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Thursday, March 8, 2018

Daily update 3/8 Trade deficit in goods

Pause day.

SPX gapped higher on the open, but then drifted lower all day until about 2:30 PM.  News hit of what the tariffs were going to be that would be signed at 3:30 PM.  With Canada and Mexico excluded the market rallied until 3:30.  During the press conference for the signing there was some volatility.  At the end of the day SPX ended just below the 50 DMA.  Breadth was +54%.  New highs were stable at 97.  New lows were down a bit to 40.

The futures pulled back gently from the open to test below the 200 SMA.  The selling was stopped by news.  They rallied into the close and ended the day right at the 100 SMA.  Should the futures turn down from here the chart would have a bit of a head and shoulders top look to it.  The bulls need to keep upward pressure on the market.

The green count picked up significantly and is above 50.  Sometimes crossing 50 with SPX still below the 50 DMA brings out sellers.  The bulls need to push higher tomorrow.

Tomorrow we get the employment report before the open.  Last month's report is what started the cascade down into the Feb. low.  I suspect that is part (combined with tariff worries) of the hesitation by bulls to push price this week.  They came in to buy the dip, but have not pushed SPX above the 50 DMA.  The tariff situation is settled for now and after the employment report the market should be more free to do whatever it decides it wants.  SPX has coiled up the last three days so some follow through on tomorrow's move seems likely.  The market seems like it wants to go up, but SPX is butted up against the 50 DMA.    IWM and QQQ are much closer to their prior highs.  That could make them more vulnerable to some profit taking if the market is not ready to push higher yet.  The SPY option data suggests above 275.5 delta hedging could accelerate prices higher.  Further upside could see more hedging above 277.5 and 280.5.  The bulls could hit 275.5 pretty easy if they come out to play after the employment report.  While the current bias is to the upside it is still possible the market turns down from here.  Since we are at a decision point tomorrow should be interesting.

I ran across this interesting chart.

The trade deficit surged after last Aug. as imports greatly increased.  This chart clearly shows the affects of all those natural disasters last year.  All those extra imports are at least partially responsible for the pickup in the global economy.  As the repairs complete those imports will settle back considerably.  The pundits seem to believe the pickup in the global economy is lasting.  I am not so sure about that.  Rates have risen around the world and some demand will be dropping off as the year goes on.  I guess we will see how this plays out.


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