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Monday, November 21, 2016


SPX makes a new high close.

SPX closed above the uptrend line from the Feb. low.  I can't say that is significant, but it might be significant if it does not stay there for a while.  The breadth was +71%.  The strong breadth days on this rally have corresponded to strong days in the price of oil.  There still seems to be some connection going on there.  There has been some comments recently on an OPEC deal of some kind.  When those comments are positive on a deal oil goes up.  Whether there ever is a deal is another question entirely.  New highs were 208 which was good, but well below the 330 on 11/14.  New lows came in at 22 which is a bit elevated for SPX closing at a new high. 

The futures closed above the recently drawn upper trendline.  They seemed to be making an attempt to invalidate the bearish looking rising wedge.  They will need to stay up there for a while to make sure that is the case.  Generally speaking when price breaks out of a structure like that and comes right back in it ends up breaking out the other side. 

The green count picked up a bit today, but remains below recent levels.  It also remains well below overbought.  The most curious aspect is that so far it has not gotten as high as that double peak back in Sept.  The summer break out had a much higher peak.  Another sign this thrust does not appear to be as strong at that one was.

The short term lines are showing a little bit of a negative divergence of late.  It is not unusual to peak before price does.  The intermediate lines got a positive cross.  The long term lines have come together.  Since Sept. the short term red line spikes have been higher then the green line spikes.  That generally means the market is in some kind of corrective phase and upside progress is tough to come by. 

Internally this break out does not appear to be nearly as strong as the summer one was.  That strikes me as a bit odd as the financial and small cap indexes are at new highs this time.  The transports have been moving up strongly as well, but have not made it back to the high yet.  If you just look at the indexes the market looks super strong.  I believe this is caused by the inflows going mostly to index funds and ETFs.  As long as those inflows keep coming then the market will keep going up.  But now that all major indexes are at the highs will those flows keep coming?  Valuations are still high and rates are rising.  Not to mention the dollar breaking out on the upside.  Interesting juncture.  Is the two year stagnation coming to an end or not?  This is the second attempt to break above the 2015 high.  If it fails again it might bring in more selling pressure this time given the fundamental backdrop.

Thanks all for the nice comments on Friday's post.

This is an interesting report (sent in by a friend, thanks Manny) on the performance of the economy  in different areas of the country.  THE NEW MAP OF ECONOMIC GROWTH AND RECOVERY


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