Daily update 7/31

Bounce as expected.

SPX gapped up a bit and eventually found enough buyers to push it above yesterday's high.  However, it failed to stay there.  Breadth was +63%.  New highs picked up a bit to 72.  New lows were stable at 33.  I don't think today told us much.  We will have to see what happens tomorrow. 
 

The futures ended the trading day below the 20 SMA, but popped after hours on AAPL's earnings.  However, that pop failed to last as they are trading back below the 20 at the moment.

Today's bounce failed to get the green count above 50.

AAPL reported after hours and the stock responded well.  It was up 4% last I checked.  I am curious to see if the market gaps up like it did with GOOG and AMZN when they reported.  Of course both those gaps were sold into.  One would think something different would happen this time.  We also have the FED meeting to contend with.  SPX is still above 2800 and short term internals are still positive.  While the bulls have not done much since the break out above 2800 they technically still have the ball.  A close below 2800 changes that picture.  Just before the open there was a headline about the U.S. and China talking again on trade.  I think that helped the buying somewhat.  The market is still slightly sensitive to trade news.  Which could easily change on any given day.  It must be fun to be a money manager these days.

Bob

Daily update 7/30

A little bit of urgency to de-FAANG.

SPX dipped slightly below 2800 and bounced.  The bounce was not particularly strong and SPX slid back down toward the close.  However, it remained above 2800.  That makes 10 days in a row now and we have a whopping 2.6 points to show for it.  Nothing to write home about for the bulls.  The breadth was -52%.  Not all that bad.  The damage is being done by big cap stocks taking the indexes down.  Some money is flowing into other sectors.  XLF was slightly positive.  New highs dropped down to 44 while new lows were stable at 37. 

The futures dipped down to the lower channel line for the first time since the last important bottom.  They closed just a bit above the 50 SMA.  We have a confirmed break of the 20 SMA.  The bears are threatening to take control, but a bounce from here would be normal.

The lines have come together after another brief trip above 50 for the green count.  The SPX break out above 2800 never showed any strength. 

It looks like earnings season is not going to be good enough to propel SPX to new highs and beyond.  The market usually has some weakness in Aug. and Sept. of mid term election years.  I think the odds are pretty good 2800 is not going to hold for too much longer.  A late summer pullback looks inevitable.  AAPL reports after the bell tomorrow and the FED meets on Wed.  After two big down days in tech that could be a recipe for a bounce.  The futures are also in position to bounce so an up day tomorrow would not be a surprise.  The bulls need to show some significant enthusiasm at this point to keep the rally going though.

Bob

Daily update 7/27

Serious profit taking.

After a gap up on the strength of AMZN's earnings the sellers went to work again.  This time they were a bit more ambitious then the other day.  Breadth was -66%.  New highs dropped way down to 68.  New lows picked up a bit to 36.  I had drawn the uptrend channel on another chart I look at during the day and noticed it showed SPX hitting the upper trend line.  So I redrew that line on this chart to match.  Trend lines are always subjective.  That might explain the more significant selling today.  I don't know if that means we are headed to the lower trend line or not, but that is a possibility.

The futures came back inside the channel first thing this morning then proceeded down below the 20 SMA.  They ended the day below the 20,but without confirmation of a break.

That was a short lived trip above 50 for the green count.  There is a triple negative divergence possibly forming in this indicator.  That could mean SPX is forming another important top.  If the bulls show up again that also means there should be more room to run before becoming overbought again.

It is interesting that the sellers came out on the days the market gapped up on blow out earnings by GOOG and AMZN.  We are coming into the seasonally weak months of Aug. and Sept. With the lack of strength in this rally a sizable pullback would not be a surprise.  COMPX (-1.46%) and R2000 (-1.89%) which have been the leading indexes this year were hit hard.  I don't know if investors read the fine print on the U.S.- EU trade news or were just in the mood to book some profits.

I sure wish I knew what money managers are thinking.  FB is one of the biggest positions in most hedge funds.  Are most of them willing to hold on or are they looking to get out?  Will the FB miss make some of them rethink their big positions in the other high flyers? The high flying must own stocks always see a 30-50% draw down when the sentiment changes.  The hard part is telling when that sentiment is changing.  He who sells first sells best when it does.  I have no way of knowing whether such a sentiment change is about to happen or not.  It is a possibility with the FB miss, but it will take some time to see how things shake out.  Next week will be interesting.  The most common response to a day like today coming off the high is to bounce the next trading day.  If we get a bounce on Monday the strength of that bounce might give us some more clues.

