If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Friday, June 29, 2018

Daily update 6/29 Signaling Slowdown: The Little-Watched Commodities That Could

Another big intraday reversal to the downside.

SPX gapped up and continued higher until the  11:00 hour.  It drifted slightly lower through the afternoon then took a bit of a plunge in the last hour.  Breadth was +56%.  It was +72% at the morning highs.  New highs were 53.  New lows dropped down to 60, but still more then the highs. 

The futures ran up to the 100 SMA and reversed.  The consolidation at the lows continues.

The red count slipped a bit, but remains above 50.

Quarter end rebalancing should be over now.  I wonder how much that affected the price action.  Can we believe what we see in the charts?  The charts look like the downtrend will continue next week.  I suspect another test of the recent low is in order.  A close above 2746 would change the outlook.

Here is a look at the European financial stocks ETF.

This ETF is in worse shape then XLF the U.S. financial ETF.  The market is clearly worried about something that might affect the financial stocks in both areas.  The U.S. financial stocks were the canary in the coal mine for the 2008 disaster.  In Daily update 6/7 The Smart Moneys Bailing As Markets Become Too Complacent I showed the smart money index looking like it did before the last two bear markets.  Another storm might be brewing somewhere.  Caution is advised.

Interesting article on commodity prices related to the global economic slowdown.  Signaling Slowdown: The Little-Watched Commodities That Could

Great camera work!

Have a great weekend.


Thursday, June 28, 2018

Daily 6/28

Quite the bounce.

It looks like it was mostly a big cap bounce though.  Breadth was only +53%.  New highs were 39 while new lows increased again to 153. There was little interest in selling at the lows which allowed the bulls to take control for the day.  SPX managed to get above the 50 SMA for a bit, but late day selling took it back slightly below it.  The bargain hunters showed up, but the question is what happens tomorrow.

The futures show consolidation for the last three days after the 6/25 sell off.  So far the 200 SMA is holding.  Will the consolidation make a bottom or is it a pause to go lower?

The narrow breadth today indicates the action was mostly short covering and bargain hunting in the big cap stocks.  That is not really a clear sign the market will bottom around here.  It might need to do some more testing.  I don't know if there will be more rebalancing tomorrow or not.  The sellers clearly stepped away today.  They could be back again now that prices have rebounded some.  The 200 DMA is about 50 points lower if SPX does not bottom around here.  That would be the next logical target on the downside.


Wednesday, June 27, 2018

Daily update 6/27 Dow 200-Day Break Could Be Brutal for Stocks

Big intraday reversal.

SPX closed slightly below the 100 SMA.  It came within three points of Monday's low so this is a valid test of that low.  The result of that test is still to be determined.  News out of the WH early this morning regarding CIFIUS and China sparked a lot of buying premarket and early on in the regular session.  However, mid day the sellers showed up and dominated the afternoon.  SPX closed right near its low for a change. 

The futures were down considerably overnight before the news hit.  The morning rally took the futures up to the 20 and 100 SMAs.  That is where the sellers went to work and sent them back below the overnight low.  They closed just above the 200 SMA.  Quite a day.

The red count is approaching an oversold condition.

Art Cashin stopped by CNBC this morning and talked about a lot of rebalancing going on because of the major out performance of tech and small caps.  That would explain why COMPX and R2000 have been showing relative weakness this week.  The problem with a rebalance is nobody really knows how much work there is left to do.  So what happens the next two days is unknown.  However, the aftermath of this rebalance seems likely to draw in bargain hunters for a bounce in early July.  What happens after that might be up to the trade situation.

Interesting article on 8 day losing streak of the Dow and a break of the 200 DMA after a long period above it.  Dow 200-Day Break Could Be Brutal for Stocks

Before Monday, the last time the Dow closed below its 200-day moving average was June 28, 2016. Thus, the index stayed above the moving average for almost two full years. It’s just the sixth time we’ve seen this since 1900 (as far back as we have data). There is no good news in the table below showing what has happened after each of these instances. Six months after the break, the Dow was negative every time, while four of the five times, it was down double-digits in the next six months.

