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Friday, March 31, 2017

Daily update 3/31

Quarter end cross currents.

SPX closed slightly below the 20 SMA.  Breadth was +55%.  New highs were stable again at 84.  Both the bulls and bears took turns intraday.

The futures came back into the channel overnight.  They tried to break out again during the day, but sold off going into the close.  Breaking out of the channel and coming right back in often leads to a trip to the other channel line.  The futures have already done that multiple times this month.  Monday will be important.

The green count dropped back below 50.  Not a great sign for the bulls.

The action of the last trading day of the month is often reversed the next trading day.  The market looked like it may be rolling over here.  Since it was month end the action might have been meaningless.  Further weakness on Monday would not be a good sign for this bounce though.  Since the market has already bounced off the 50 DMA a roll over here is likely to go through that MA this time.  There could be a bit of an air pocket under there down to the 2280 area.  There should be good support there though.

All bull markets come to an end eventually.

The question is when will that penguin wake up the bear.

Have a great weekend.


Thursday, March 30, 2017

Daily update 3/30 CBO 2017 Long-Term Budget

Break out above first resistance.

SPX closed above the 20 SMA.  Breadth was +57%.  New highs were stable at 86.  An expansion of new highs would have been better.  Today was a bit tepid.

The futures have popped out above the upper channel line again.  The last two times they did this they ended up falling back.  I don't know if it is different this time or not.

The green count crossed 50.  This is usually where the bounce fails if it is going to.

The short term lines are showing some buying power.  The intermediate lines are coming together but are still slightly negative.  The long term lines have been braided recently.  Still not clear if the market is just consolidating or forming a top.  

Both R2000 and SPX turned their short term trends to neutral.  Despite the market being up the VIX was up a bit.  I wonder if some investors were adding hedges.  The oversold condition has been eliminated.  SPX is right at the edge of the 3/1 gap up so there could be some resistance just above here.  If that gap was an exhaustion gap the bounce should fail right around here.  While the market has struggled since that day it has not sold off enough to conclude there was exhaustion.  I think this is an important bounce.  Will the bulls decide to push to new highs?

I heard CNBC say the CBO issued a warning about a possible future financial crisis because of sky rocketing government debt.  All I can say it is about time somebody said something.  Here is the report.  CBO budget outlook


Wednesday, March 29, 2017

Daily update 3/29

To go up or not to go up.

SPX is still a few points below the 20 SMA.  It was not able to surpass yesterday's high.  Breadth was +58%.  New highs decreased a bit to 84.  Volume dropped off considerably.

The futures got stuck right at the 50 and 100 SMAs.  Will they or won't they get through here?

The green count picked up considerably today, but remains below 50.  Better for the bulls, but still non committal.

The market had clear resistance today at yesterday's high.  We will have to wait and see if it gets through it.  It is not clear to me that it will.


Tuesday, March 28, 2017

Daily update 3/28 Hedge fund exposure

Dip buyers showed up in force.

SPX came within a few points of hitting the 20 SMA.  Breadth was a whopping +70%.  New highs increased a bit to 89.  Volume was slightly lighter then yesterday which was not particularly high.  Is the market launching from a two step pullback?

The futures got above the 100 SMA and almost tagged the 50.  However, they fell back late in the day and ended up below the 100 again.  Its not exactly clear here whether the futures will continue higher or not.

The red count dropped below 50, but remains above the green.  Not clear yet on this chart if the bulls are going to take control.

The dip buyers are doing their thing yet again.  The biggest fly in the ointment I see is the VIX.  One day off the low and it is already down to 11.53.  That is really low, but I can't say whether that will end up being a problem or not.  Since the 3/21 smack down the futures 100 SMA has been resistance.  If the bulls overcome that line it should set up a test of the high.  A failure to do that would be an indication the sellers have more ammo at this time.

This is an interesting chart.

Hedge funds have had an historically heavy long exposure lately.  This condition has preceded sizable corrections in the past.  However, those corrections don't always start right away.  In Daily update 2/15 McClellan summation index I showed some historical instances of sizable corrections when the major indexes were making new highs and the summation index was negative.  The above chart shows a second indicator that has had similar historical consequences.  The possibility exists the market has a bigger pullback then what most people expect.  Just because the door is open to a bigger correction it does not mean it will happen.  On the other hand, bigger pullbacks often happen when they are least expected.


