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Thursday, September 14, 2017

Daily update 9/14 Fund Managers Drop US Exposure to 10 Year Low

Resistance held again.

Like yesterday when SPX got above the 9/12 high it sold off.  Not hard, but enough to know there is resistance.  Breadth was slightly negative.  New highs fell to 98.  More loss of momentum.

The futures are down a bit after hours.  They are just about at the upper channel edge.  Closing inside the line should mean the current thrust is over and consolidation has started.

The green count is turning down from overbought.  I don't think this tells us much though.

The most important thing today was probably that QQQ was quite weak.  I mentioned that since it made a new high days ago it stalled.  It may be turning down from that stall so it needs to be watched closely.  The last two days the bulls faithfully bought the slight down openings.  However, once price got to a new high the sellers showed up.  Not in force, but enough to push prices back down a bit.  I wonder if the futures are down again tomorrow if they will buy it.  The short term market internals are pretty strong on this rally.  However, the price action of the last three days looks quite tentative.  I don't know if that is because the key 2500 level lies just above or the rumor NK is readying another ICBM for launch.  It may be both.  There is also the belief the FED will announce the start of their balance sheet reduction.  The trend indicator on the daily SPX chart suggests this retest should fail.  The intermediate indicator on the red/green count chart suggests a failure is likely to lead to a trip to the 200 DMA.  The bulls need another thrust bar to clear the air and get the market going higher.  I don't know if that will happen in this news environment.  I guess we will see.

There are some interesting charts in this article.  Fund Managers Drop US Exposure to 10 Year Low  I found this one particularly interesting.

Fund managers have now dramatically dropped their allocation to -28% underweight, the lowest since November 2007 (1.2 standard deviations below its long term mean). This is where US equities typically start to outperform again.

In most cases when fund managers get underweight U.S. stocks they have tended to outperform global equities.  It is a little curious that we now have the biggest underweight reading since Nov. 2007.  That was right after the bull market top in Oct. 2007.  If we are not on the cusp of a new bear market this should eventually get resolved with the U.S. outperforming the rest of the world.  However, I can't be absolutely sure we are not on the cusp of a new bear market.  Rather then being very bullish this chart could be indicating that is the case.  I am hopeful things will become clearer in Oct. and Nov.

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