thing get going on the upside.

Bob

Friday, October 14, 2016

Daily update 10/14 SPX double inside weeks

Uh oh.


SPX tested up into the 2145 resistance area this morning and was soundly rejected.  The new blue trendline is from the Feb. low.  SPX appears to have broken that line.  The break needs confirmation though.  New highs increased a bit to 50 while new lows dropped to 20.  The futures gapped up and ran up further after the open.  However, the persistent pattern of sellers showing up around 10:10 AM happened again.  They just kept hitting the bids on any intraday strength and SPX ended the day closing on its low.  This has been going on for weeks now.  You can almost set your watch by it.  During the last two bear markets it was common for sellers to come out some time during the morning on up days.  However, I can't remember them being so precise on the time.  It is like there is a coordinated effort going on.  This reminds me of all those 100 DMA bounces SPX did a few years back.  This is not random price action.  Something is going on.  Maybe the same group of people that were doing that coordinated buying are now doing coordinated selling.  At any rate this market is not going significantly higher until that price action stops.


The futures were rejected at the 20 SMA.  It appears that prior support has turned into resistance.


The red count moved down only slightly and remains above 50 and below oversold levels.  Here is a look at the weekly version.


While SPX is above the brexit low the red count is higher then it was then.  It is well above 50 now.  Lets look at the monthly version.


Notice the green count dropped precipitously in Sept. and has continued lower in Oct.  Both Aug. and Sept. were doji bars after the long run up from the 2009 low.  I think a monthly close below the Sept. low (2119) would be very bearish.  Also notice the double peaks in the red count earlier this year with the count dropping below 50 in between.  The only other times that happened going back to 1987 were in 2000 and early 2008.  You know what happened after that.  I think that was a sign we had entered a bear market.  In 2003 and 2009 the new bull markets shot the green count over 80 before dropping back.  The peak back in Aug. was 65.  Was that enough to kick off a new bull market?  I don't think so.

There have been a lot of billionaires saying they are short and expect the market to tank.  For all I know it could be them working together doing the coordinated selling.  All I know is that this price action is not random.  How long it lasts is anybodies guess.  I also know that if it persists long enough it will break the market down.  Investors are holding expensive stocks and earnings growth is either slow or non existent.  At some point there will be a panic exit if we keep heading lower.  Breaking the brexit low probably sends us back to the Feb. low.  Breaking that and full scale panic is likely.  SPX closed today at 2132.98.  That is less then 3 points above the 2015 high close from May of that year.  That is almost 17 months ago.  While the pundits proclaim the bull market is still intact is that really true?  Shouldn't we have more then 3 points of gains in all that time?  Meanwhile we have 17 months of people putting money to work in the market with no gains to show for it.  How long do you think they will hold on when the losses start to add up?  There is clearly an air pocket below the Feb. low all the way down to the 2007 high around 1550.  On top of the shaky behavior of the market the latest NAAIM number came out today at 86.  That means active money managers are extremely loaded up on the long side.  It is possible they are not very heavily hedged because of the prevailing feeling that nothing bad can happen to the market.  After all it is an election year.  Maybe I worry for nothing and everything is just fine.  However, it looks to me this market could come unhinged a bit more then people think. 

I missed the possible significance of the weekly chart.  This could be a bad omen.  The S&P did something it hasn’t since 2008 — and it could be a bad sign for stocks  Here are a couple of snippets.

The S&P 500 just experienced two "inside weeks" in a row for the first time since February 2008, an indication that the market may be in for a major breakdown or breakout in the weeks ahead.

Inside weeks are unusual, but two inside weeks in a row is rare indeed. The last time the market created such a Russian-doll-like trading pattern was in February 2008; the two prior occurrences were in June 2007 and January 2000, according to Ryan Detrick, a technical analyst with LPL Financial.