Monday, March 27, 2017

Daily update 3/27

The bulls are keeping the bounce scenario alive.

It appeared that nobody wanted to sell into the sizable gap down this morning.  That emboldened the dip buyers to load up.  Sellers never really showed up.  Breadth was -74% early in the day, but ended up about even.  New highs dropped down to 48.  New lows picked up a bit to 39, but that was lower then the 80 on 8/22.  SPX opened below the 50 SMA, but did not stay there long.  Most indexes closed slightly green.

The futures tested lower, but quickly came back above the 3/21 low this morning.  That set the table for the bulls to keep nibbling on stocks all day.

The counts did not change much today. 

The market still looks like it wants to bounce.  The gap down did not deter the dip buyers.  While the VIX was over 14 early in the day it collapsed to close down over 3.5% at 12.5.  That is already low and the market hasn't even bounced yet.  I heard somebody on TV claiming this pullback is just like brexit or the election low.  Both of those incidents saw the VIX well over 20.  This time is different.  The market may have trouble getting much past the highs.  First things first though.  Lets see if the bulls do indeed get a bounce going.


Friday, March 24, 2017

Daily update 3/24

Mixed day.

SPX was up and down today.  Breadth ended the day slightly positive.  New highs were 62 while new lows came in at 23.  The buyers started right out of the gate.  After stalling mid day for a while it came out that there was a scheduled vote on the healthcare bill, but they did not have the votes to pass it.  That sent the market down to a new low for the current pullback.  Then the news hit that the bill had been pulled which sent the market higher.  This leaves us with a potential successful test of the 3/22 low.  That might embolden some bulls on Monday.

The futures seem to be hugging the 100 SMA.  Will they be able to climb back above it?

The counts were stable today.  Still no oversold condition.  That might be important if we bounce from here.

It would appear that the healthcare bill is off the table for now.  From what I understand they were looking to get some savings for the government in that bill so they could do bigger tax cuts.  That should mean the cuts won't be as big as was being talked about.  Whether that matters to the market or not I cannot say. 

We don't have a juicy oversold condition for the bulls to sink their teeth into.  However, we do have a possible successful test of the 3/22 low.  A bounce is certainly feasible from here.  If the market is up Monday morning the buyers might show up to keep it going.  Getting this close to the 50 DMA and not touching it is usually problematical.  A bounce often ends with SPX rolling over around the 20 DMA.  Well, that is when I take a hundred years of history into context.  In the context of this particular bull market it is a bit different.  Most bounces over the last few years end up at new highs.  If the bears show up on Monday the obvious next target down is the 50 DMA (2330).

The next time you see somebody that needs comforting remember even bears need a hug once in a while.

Have a great weekend.


Thursday, March 23, 2017

Daily update 3/23

Bounce aborted when news that today's healthcare vote was probably not going to happen.

Weak two day bounce attempt.  There was some strength in small caps though.  Breadth was +62%.  New highs increased a bit to 61,  New lows dropped way down to 23.

The futures tested above the 100 SMA, but were rejected.  However, the rejection came after it started to become obvious the healthcare bill was not going to pass the house today. 

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

SPX had a good bounce going through mid day.  That was squashed by the folks in D.C.  So how do we predict what happens tomorrow?  If today's action had happened without news I would say the odds tomorrow will be down are pretty good.  That may still be the case, but news out of D.C. could easily change that.  Until we get the vote over with the market could be choppy.  I don't have any idea how to analyze D.C. actions.


Wednesday, March 22, 2017

Daily update 2/22

A few dip buyers showed up today.

SPX held on to the upper channel line.  Breadth was slightly positive.  New highs dropped way down to 35.  New lows climbed again to 80.  No follow through selling to speak of this morning which emboldened some dip buyers to step in.

The futures are showing a bit of a bounce.  It is not uncommon after a high -DI reading to get an oversold bounce.  Whether that bounce gets some legs probably depends on a lot of different factors. 

The red count dropped back below 50.  It looks like the bears are taking a wait and see atttitude for now.