All five of the prior instances saw the Dow in the red six months out.  Four of the five saw the Dow down one year out.  You don't see stats like that about the market very often.  Keep in mind the sample size is small.  Maybe it will be different this time.  However, SPX continues to look like a possible bull market top forming.  With the global economy weakening and the FED doing QT and raising rates the market being down from here six months out is certainly possible.


Tuesday, June 26, 2018

Daily update 6/26 The Fed Just Made Its Most Hawkish Turn in 30+ Years (Did Anyone Notice?)

Bounce day.

The market gapped up a little bit and struggled some higher mid day.  However, at the end of the day SPX ended where it started.  Breadth was +58%.  New highs were 44 while new lows dropped to 62.  The follow through from yesterday's bounce off of key support was unimpressive. 

The futures tested slightly above the lower channel line, but found a few sellers.  That keeps the move down intact for the moment.

Not much change in the counts.

IYT and XLF were both down despite the bounce in the major indexes.  That does not bode well for yesterday being a bottom.  The bulls are going to have to do better then this.  The last hour was dominated by sellers.  Another not so good sign for bulls.  Unless the bulls really come out firing tomorrow and hold on all day I think the odds are pretty good SPX will test yesterday's low in the near future.  A successful test of that low might lead to a better bounce.

I mentioned a few times I think we have a new sheriff in town at the FED.  This is an interesting read on what Powell said in last press conference.  The Fed Just Made Its Most Hawkish Turn in 30+ Years (Did Anyone Notice?)


Monday, June 25, 2018

Daily update 6/25 Mauldin: Europe Has Train Wrecks, Too

I guess some people woke up to the trade war.  Others snapped up the bargains late in the day.

SPX sliced down through the 50 DMA and slightly penetrated the 100.  The late day rebound took SPX back above the 50.  Breadth was -73%.  New highs dropped to 36.  New lows spiked up to 105.  As you know I am not a big fan of those late day rebounds.  Listening to the crowd on TV you would think they were a great thing.  The problem is we have been seeing them for months and still SPX has not made new highs.  Are they really a good thing?  We are not getting selling exhaustion.  That makes it harder for the market to bottom.

The futures ran down to the 200 SMA before bouncing strongly into the close.  The -DI line is well over 35 which often leads to a bounce. 

The red count crossed 50, but did not reach oversold levels. 

The SPY option data showed a lot of calls and therefore potential support at 270.  SPY got below that level intraday for a while, but bounced back strongly.  SPX hit its 100 DMA where there could be dip buying interest for a bounce.  How much of a bounce we might get I do not know.  I don't particularly like the looks of XLF, IYT, or DIA in regards to the health of the market.  I don't like the looks of today's bar for a long lasting low.  However, all those things have been going on really for months and we have made several short term bottoms with bars like we had today.  If we don't bounce from here the 200 DMA (2664) would be the next downside target. We could bounce for a day or two then slice right back down through the 100 DMA.  On the other hand, SPX could go back up and retest the recent high.  No crystal ball here.

The market does not like the idea of a trade war.  That is clear.  However, there are still a lot of people that do not believe that will actually happen.  I am not one of those people.  Until it becomes clear one way or the other I think we can expect some ups and downs.  I don't see how SPX marches to new highs unless things clearly settle down on the trade front.

Here is the next article from Mauldin.  Europe Has Train Wrecks, Too


Friday, June 22, 2018

Daily update 6/22 S&P 500 Historic Resilience: Bullish Or Bearish?

The shoe was on the other foot today.  SPX was green for a change while QQQ and IWM ended in the red.

The futures gapped up, but found their high in the first minute the market was open.  That was also true of QQQ and IWM.  Some investors had no qualms about selling into strength.  Breadth was +63%.  New highs were stable at 84.  New lows dropped to 33.  I suspect the beaten down cyclical stocks had some bargain hunters active. 

The futures made several attempts to get above the 50 SMA, but it was clear resistance.  We still don't have a confirmed break of the 50, but the action today did not look bullish to me.

Not much change in the red count.  Despite the up day the green count slipped a bit.  Most likely because of the sell off in tech land.