The last three times SPX had back to back inside weeks the market was either in a bear market or about to start one.  Statistically that is a small sample, but it covers 16 years of market action.  Given the weakness I see in the economy it is easy for me to believe a bear market is coming.

The market and sector status pages have been updated.  Have a great weekend.

Bob

Thursday, October 13, 2016

Daily update 10/13 This is Why US Gov. Deficit Numbers are a BIG Lie

Not as bad as it could have been.


SPX tested down below the key 2120 level, but bounced back above it.  Thus validating the importance.  The breadth was -65%.  New highs came in at 30 while new lows increased to 36.  That is the most new lows since the brexit vote sell off.  Some people might view that chart as a possible double bottom.


The futures got a bit extended on the downside short term and put together a nice rally.  The -DI line reached the 35 level again and that often causes a bounce.  SPX never made new highs since the last -DI 35 reading.  The door to a larger decline was already open.  That is just a reminder.  It remains to be seen if the bears step through that door.


The red count turned up a bit today, but remains below oversold levels.

We have not had a high TRIN reading.  The red count has not reached oversold levels.  The VIX has a 16 handle.  This does not appear to be a technical condition that will bring in a rush of buyers to push SPX to new highs.  If this is to be a double I think the impetus will have to come from earnings.  Of course earnings could end up being the reason the market rolls over and down through 2120.  I don't have any idea what happens tomorrow.  I am sure the news flow will determine that.  There is room to bounce as it is 20 points up to SPX's 20 DMA.

Today's early selling came from disappointing economic data out of China.  You might recall SPX has tanked on China worries before.  The worries seem to come and go, but the problems remain.  Sometimes I wonder if a large part of the buying we saw last spring was mostly foreign money coming to the U.S. to escape the world's problems.  After all there are a lot of money managers around the world that must be invested at all times.  The problem of course is that one consequence of globalization is that the entire world tanks together.  We have a truly global economy now days.  There will be no island of refuge if the proverbial *(&^ hits the fan.

This is a good article, but only read it if you can handle or want to know the truth. This is Why US Gov. Deficit Numbers are a BIG Lie

Bob

Wednesday, October 12, 2016

Daily update 10/12 Just Say No!

Dead cat bounce day?


After the FOMC minutes came out at 2 PM the market messed around and eventually SPX got up to the key 2145 level.  It stopped dead in its tracks and drifted lower the rest of the day.  That validates that resistance level.  The breadth was slightly positive.  New highs came in at 33 while new lows were 28.  Volume was very light.  I would say today was the very definition of a dead cat bounce. 


The futures are a little lower in after hours.  I don't know if that is because of more poor earnings or what.  We can see the futures tested above the new red resistance line (prior support) on two different bars and failed.  Old support is now resistance (at least for today).


The red count slipped a bit today.  It remains above 50 and below oversold levels.  There is more room for the market to go down.

This was a very wimpy bounce day.  It looks much more like a continuation pattern rather then the start of a bottom.  I think we are going to test the key 2120 level.  Breaking that could unleash the flood gates.  The dollar continued higher today.  It is really on a tear.  That will certainly lower future earnings estimates if it keeps that up.  I heard a couple of people on CNBC today talking about how the expected pick up in the economy has not happened.  You all know that as I have shown you that is the case.  However, the pundits on TV have all been saying the economy is doing great.  Maybe more people are realizing that is not the case.  This is an interesting situation.  The economy is weak, it is possible earnings won't be very good, the FED is insisting it will raise rates in Dec. and nobody is expecting a big down move.  The complacency in the face of obvious head winds is something that never would have happened before the FED left rates at 0 for years.  The market keeps bouncing back from every sell off.  Now everybody expects that to be the case.  There are a lot of things in this world I do not understand.  However, there is never going to be a situation where the market never, ever tanks ever again.  One day it won't come bouncing right back and a lot of people will lose a lot of money.  The only question is when.  Maybe now is the time, maybe it isn't.  I can see there is certainly a risk of a downside surprise.  Whether that risk turns into actual downside likely resides with earnings reports.  Time to pay attention to what is going on there a little more closely.  I heard Bob Pisani today saying things were not starting out very good.  A lot can happen though as more companies report.