A lot of sectors have been hit pretty hard and I have to think that might not all be related to the healthcare vote.  Anything that looks to be delaying tax cuts will probably not be received very well.  The house is supposed to vote on healthcare tomorrow.  I have no idea how that will work out.  A no vote or a postponement will probably be a negative.  If the bill is passed we could see more bounce.  So I guess we will wait and see what happens tomorrow and go from there.


Tuesday, March 21, 2017

Daily update 3/21


Clearly the market decided it didn't like something.  At least for one day.  Quite a bit of volume behind the sell off.  Breadth was -77%.  New highs came in at 104.  New lows picked up considerably to 52.  SPX came back to the upper channel line it broke out above back in Feb.  That could provide some support.

Last night I mentioned a break of the 50 SMA would probably send the futures down to the 100.  They managed to do that all in one day.  They are currently down a little more after hours.  The -DI line is well above the 35 threshold that opens up the door for a bigger decline.  That is the highest it has been since election night.  Whether the bears choose to step through that open door remains to be seen.  It would not be a surprise with what looks like an exhaustion gap on 3/1 to see a sizable pullback. 

The red line crossed above 50, but remains below the oversold threshold.  The bears are making an attempt to gain control.  The intermediate indicator is still above 50 so the bulls still have a chance at a another save.

The short term lines recrossed today, but the more important thing to note is the cross in the long term lines.  Those lines could do a bounce cross if the bulls start another round of buying.  On the other hand, the bears might be in the process of gaining control for more then just a few days.  We will have to see how the bulls react to today's big move down.

Technically the door is opening up for a bigger correction, but it is too soon to tell if the bears are going to pounce on that opportunity or not.  Further weakness tomorrow would increase the odds for the bears. 

Both SPX and R2000 entered short term downtrends today.  COMPX was actually at an all time high early in the day so it remains neutral despite the magnitude of the sell off.


Monday, March 20, 2017

Daily update 3/20 Industrial production (iP)

I guess the lack of buying enthusiasm had nothing to do with option expiration.

SPX tested below the 20 SMA and bounced.  While it held the MA at the close this is not the most inspiring looking chart at the moment.  Breadth was -56%.  New highs dropped down to 107.  New lows picked up a bit to 23.  The old Wall Street saying "markets can fall from their own weight" comes to mind.  There is clearly a lack of buying pressure at the moment.  How long that might last is impossible to say.

The futures are slightly below the 50 SMA.  It looks like it could be time to bounce or break.  A break could send them down to the 100 SMA.

The green count slipped considerably today, but remains above the red line.  So far that last spike up to oversold in the red line has not generated a lot of buying interest.  I take that to mean the market needs a catalyst to move higher from here.  Just getting oversold does not seem to be enough to entice the buyers.

I am going to throw this out there even if it might sound a little crazy.  There are some things I don't understand.  The last move up in early Feb. came after DJT tweeted out they would have a phenomenal tax package in a few weeks.  A few weeks later we find out they can't do the tax package until they do the healthcare changes.  I have a bit of a hard time believing they did not already know they wanted to do healthcare first.  So why talk about the tax plan?  Then they throw out a healthcare plan that practically nobody seems to like.  They say it has no chance to pass the senate at this time.  Next DJT claims that BO spied on him, but there seems to be no evidence of that so far.  Why would you say such a thing if you did not have some reasonable proof.  Over the weekend the G20 meeting ended with the possibility of trade wars.  Does any of this makes sense?  Now put those same actions into a context of wanting to spark a sell off in the market.  They set the market up for disappointment with the tax plan, but that didn't work.  Knowing they want to do the healthcare before taxes they throw out a plan that is very unlikely to pass.  That didn't work either.  Get radical and let the president sound a little nutty.  So far that hasn't worked either.  Start speculation of global trade wars.  The market didn't seem to notice that today.  If the objective is to get the market to sell off we will see more crazy things come out of D.C.  If that is not the objective, then I have no idea what they are doing. 

You might ask why would they want the market to go down.  That one is easy.  Clearly the market is in a bubble.  You might recall DJT saying that on the campaign trail.  The sooner it pops the easier it will be to blame it on BO.  If the market stays up too long DJT will definitely get the blame.  Of course the real truth could be I am just going loco.

Here is a look at the latest IP chart.

