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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.


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