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Friday, November 10, 2017

Daily update 11/10 The Distribution of Pain

Asia and Europe were both down which greatly dampened buying enthusiasm in the U.S. today.

SPX tested the 20 SMA and held.  Breadth was -56%.  New highs were 73 while new lows were 55.  Today set a record for the most number of days without a 3% pullback.  Of course that means we are on borrowed time before it happens.

The futures failed to capitalize on yesterday afternoon's bounce.  They still have not confirmed a break below the 20 SMA yet.

The green and red counts came together.  This is where the bulls sometimes come out to play.  I kind of think they need to or the long awaited pullback might finally happen.

Many foreign markets are up more then the U.S. since the election with similar low volatility.  Maybe the temptation to take some profits is starting in with some of those markets.  What little selling pressure we are seeing mostly happens before the European close suggesting that is where it is coming from.  There is plenty of foreign money in our market.  If a global pullback happens we will be affected.  Market internals have been diverging negatively since early Oct.  Unless the market starts another thrust higher those divergences will eventually lead to a pullback.  IWM will need to play along this time.  I read today R2000 had the longest number of days trading within 1% of its 52 week high without making a new high.  It about doubled the prior streak.  I also think HYG needs to show some signs of recovery as well.  It would be helpful if IYT and XLF played along as well.

The senate bill seems to be a completely different animal then the house version.  This was as close as they could come together?  Oh boy.  Republicans feel a lot of pressure to pass tax cuts.  They are seriously worried about what will happen in the next election if they don't.  I can't seem to get the feeling that they will get their act together and pass a good bill.  I worry they will pass something that ends up making the country worse in the long run to try to help with elections in the short run.  I can't see how our big companies with profit margins the highest in history need a tax cut.  Many of those companies have effective tax rates below 25% and quite a few under 20%.  I would like to see them pay more while the small companies with a few employees that end up paying the highest tax rate get a break.  That I am sure will not happen so I probably will not like anything they come up with.  I have felt the rally since Aug. was sparked by the dropping of the health care problem to focus on taxes.  If the squabbling in DC starts up and it really looks like they won't get things done there is some premium in SPX that will come out.  Unfortunately we can't know whether that will happen or not.  I will just say I am not impressed with the republican leadership (full disclosure I have been a registered republican my entire life and a disgruntled one for decades).

This is an interesting article on the division of wealth in this country.  The Distribution of Pain

Have a great weekend.

A special thanks to all those that have served and their families.  While I did not serve I have many family members that have.  I well understand the sacrifices made.  I salute you.


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