IP looks rather flat the last three months.  IP has never been negative over a 24 month period without the U.S. being in recession.  I don't think we are in recession, but I don't think there is an all clear sign yet either.  This is the longest period of U.S. economic weakness of this magnitude where the U.S. did not fall into recession.  Could it be different this time?  I am not yet convinced of that, but there is a first time for everything.   I think the jury is still out especially with the FED raising rates.


Friday, March 17, 2017

Daily update 3/17

More nothing.

The lack of action could be due to an option week pin.  If that is the case it should be all over now.  Maybe next week the market will resume going somewhere.  Breadth was +57% due to strength in small caps.  new highs dropped a bit to 139.  Except for FED day this week was a non event.

The futures appear to be headed for the 20 and 50 SMA area again.  Not much new here.

The green count ticked up a bit, but nothing to write home about. 

The muted action this week might have been caused by the option configuration for expiration.  We will see if the lack of buying enthusiasm extends into next week or not.  If it does then we might really be in a corrective period.

This reminds me of the current stock market.  Complacency.

Have a great weekend.


Thursday, March 16, 2017

Daily update 3/16 The Corporate Bond Market: The Start of the Matter

No follow through from yesterday's buying panic.

Volume dropped considerably today.  That  means there was a lack of buying enthusiasm rather then a lot of selling pressure.  Breadth was slightly positive.  New highs remained near yesterday's number at 165.  New lows dropped way down to 13.

The futures tried to break out of the channel, but fell back in.  Since we did not get a clear break out and failure they won't necessarily drop back to the lower channel.

The green count slipped considerably today.  The bulls had a chance to seize the day, but decided not to.

The short term bull pressure lines are positive, but not by much.  The intermediate lines are still negative.  That last pullback did some technical damage and it remains to be seen if the bulls will rekindle their buying enthusiasm or not.  The long term lines are still positive, but the green line is not particularly strong with SPX sitting this close to the high.

There was clearly a lack of desire by the bulls today.  What caused that is hard to say.  It could be option related which should not last.  However, it could be oil related (or some other reason like valuation) which could persist.  I think we need to let the market sort itself it put and see what develops.

R2000 turned its short term trend sideways today.

Some interesting comments on the corporate bond market.
The Corporate Bond Market: The Start of the Matter


Wednesday, March 15, 2017

Daily update 3/15

Nothing like a rate hike to spark some buying.

We finally got the bounce off the 20 SMA.  Breadth was +84%.  That probably qualifies as panic buying.  I can't imagine what the panic was about though.  New highs increased to 156.  New lows dropped way down to 26.

The futures are testing the upper channel line.  Will they break out and continue on or not?

Pretty good pop in the green count today, but it remains below 50.

FED day moves are notoriously fickle.  Sometimes they reverse in the next day or two.  We will just have to wait and see if SPX can get above 2400 or not.

Here are a couple of articles mostly on valuation sent in by a friend (tnx Manny).
“In the Short Run, It’s Very Difficult to See When to Bail Out”
Blue Skies


Tuesday, March 14, 2017

Daily update 3/14

The futures headed south right at the European open so no pre FED day gap up.

SPX closed slightly below the 20 SMA.  Breadth was -66%.  New highs dropped a bit to 54.  New lows increased to 69.  That is not particularly good.  I think the break down in oil has put a damper on buying enthusiasm.  So far the selling pressure has been minimal, but I don't know if we can count on that continuing if oil keeps dropping.  I don't know if there is a magic oil price that becomes a problem.

The futures closed below the 50 SMA, but have not confirmed a break yet. 

The red count remains above 50.

The market seems to be losing some steam.  We had a good bounce setup off the 20 DMA, but so far the bulls have failed to pounce on that.  However, the bears have not been anxious to sell yet.  That 3/1 big gap up is looking more and more like an exhaustion gap.  We may have entered some kind of corrective phase.  In Daily update 2/15 McClellan summation index I wrote about the oddly negative summation index with the indexes at new highs.  That never cleared up.  It is entirely possible we are in for a bigger decline then most people expect.  It is also possible 3/1 was the bull market high.  Unfortunately there is no way to know that yet.  I believe a lot will depend on what the economy does.  I am watching it closely.  There will be some important data coming up soon.



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