SPX is trying to hold support above the May highs.  It is not looking very convincing to me.  There is clear overhead supply at the moment.  History suggests the pullback should continue and I see no reason for things to be different yet.  Now that I said that SPX will probably be up 2% on Monday!

Rant on:

The media is getting like the weather.  You know the old saying.  Everybody complains about the weather, but nobody does anything about it.  I see more and more people complaining about the "fake news" and lies in the media these days.  It is tough to run a democracy when the people are uniformed.  I think we have a worse problem.  People are misinformed rather then uninformed.  In the long run our democracy will fall apart if we do not change things.  We must get back to truth in the media.  Unfortunately I am not sure how to do that.  Digital media has fostered a quest for clicks by media companies.  Lies and hate get many more clicks then the truth.  As long as there is no penalty for lies there will be no change.

Rant off:

This is an interesting look at the unprecedented action of June 15-19.  S&P 500 Historic Resilience: Bullish Or Bearish?

Have a great weekend.


Thursday, June 21, 2018

Daily update 6/21

IWM and QQQ joined the party on the downside at least for one day.

SPX closed below the uptrend line, but above Tuesday's low.  Breadth was -66%.  New highs dropped down to 78.  New lows picked up to 81.  I heard Bob Pisani mention a lot of cyclical stocks were hitting new 52 week lows.  That can't be a good thing especially with the way financials are acting.

The futures closed below the 50 SMA, but have not confirmed a break yet.  We could be in pullback mode now, but some downside follow through is still needed.

The red count climbed to a new pullback high, but is still below 50.  That probably lowers the odds a bit of this being a bounce cross and right back to rally.

I reported this stat back in early June.  Maybe now it is appropriate.
since 1970, the low in June has always been below (or equal to) the close in May.

That makes 2705 as a potential target for this pullback. It just so happens the 100 DMA is at 2704.  Global stocks have sold off much more then the U.S. market has.  However, with QQQ and IWM joining in on the downside the pullback might pick up a bit of steam.  I don't know if this is going to get really ugly or not, but it could.  That second key reversal day near the March high and subsequent sell off opens up the door to the double top lower high pattern.  This one would be much wider then the earlier pattern and potentially much more serious.  Here are a couple of things to watch out for. SPX failing to find support at the 100 DMA and COMPX failing its break out above the March high.  Those events could open up the door for considerably more selling pressure.

I always have trouble figuring out what investors are thinking.  I think they are getting a little more worried about a trade war and the weakening global economy.  I suspect there are grounds to be worried.  Tomorrow will be interesting.  Do dip buyers show up or do sellers keep on going to work?


Wednesday, June 20, 2018

Daily update 6/20 SPY option data

Selling into strength.

The market gapped higher, but SPX was frozen in place.  The sellers came out to make use of the strength by hitting the bids.  Nothing excessive, but enough to keep SPX from running higher.  After a morning dip SPX was able to make slight new highs on the day during lunch (when the big boys were out).  However, after 1 PM the sellers went back to work and dominated the afternoon.  Breadth was +58%.  New highs increased considerably to 113 while new lows dropped to 38. 

The futures briefly got above the 20 SMA.  After that the sellers dominated the rest of the day. 

The red count dipped a bit, but remains above the green line.  This could still be a bounce cross if the bulls come out to play tomorrow.

The SPY call data still shows a large number of calls at the 280 strike.  That is a key resistance or acceleration point if broken.  The puts show support or acceleration points at the 270 and 265 strikes.

The rotation continues as the COMPX and R2000 indexes showed considerable relative strength today.  I hear somebody on TV loving this market because those indexes are at new highs.  It is true that those indexes often lead SPX.  However, in this instance the outperformance can easily be explained and might not be as bullish as usual.  The tax cut benefits small caps more then large caps and they are less susceptible to tariffs.  Tech stocks have been the darlings of the market for years and also are less susceptible to tariffs.  They are often the last to top in a bull market.  To counter that bullish outlook the financials are seriously lagging.  The XLF is still hanging around its 200 DMA.  What is up with that?  As a whole the market is still not quite acting right.  The possibility a bull market top is forming still exists.  The FED is raising rates and withdrawing liquidity which is causing problems in some emerging markets.  The global economy is clearly slowing.  The pundits on TV are almost hyper about how good the fundamentals are.  While the U.S. economy is doing fine it is possible this is as good as it is going to get for this cycle.  In today's global economy no country is totally immune if things go bad around the world.  We don't yet know if things are going to go bad, but that could be one explanation for the behavior of the financials.

