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Tuesday, November 29, 2016

Daily update 11/29 Bloomberg Financial conditions index

Bounce back fell a little short of yesterday's high.

The morning dip was met with some buying when SPX dropped below 2200.  However, when SPX got to within 1 point of yesterday's high the sellers showed up again.  Breadth was slightly negative.  New highs were stable at 131.  New lows picked up a bit to 25. 

The futures bounced off the 20 SMA, but did not get very far.  They are sitting just above it as I write this.  Will they break it or bounce?

The green count picked up just a bit today and remains above 50.  Still bullish, but not as strong as one would like to see on a break out type move.

The short term bull pressure lines are getting ever closet together.  The intermediate line is still rising, but remains below the level of the last red line spike.  The long term line has quite a ways to go to get to its last red peak.  If the market turns down without eclipsing any of the red peaks on the various time frames it would be highly likely we would see the last swing low again.

It appeared that 2200 held as support today.  The more important support should be the area of the prior high 2190-93.  Should that fail to hold selling will likely pick up. 

Tomorrow is the much talked about OPEC meeting.  There did not seem to be very much optimism on a deal today, but who knows what will happen when they really sit down together.  It seems unlikely to me there will be any cut in production.  I think the best would be a freeze.  That freeze would be coming when OPEC production was the highest it had ever been.  I am not sure that will be very supportive of price.  The correlation of SPX to oil has been somewhat loose lately.  However, if there is no deal and oil reacts very negatively it could become important once again.  An actual production cut could be very bullish to both. 

On Dec. 4th there is a big referendum vote in Italy that could be market moving.  A no vote is supposed to be bad for markets, but we have heard such things before with no serious consequences.  Maybe this one is for real or maybe it is just another non event.  It may put a bit of a damper on buying enthusiasm in an overbought market until it is over though. 

I have not taken a look at this index in a long time.  It is painting a slightly different picture then SPX at the moment.  First lets look at the index starting back in 2007.

The index went negative in Aug. of 2007 and stayed there throughout the crisis in 2008.  The index was still negative when SPX set its bull market high in Oct. of 2007.  Now lets look at the current chart.

The index has been negative most of the time since Aug. 2015.  It is only slightly negative at the moment as SPX hits a new high.  While it is not as negative as it was when SPX hit its high in 2007 it has been negative for a lot longer period of time.  The recent peak was below the peaks back in May and July.  This index is lending some credence to the theory we might be seeing a blow off top.  The economic situation is not nearly as rosy as the pundits would like everyone to believe.  This is just one more piece of data showing that.


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