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Wednesday, April 12, 2017

Daily updpate 4/12

Less buying enthusiasm today.

SPX closed below the 50 SMA.  The breadth was -66%.  New highs slipped a bit to 76.  No panic selling today, but there was plenty of hitting of the bids.  The bears kept the dip buyers from making any upside progress.

The futures popped up over the 20 SMA overnight.  However, sellers came in before the market opened and push them back down.  They are now sitting near the bottom of this month's trading range.

The red line crossed back above the green again.  Both lines remain below 50.  A bull/bear standoff.

Since the 3/21 splat there has been considerable dip buying enthusiasm.  However, each rally was met with sellers once price got above the 20 DMA on SPX.  Most of the time since 3/21 oil has been rallying.  Maybe that was helping the dip buyers enthusiasm level.  Today oil sold off and buyers were very laid back.  Maybe that was just a coincidence and maybe it wasn't.  I read that oil production was at 20 month highs.  That was likely the catalyst for the move down.  Was that just a one day move or is the multi week rally coming to an end?  Was the dip buying enthusiasm in stocks related to the oil rally or something else entirely?  If only I knew the answers to those questions.  What I do know is that a break down in the market will leave three weeks of dip buyers underwater and unhappy.  Will they hold or fold?  A close below today's low suggests a move down to test the 3/27 low (2322).  If those dip buyers fold that would not take long.  A close above the 20 DMA could get the ball rolling on the upside.  That might be hard for the bulls to achieve at the moment.

In Daily update 3/20 Industrial production (iP) I wrote:

"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."

Since that time the tax plan seems to be getting further and further away.  Ryan says the House has a plan, the Senate has a plan, the White House has a plan and they are all different.  Healthcare had been mostly sidelined, but I heard DJT once again say healthcare needs to be done before taxes.  I don't think there is much going on with an infrastructure bill.  Despite the post election rally seemingly built on the Trump agenda it is interesting none of the political mess has had much effect on the market.  I think it is very clear things are not going to happen any time soon.  Quick, act surprised.  Now the FED enters the scene with talk about balance sheet reduction and over valued stocks.  From where I sit the balance sheet talk came totally out of the blue.  All I can remember hearing was the FED wanted to normalize rates while maintaining the balance sheet.  What changed?  It certainly was not economic growth.  I think every time the FED talks about stock valuation they get criticized.  Why mention that now?  Doesn't it seem like both those FED talking points could be aimed at getting the stock market lower?  Now it seems that both the government and the FED are trying to get the market to go down without doing anything overtly to make it happen.  Maybe there is some other explanation, but I am having trouble figuring out what it could be.


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