Tomorrow should be interesting.  Will the bulls try to build on today's gains or will the bears show up to take advantage of the higher prices to sell into?  Closing below yesterday's low would clearly break the uptrend line from the early May low.  That could increase the selling pressure.


Tuesday, June 19, 2018

Daily update 6/19 John Mauldin - The Pension Train Has No Seat Belts

Yet anther big gap down.

Just like the last two days the dip buyer buyers showed up to snap up the bargains.  Breadth was -55%.  New highs dropped way down to 56.  New lows picked up a bit more to 86.  SPX pierced the 20 SMA and the uptrend line this morning, but didn't collapse and rallied in the afternoon.  The 50 SMA crossed above the 100 SMA today.  Some people might look at that as a buy signal.  The 100 could provide some support if tested.

Escalation of trade war headlines sent the futures spiraling lower overnight.  They confirmed a break of the 20 SMA.  That means the market has extra work to do to get back in rally mode. 

The red count crossed the green line, but is still below 50.  Another down day could take care of that.

Money is clearly rotating away from companies more affected by tariffs.  The market has found its low early on the last three days then chugged somewhat higher the rest of the day.  The guys on TV find that action bullish, but that may not be the case.  People are selling the big cap heavily traded stocks first thing then putting that money to work in less liquid smaller caps.  The net effect keeps the market from tanking, but that is not the same thing as the market being bullish.  We will have to see what happens when there is no negative trade headlines.  Some people that did not want to sell into the down gaps might do so on a market rally.

SPX had a key reversal day from near the same level as a prior reversal back in March.  Now it has confirmed the reversal with a close below that day's low.  The rally that has been going on since back in May is now in question whether it will continue or not. 
They paraded a lot of people on CNBC today expecting a resolution to the trade dispute relatively soon.  I did not happen to catch a single guest claiming things could get ugly.  China is used to everybody else being afraid to challenge them.  President Xi has been elected for life.  He has to be thinking he can outlast Trump.  On this side of the pond Trump does not back down.  The tax cuts are stimulating the economy.  If there was ever a time to do something with the trade situation I am sure Trump is thinking it is now.  I just don't see him backing down.  I think he cares little what happens in the short run.  He is convinced adjusting the trade deals will benefit the country in the long run.  Unless China agrees to remove tariffs and stop stealing our intellectual property there will be no agreement soon.  I don't see that happening.  Can somebody explain to me what I am missing?  I don't see a simple and quick resolution coming soon.

Here is Mauldin's next installment.  The Pension Train Has No Seat Belts


Monday, June 18, 2018

Daily update 6/18

Dip buyers to the rescue.

A second sizable gap down in a row was met like the first with dip buyers.  Even though many indexes were in the red R2000 made a new high.  Breadth was +52%.  New highs increased a bit to 100.  New lows were stable at 77.

The futures tested the lower channel line again and once again they bounced.  We still do not have a confirmed break of the 20 SMA.  With this many bars that seems unlikely to happen in the near term.  The more likely scenario is a bounce back above the 20.

The lines are coming very close together now.  This may be close enough to bring out the buyers.  They don't always cross before that happens.

There was clear rotation into small caps on the theory they would be less affected by tariffs.  However, there was no fear in the air despite back to back big downside gaps.  Today's bar on SPX looks like a bullish hammer candle.  SPX close fractionally below the low of the key reversal day.  It is not enough to be significant.  SPX looks more likely to bounce then sell off.  I am guessing most investors do not believe the current trade spat will develop into a serious trade war.  I don't know that I agree with that assessment, but it could take some time before we know.  In the mean time lets see if the bulls decide to continue the rally.


Friday, June 15, 2018

Daily update 6/15 Recession Alert: World Headed for Cyclical Slowdown

Sell, sell, sell.  No wait, buy, buy, buy.

