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Thursday, July 13, 2017

Daily update 7/13

Slight bit of follow through, but...

SPX fell just short of 2450 and 4 points short of a new high.  This is the second time it has closed above the FED rate hike resistance line.  Last time it turned right back down the next day.  Breadth was slightly positive.  New highs actually decreased to 120.  Not a particularly good sign.  New lows dropped again to 11.  At least they are not elevated at the moment.

The futures stayed outside the channel continuing yesterday's rally.  Closing back in the channel should indicate this thrust is over.

At least the green count increased today.  However, it remains below 50.  Still non committal and SPX is just a few points from a new high.

I heard somebody mention on TV today that when the VIX gets below 10 it tends to pop.  Traders are starting to go long volatility when that happens.  I have talked about that a number of times in the blog, but this is the first time I have seen any mention of that anywhere else.  It will now become common knowledge which will either make it stop happening or a self fulfilling event.  Since the history of the VIX shows it has never been able to stay below 10 very long it seems unlikely to stop working.  It might stop getting below 10 though.  Time will tell. 

The VIX closed at 9.9.  Several big banks report earning tomorrow.  They are expected to be very good.  That could cause a gap up to new highs.  It seems unlikely to stay there though.  If we gap down it would not be a surprise to see it keep going down. 

I think earnings comparisons get a bit tougher in Q3 and Q4 especially if oil stays in the mid 40s.  I am still not exactly sure what is going on with the economy.  It is clearly not as strong as the pundits claim.  Auto sales and retail sales in general have not been good.  There seems to be some weakness developing in the housing market.  Delinquencies are rising in most loan categories.  However, I have not seen any sign the economy is rolling over yet.  Just keep in mind caution signs are plentiful and softening in the economy going forward is not out of the question.


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