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Friday, May 11, 2018

Daily update 5/11 More evidence of global economic slowdown

Pattern break.  Well maybe.

SPX closed about 1.5 points above yesterday's high.  Technically it is different this time from the last three peaks, but 1.5 points isn't much.  Breadth was +51%.  New highs dropped again to 109.  That is the second day in a row SPX went higher but new highs declined by a noticeable amount.  New lows dropped to 27.  Since this correction began SPX has reached the upper Keltner 50 channel line (dashed purple) twice and turned back.  SPX came within four points of that line today.  One common action is to approach that line and pullback to the 50 SMA then rally through the upper line.  The other rallies failed to stop at the 50 on the way down.  Going back to test the 50 would put SPX back below the downtrend line which could be viewed by some as bearish.  While SPX has climbed above the downtrend line the volume the last two days is rather light.  Not a lot of conviction behind the move.

The futures managed to close above resistance.  There was some intraday selling that indicated there really is resistance here.  However, dip buyers stepped in to buy those pullbacks.  Today's buyers were likely break out players.  That source of buying probably won't last long.

The green count is still a bit below overbought.  The intermediate indicator has climbed to 52 the highest it has been in this correction.

The VIX closed at 12.65 which is the lowest level during this correction.  Is that good or bad?  COMPX closed slightly red.  The market is a bit extended so a pause soon is likely.  How the market deals with this overbought breadth situation will tell us a lot more about whether this correction is over or not.

Here is another chart showing the potential for global economic weakness.

Leading indicators are still falling.  We can expect further weakness in the months ahead globally.  So far the U.S. is holding up, but that is likely because of the natural disasters last year.  That influence will be waning in the months ahead.

In many offices this is what happens...

Have a great weekend.


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