After some selling into the down open this morning the dip buyers showed up and rallied SPX back to the flat line.  The sellers showed up again a bit going into the close.  Breadth was -51%.  New highs contracted to 81.  New lows expanded to 73.  That is a lot of new lows at this point in the recovery rally.  Interest rates were down on the day so bond funds were not the culprit.  Still no close outside the range of the key reversal day.

The futures traded down to the lower channel line and bounced back.  They got above the 20 SMA for a while, but failed to stay there.  We do not have a confirmed downside break of the 20 yet.

Both the red and green counts increased today.  The green count is still above the red line, but is below 50.

The market sure seems to be taking the talk of increased tariffs remarkably well.  Is it that people don't believe it will happen?  Trump has been trying to renegotiate our trade deals for over a year.  Other countries are seriously balking at making any changes.  Trump started with the tariffs in order to get some movement.  He was on and off giving others a chance to do some negotiation.  So far no cigar.  I think he is getting close to the point of no more fooling around.  The tariffs are likely to be put on and stay on.  The talk from around the world is all about retaliation.  It seems to me there will be a trade war of some sorts.  How nasty it gets remains to be seen.  I just don't see Trump backing down anytime soon.  While the market is somewhat ignoring this at the moment it may change its mind some day.

Some investors are buying weakness while others are selling strength. Neither side has been very aggressive.  That could have been because of option expiration week.  They usually have a slight upside bias.  We also had strong SPY resistance at 280 because of options.  That may change next week.  Some day SPX will close outside the range of the key reversal day.  Until that happens expect more chop. 

More data on the global economic slowdown.  Recession Alert: World Headed for Cyclical Slowdown

Have a great weekend.


Thursday, June 14, 2018

Daily update 6/14 Global Earnings Recession All But Certain As World Trade Weakens


SPX gapped up on news the ECB will not be raising rates until at least next summer.  However, they did announce a plan to cut their QE program in half in Sep. and terminate QE completely in Dec.  The bulls and bears took turns after the open all day.  At the end of the day SPX was slightly lower then the open.  Breadth was slightly positive.  New highs were stable at 97.  New lows picked up to 52. 

The futures held the 20 SMA all day.  They tried to launch off that line this morning, but the sellers showed up.

The green count slipped below 50, but remains above the red line.  The market has worked off the overbought condition. 

Early this morning SPX got above its price from just before the FED announcement.  It failed just like yesterday afternoon.  That suggests some investors that did not expect the fourth rate hike were selling when price got back to where it was.  They sold from lower highs in the afternoon.  There were plenty of dip buyers to absorb the selling today from the ECB news.  The question is will they be able to do that tomorrow.  I did not see any sign the selling was exhausted.  If SPX can close above today's high that would be a very positive sign.  I can't recall many people expecting that extra hike this year.  I think that move caught a lot of people off guard.  It remains to be seen if that means more selling. 

The tariff rhetoric is clearly picking up.  The market seems to be ignoring it for now.  However, it seems to me there will be more tariffs coming all around.  I get the feeling foreign leaders think Trump will back down.  I can't imagine where that idea comes from.  I have seen nothing in his character (observed over decades) that suggests that will be the case.  The U.S. has the least amount of tariffs in the world.  If other countries insist on increasing tariffs instead of moving toward actual free trade I think they will be in for a shock.  I believe Trump is completely comfortable with a trade war.  He thinks he can win it.  The market might not like that if it comes to pass.  I would also add that both Trump and Powell are much more comfortable with market volatility then Bernanke or Yellen were.  The FED put is much lower then it used to be.

I still have seen no sign from ECRI their long lead indexes have turned back up.  This article shows some trade data that backs up the idea the global economy is still slowing.  Global Earnings Recession All But Certain As World Trade Weakens


Wednesday, June 13, 2018

Daily update 6/13

Key reversal day.