Have a great weekend all.

Bob

Daily update 7/26

Consolidation day.

The market gapped down on FB's miss.  However, dip buyers were busy right from the open.  SPX ended up with a doji bar.  Breadth was +56%.  Another negative day on positive breadth.  The strangeness continues.  New highs spiked up to 131.  New lows dropped considerably to 27. 

The futures remain above the upper channel line. 

The green count crossed above 50.

The headline of a trade deal that drove yesterday's late rally turns out to be an agreement to negotiate.  Nobody seemed to notice the difference today though.  All my short term market internals are positive again.  The negative crosses I showed before brought out the buyers as they should in an uptrend.  None of them are in overbought territory.  There is more room to run on the upside.  The question is how much ambition the bulls have.  The weak breadth the last couple of weeks and the disparity in the sectors calls into question a bit the true strength of this rally.  The financials lagging seems pretty important to me.  Another thing a little troubling is the rapid rotation among various sectors.  A sector should not be up and down over 1% in just a few days. I have seen that a few times over the years and it normally means the market is still in correction mode. We will have to watch closely and see how SPX acts on the retest of the Jan. high.  Does it break out and keep going or end up failing?

Bob

Daily update 7/25

A late day trade news thrust lit the afterburners.

SPX took off to the upside about 3:30 as a headline hit on EU trade concessions.  Breadth ended up at +59%.  Before the blast off it was yet another weak breadth day at +52%.  New highs were slightly less then yesterday at 87.  New lows were up from yesterday at 52.  SPX got above the low of the 1/26 high close day.  It came within three points of closing the gap from 1/29.  Since 1/29 was an inside day the gap is kind of closed.  The only business left for SPX is to make a new high.

The futures shot up 18 points in the last 30 minutes on the news.  There was to be a press conference about it after the close which I did not see.  The futures opened back up for trading at 6 PM and have given back 12 points from the peak.  I have no idea why.  Maybe the actual news was not as appealing as the headline.

The green count picked up again today and is right at 50.

News induced moves are often retraced.  The futures have already done 2/3 of the retrace.  From today's high it is another 24 points to the all time high.  I am not even going to try to guess what happens now.  The rally since July 9 has been very thin.  The market is going to have to broaden out in order for SPX to break out and make a sustained move higher.  If it does not do that then the move up from July 9 will likely get retraced in the weeks ahead.

Bob

Daily update 7/24

Selling into strength.

What a day.  SPX gapped up and started higher at first.  However, about 10:30 sellers showed up and put a stop to the rally.  It nearly filled the gap before a late day bounce.  Breadth was slightly negative again.  New highs increased a bit to 93.  New lows came in at 35.  Volume was the highest this month so there was some real participation.

The futures got above the upper channel line again, but came right back in on the next bar.  That often leads to a trip to the lower channel line. 

The green count picked up a bit, but remains below 50. 

This was the most selling pressure we have seen all month.  Maybe it was a Trump tweet that he loves tariffs.  The end result is that instead an upward thrust that could have propelled SPX back to the Jan. high we ended up with a doji bar on negative breadth.  The SOX, IWM and IYT were all down over 1%.  COMPX closed down slightly after being up over 1%.  Once again a sign the market is having trouble getting itself together to make a run higher.  The internals peaked on July 9.  The rest of the run up has come with weakening internals.  That is not usually a good way to retest a prior high.  It does not look to me like SPX is getting ready to break out and run higher.  We will have to watch and see if it rolls over again.  If it does the selling might be worse this time because we got so close to the high.

Bob

Daily update 7/23 SPY option data

Indecision.

SPX opened down a bit this morning.  However, the dip buyers showed up and pushed SPX back up through 2800.  It never got above yesterday's high though.  Breadth was -55% and volume was light.  New highs were stable at 77.  New lows were also stable at 30.  This was not a thrust day so there is no decision on whether we have truly broken out above the recent trading range or not.

The futures dipped down overnight to test the recent lows.  However, they were well off those lows by the open.  They closed back above the 20 SMA.  Will they launch or roll over?

The green count slipped a bit more.  The red line actually picked up considerably.  Not exactly a confidence booster.

All three breadth indicators are negative again.

The massive call overhead we had last month at 280 is gone for the moment.  There are actually more puts then calls at that strike now.  There is no stand out resistance on the upside.  Downside support comes in at 275 and 270.  If SPY does not rally from here I don't think it will be because of options.