This is a very interesting read about the FED.  Just Say No!

Bob

Tuesday, October 11, 2016

Daily update 10/11 Confidence Lost, Then Crisis

Splat.


Yesterday we had a hint in the red/green chart that bears might be trying to take control.  The bears decided to step through the door.  SPX ended the day right at the 100 SMA.  That put it below the lows of the last 3 weeks.  Breadth was -84%.  New highs dropped way down to 29 while new lows picked up to 32.  Broad based selling, but no panic as TRIN was only 1.23.  Volume picked up from yesterday, but was not high enough to indicate some kind of climax. 


The futures are up at the moment and are above the recent lows.  Will the dip buyers come to the rescue again?


The red count jumped over 50, but remains below oversold levels. 


The long term bull pressure lines got a negative cross today so all time frames are negative.  This is not enough to pronounce the rally over.  However, it could be on life support.


In Daily update 9/29 IMF's SDR change on Oct. 1 I wrote "The announcement caused a big move down in the dollar the first trading day.  The market has had plenty of time to adjust.  I suspect this adjustment is what has been holding the dollar index down.  I think this could be a case of sell the rumor and buy the fact.  The volatility of the dollar is declining in recent weeks indicating positioning is likely complete.  The 500 DMA has been solid support since first touched last spring.  Instead of the dollar crashing as the gloom and doom crowd is suggesting I expect the dollar to continue its bull market.  The selling involved with the weight change looks complete to me.  However, there are still $9 trillion (or more) of dollar denominated foreign debt that should be a constant demand still out there.  There might be a down day on Monday as the news of the change hits the wires, but shortly after that I think the dollar will rally and break out above that down trendline."

The dollar rallied as expected and has a confirmed break of the downtrend line.  It looks like the dollar bull market might be back on.  There was quite a bit of discussion on CNBC about that today.  It is being noticed.  I think the dollar was largely the reason for today's sell off.  The dollar rising is effectively a global monetary tightening so what it does here is extremely important.  A test of last year's highs seems likely.  Whether it makes a triple top in the process or eventually breaks out to new highs remains to be seen. 
 
The bears made a strong attempt to take control of this market.  All market internals are negative.  However, SPX is still above the key 2120 level.  It tested below the 2015 high close of 2130, but ended the day above it.  The futures are up even more after hours.  Maybe the bulls will come out to play in the morning.  The sellers have been coming in between 10 and 10:10 AM.  If the futures are still up in the morning it will be important to see if the pattern repeats.  SPX 2145 has been support the last couple of weeks so it might be resistance now.  Closing back above that level would be a positive and might foretell an upside break out over the 50 DMA.

The long term bull pressure lines indicate the strong buying wave we saw last spring has run its course.  The market needs a fresh wave of buying if SPX is going to return to the highs.  The VIX is probably not high enough at this time to get that strong buying.  The problem here is that a break of the 2120 support level indicates the summer break out to new highs failed.  That could unleash considerable selling.  Especially if earnings disappoint.  On that  note David Kostin from GS was on CNBC today.  He said current expectations for Q3 earnings were for a decline of about 1%.  He also said their economic indicators suggest there is risk that companies might miss that target.  Right after he said that the market took another leg down.  Remember that wave of buying we saw last spring was because Q2 was supposed to be the earnings trough.  If that turns out not to be the case there could be even more selling pressure.  So not only are Q2 earnings important, but also what companies say about the future.  A rising dollar will not help that part.  The European banking system under stress probably won't help either.  There are lots of things that could go wrong.  Possibly wrong in a big way.  The next couple weeks of earnings reports will be critical.

This is an interesting article on Deutsche Bank situation.  On My Radar: Confidence Lost, Then Crisis

Bob

Important

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