SPX gapped up slightly and climbed above recent highs.  However, once there it stalled.  It made a couple of attempts to go higher, but was thwarted.  By the time the FED announcement came SPX was already of its high a ways.  The immediate response was negative and SPX traded down below yesterday's low.  The dip buyers rushed in and retraced the entire post FED move down.  However, that rally ran out of steam and sellers pushed SPX to new lows.  At the end of the day we had a second key reversal day from the same area.  Breadth was -64%.  New highs slipped down to 100.  New lows picked up slightly to 33.  Volume was heavy.

The futures closed back inside the upper channel line.  That ends the rally and puts us in consolidation/pullback mode.  They stopped at the 20 SMA for the moment.

The green count took a significant hit, but remains above 50.

The sell off from the Jan. top started when the strong employment report got people thinking there could be four rate hikes this year instead of three.  Until today the FED never indicated they were thinking about that extra hike.  They spelled it out clearly today they expect two more hikes this year.  I am a little surprised the selling was as muted as it was.  Tomorrow will be interesting.  Does the market still care if there are four hikes?  We will find out in the coming days.  The market already looked tired and in need of a pullback.  It seems likely there will be some follow on selling from this key reversal.  Individual key reversal days do not have all that great of a track record.  The one back in March obviously was key.  A friend of mine did a study and found key reversal days more then a month apart like we have now are much more effective.  I recently mentioned that SPX could be forming a wide double top lower high pattern.  Today clearly opened the door to that pattern.  It remains to be seen if the bears step through that door or not.  I have not liked the quality of this rally at all.  It won't be a surprise if the market reacts strongly on the downside.  I am changing my mind on the idea of a pullback here being a buying op.  I will have to wait and see what happens.  The bulls really need to show up with some enthusiasm tomorrow to show the extra rate hike is not a problem.


Tuesday, June 12, 2018

Daily update 6/12

Another doji bar.

SPX closed fractionally above the March high, but never got above yesterday's high.  Breadth was slightly negative.  New highs were 127.  New lows were 29.  Resistance held for a second day.

The futures are up after hours to a slight new rally high.  Hard to say where they will be in the morning.  So far they have managed to stay above the upper channel line, but they will have to get moving higher a little faster to stay there. 

The green count turned down a little bit.  We may be past the momentum peak for this bounce. 

The breadth was negative and the green count turned down today.  The market looks a little tired here.  That is not particularly good when sitting right at a prior peak.  The market has tended to struggle the month after a FED rate hike.  Since the market already looks tired a pullback after tomorrow's hike seems pretty likely.  If that happens it will be important for the market to find some support somewhere and head to new highs. 


Monday, June 11, 2018

Daily update 6/11 Mauldin - Debt Clock Ticking

More up, but late day selling.

Today's candle looks like a gravestone doji.  SPX climbed above the March high for a while, but sold off going into the close.  We did not get a new high close for the correction.  The late day selling may be a sign of resistance here.  It would not be surprising.  The question is whether it is stiff enough to kill the rally or not.  Breadth was +53%.  New highs were 138.  New lows were stable at 24.

The futures are still above the upper channel line, but look like they are still losing momentum. 

The green count pushed only slightly higher today.  It remains overbought.

The SPY option data still shows a lot of calls at the 280 strike.  With the market overbought and momentum waning I don't see SPY getting through 280 this week.  It might bump its head on it though.
Getting overbought on the red/green count chart has ended rallies ever since this correction began.  What happens here is very important.  SPX could consolidate/pullback and push higher.  It is also possible it is making a wide lower double top pattern that could be very bearish.  There was lots of optimism on CNBC today.  Apparently it is a done deal that everything is okay and we are going higher.  I don't know if that is the case.  This rally has bothered me from the beginning largely because the bottom formation does not look right.  Then I saw the smart money chart I showed the other day and that reinforced the idea that maybe something isn't quite right.  Historically June is one of the weaker months of the year.  The weakness often happens in the second half of the month.  Even though SPX gapped up and never traded negative on the day the VIX was green all day.  That is rather odd.  In that context the late day selling might make sense.  Maybe we get a pullback here soon.  At the moment I would view a pullback as a buying op.  However, I reserve the right to change my mind depending on how said pullback unfolds.

Here is the next installment of Mauldin's train wreck series.  Debt Clock Ticking



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