Price was stronger today then the internals.  Recently we have had a few up days on negative breadth and one down day on positive breadth.  I am not exactly sure what is going on.  All the short term market internals have turned negative.  If the market is going to head higher this would be a good  time for the bulls to step in with some enthusiasm.  Today was obviously lacking in the enthusiasm department.  On the positive side sellers also lack desire.  So far the trade war rhetoric has not ratcheted up anxiety amongst the bulls that I can detect.  That may simply be everybody holding on until the big cap tech companies report.  There are a lot of earnings this week.  Maybe that will push the market one way or the other.

Bob

Daily update 7/20

A soft day.

SPX held 2800 again, but just barely.  Breadth was -52%.  New highs were up a bit to 84.  New lows were down a tad to 31.  It was a choppy session with bulls buying weakness and bears selling strength.  They got the SPY close below the option related resistance of 280. 

The futures had two odd spike downs overnight, but rallied back from each one.  They held the 20 SMA so far.  Will they bounce or break next week?

The green count fell back below 50 again.  It would be easy to get a negative cross now.

There has been no follow through of the breakout over 2800.  I have not noticed much in the way of selling pressure.  It looks more like a lack of buying interest.  That usually needs a pullback to get buyers interested again.  Unfortunately this may not be the best place to start a pullback from.  I can understand the hesitation from buyers with all the trade rhetoric going on.  I still heard people on TV today saying they think people will come to an agreement and this will all be over.  I am usually pretty good at reading people and I just don't see that happening.  Trump's version of walking away from the negotiating table in a trade deal is to use tariffs.  You won't deal with me I will just load up the tariffs.  Xi has been elected president for life.  He has no electorate to worry about.  He is sure he can just wait it out until the next U.S. election.  Both are sure they can win a trade war.  What am I missing?  I don't believe either is going to blink in the near term.  The market displays intelligence a lot of the time.  However, sometimes it does not see the future very clearly and gets blindsided.  This may be one of those times.  Stay nimble. Next week should see either a failed break out or an upside thrust to confirm it.

Have a great weekend.

Bob

Daily update 7/19

Trade war fears surface as small caps outperform big caps.

SPX tested 2800 this morning and bounced.  However, it did not bounce strongly.  There is only a four point cushion now.  Breadth was +57%.  New highs were 78 and new lows were 37.  The volume picked up a bit today which does not seem good on a down day. 

The futures came back inside the channel this morning.  Usually when they come right back in like this they end up touching the lower channel line.  Occasionally they will get caught by the 20 SMA. 

The green count crossed back above 50.  That is a positive as long as it stays there for a bit.

They kept playing Kudlow's comments all day on TV.  That might have given some investors renewed worries about the trade situation.  They should have worries.  I do not understand the pundits they parade on CNBC.  They do not seem to understand the personalities involved at all.  My opinion remains the same.  We have two alpha males going head to head.  There will be a fight.  Both presidents believe they have the winning hand.  I don't see either China or the U.S. backing down any time soon.  Some day the market may realize this.

SPX held above 2800 again today.  The bulls need a thrust day to truly confirm the break out.  This messing around is not a confidence booster.  XLF wiped out yesterday's strong day.  The market is having trouble getting itself into gear to go up.  Will the bulls come to play again?

Bob

Daily update 7/18

A mixed day.

SPX made a new rally high and closed above yesterday's high.  Theoretically that confirms yesterday's break out.  However, SPX was only 1.5 points above the high and COMPX was slightly negative.  Breadth was +52%.  New highs came in at 73.  New lows increased to 41.  We are not seeing much conviction here.  However, this is the longest rally in days since the Feb. low. 

The futures managed to end the day still above the upper channel line.  However, they did not close above the high of the bar that first closed back above the line.  I can't say the rally is really taking off again yet.

At least the green count turned up today.  It remains below 50 though.

The short term bull pressure lines are actually negatively crossed while SPX hit a new rally high.  Another sign the rally lacks oomph.

SPX is close enough to the Jan. top that this constitutes a test of that high.  We may be close enough for that high to act like a magnet, but hard to say.  The internals do not show a lot of enthusiasm.  It might be more of a slow creep higher from here if we keep going.  This is one of those situations that is tough to analyze.  SPX is floating higher on low volume because of a lack of sellers.  If news happens that changes that dynamic with the sellers the market could reverse sharply.  The trouble is we can't know whether a sell catalyst will happen or not.  I heard Kudlow on TV this morning and he seemed to indicate there will be more trade war related news next week.  We are coming up on six months since the SPX high.  A failure here after being this close to that high could cause more selling pressure then we have seen the last few months.  At this point I would think a close back below 2800 could be a warning sign of potential trouble.  That might bring out a few more sellers.  Low volume weak breadth rallies can last a few weeks.  The trouble is they can also reverse sharply without warning. 

