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Thursday, February 16, 2017

Daily update 2/16 Industrial Production (IP)

Apparently some of the buying the last few days was caused by a large fund covering their position.  According to CNBC this morning that particular trade was over.  Curious the market did not rally today. 

That is a hanging man bar.  After a long run up that could be significant.  SPX needs to close below today's low to confirm the potential of a reversal.  Breadth was -55%.  New highs fell a bit to 193.

The ADX has turned down on the futures which suggests they have moved into consolidation mode.  The short term uptrend  was strong, but it is probably time for a rest.  Whether that turns into an important reversal remains to be seen.  High ADX readings often mean a retest of the high or low before a reversal occurs.  However, sometimes they just reverse without that test (more often at bottoms) and when that happens it can be sharp.  A pullback to the red line would be perfectly normal and could find support there.  Below that and we could be in for a more significant pullback.

The green count turned down a little bit today from overbought.  We are probably past peak momentum, but not necessarily peak price.

From what I understand the fund mentioned above started covering their position when SPX crossed 2300.  That encompasses almost the entire last leg up.  Maybe that move is a bit artificial.  Would that make a bigger reversal more likely then a sideways consolidation?  Time will tell.  The first warning sign would be a close below today's low.  If we keep going up from here then we know it really is people still piling in.

Here is a look at the latest IP chart.

The pop in Dec. was largely if not entirely due to the extreme cold weather across the northern half of the country.  The move back down in Jan. is largely due to the much warmer weather in Jan.  Notice that IP is just about where it was back in July.  We still do not have a clear uptrend in place to indicate the economy is getting stronger.  This is muddling around.


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