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Friday, February 23, 2018

Daily update 2/23 ECRI still looking for slowdown in growth

Lift off.

The afternoon sellers took the day off.  Late in the day when the market was still up bulls got emboldened to pile in.  Breadth was +79%.  New highs were still low at 43.  New lows dropped down to 30 as bonds rallied today.  SPX closed right at the 2/21 high.  It looks like the buyers outlasted the afternoon sellers.

The futures confirmed upside breaks of the 20, 50, and 200 MAs.  This appears to be bullish.

The green count sprinted higher and is above 50.  This looks bullish.

It looks like the rallied restarted today.  SPY has possible resistance at 275 from options with possible acceleration above 275.5.  I think the market should have enough upside momentum to get through there with the look of things.  So many money managers were expecting a retest of the low.  I was wondering if that would mean it would not happen or become a self fulfilling prophecy.  It looks like it won't happen in the near term.  Down the road is a different question.  For now I think those same managers will have to pile in.  The last four days probably sucked in some shorts.  Further upside on Monday will cause a bit of a short squeeze.  A close back below the 50 DMA means today was a fake out and the odds would shift to the bears and a retest of the low.

I happened to catch Tom Mclellan on CNBC.  He is still looking for a top in March and a sell off into Oct.  Based on what happened today I could see that scenario playing out.  I think money managers are likely to chase the market here pushing it to new highs.  A strong jobs report in the March data could cause a rise in rates and spark another sell off in stocks.  With the volatility we just had it is not hard to imagine a multi month sell off ensuing.  Something to think about as we watch the price action unfold.

In the latest video ECRI still claims there will be a growth slow down.  They claim the bond market is starting to show the same thing as their long lead indicators are showing.  https://www.businesscycle.com/#  I am not seeing the slow down in the data yet.  That does not mean it won't happen though.  Back in 2016 their long lead indicators did a good job of forecasting the strength that happened many months later.  I will keep my eyes open for it.  If that were to happen it could help make that sell off into Oct. more likely.

Have a great weekend.


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