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Tuesday, March 7, 2017

Daily update 3/7 Soft/hard economic data spread

More hitting of the bids.

Intraday bounces got sold today.  Breadth was -67%.  Once again that was more negative then what one would expect for the amount SPX was down.  New highs were 53 while new lows were 62.  Four days off a new high and there were more lows then highs.  That is pretty rare.  This is known as the Ohama titanic syndrome.  I don't know much about it.  Anybody that knows the details of this signal please email me.  At any rate the idea that 3/1 was an exhaustion gap is looking more and more likely.

The futures are down a bit as I write this.  They are getting into the area of the lower channel line and the 50 SMA.  This is a possible bounce point.

The red count was up some today, but remains below 50.

The short term red line is the highest it has been since the Nov. low.  The intermediate lines have come together and the long term lines are getting close.  We are getting some selling pressure now.

The bears are starting to come to life a bit.  How long that lasts is the real question.  Will the bulls rush back in on this dip or wait for lower prices?  The dip buyers have been active intraday, but the rallies are getting sold into so far.  The evidence suggests we may have entered into a corrective phase.  With the market so extended that should not be a surprise.  Right now the market is still hanging around in that 3/1 gap, but a little lower and the selling might pick up a bit.

R2000 has entered a short term downtrend.

I have mentioned a number of times how odd it is that the hard economic data is not showing the strength expected based on surveys and leading economic indicators.  This chart makes that very clear.


The difference between the soft data and hard is the biggest it has been since the chart began in 2000.  Notice the last time the spread was high was early 2011.  We ended up with a near 20% draw down in SPX and a recession scare so bad that ECRI was saying a recession was unavoidable.  The industrial production data at that time was much stronger then we have today.  There is a possibility that the real economy takes off.  There is also the possibility that investors end up being disappointed if the economy softens further.  Expectations may be way too high for the economy to ever meet.  Curious situation and I don't exactly understand it.  Why are the leading indicators so much stronger then the real economy?


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