Bob

Daily update 7/17

Break out.

SPX closed above 2800 again.  Breadth was +55%.  New highs were only 64.  New lows dropped down to 25.  Not the strongest of break outs.

The futures managed to close above the upper channel line.  Will they be able to stay there?

The green count actually dropped.  Not a particularly good sign.

While SPX closed above 2800 it was not the strongest of days.  It remains to be seen whether it can stay there or not.  It would have been nice to see an expansion of new highs and stronger breadth.  Something that might indicate the bulls really mean it.  Since we don't have that we will have to wait and see if the bulls come to the party again tomorrow.  Since we had SPY option resistance at 280 some of the move could have been delta hedging when SPY got above 280 this morning.  If that is the case a drop back below 280 could cause some to take off those hedges and increase the selling pressure.  If the bulls keep on playing there is a gap at 2851.  Above that is the all time high 2873.

Bob

Daily update 7/16 Mauldin: The Debt Train Will Crash

Resistance held for a another day.

SPX tried to go nowhere today and accomplished that very well.  Breadth was -63%.  New highs were 43.  New lows were 50.  Market internals suggest today was weaker then it looked.  SPX has put in six 7-10 day rallies since the Feb. bottom.  Each one ended with a pullback of several days.  Will it be different this time?

The futures closed back inside the channel this morning.  That puts them in consolidation mode.  Each of the previous five rallies ended when the futures came back inside the channel.  I don't see any reason for it to be different this time.  However, until the market rolls over the bulls could keep on buying.

The green count is almost back to 50.  The market has worked off the overbought condition.  The question is whether there will be another big round of buying or not.

The rally has not had a lot of vigor.  The volume has been light and new highs are not particularly strong.  The last two days have been weak with negative breadth.  There were even more new lows then highs today.  The internals appear to be weaker then when we were in this area in June.  There is definitely some risk the market rolls over once again.  The bulls need to get a good solid break out above 2800 and make it stick.  A little patience is needed to let the market decide what it wants to do.

Here is the latest installment from Mauldin.  The Debt Train Will Crash

Bob

Daily update 7/13

SPX tested above the March high, but closed slightly below it.

Volume was light once again.  Breadth was -51%.  New highs were 96.  New lows dipped a bit to 31.  Not exactly great internals considering SPX made the highest print since 2/5.  XLF closed slightly in the red along with IWM.  Extremely narrow rally today.

The futures remained outside the channel.  However, they are only 7 points above the 7/10 overnight high.  That is not a lot of progress.  The market appears to be losing some momentum.

 
The green count turned down a bit despite the up day.  There must have been some profit taking going on.  Notice the sizable negative divergence with the June high in the intermediate indicator.  This is important if the market turns back down instead of breaking out.  If the market turns back down from around here and the intermediate indicator drops back below 50 then the odds go up considerably that SPX will test the Feb. low. 

This does not look like a market that is preparing to blast off to me.  The various sectors are all over the place.  Lately copper and other metals have tanked.  Here is a look at Dr. Copper.

Financials around the world have sold off.  Here is a look at IXG the global financial ETF.

Most of the major stock markets around the world are much weaker then the U.S.  Here is a world ex U.S. ETF.

 It dipped below its Feb. low recently.   It bounced back a bit, but the test of that low is still ongoing. The global economy still appears to be slowing.  With commodity prices falling the way they have lately it may be about to slow at a faster rate. 

Next week is option expiration.  Normally that week has a bullish bias.  However, with the market  looking tired and SPX at what could be major resistance it could be a sideways choppy week. 

Have a great weekend.

Bob

Daily update 7/12

Bulls strike back.

SPX closed at a slight new rally high making up yesterday's losses and then some.  It got within 1 point intraday of the key 2800 level everybody seems to be watching.  Breadth was only +57% and was even negative for a while mid morning.  This rally was pretty narrow given the magnitude of the increase today.  NDX was even up 1.69% on the strength of big cap tech.  New highs were up a good bit from yesterday, but were only 90.  New lows were 38.

The futures held support above the upper channel line and popped to a slight new high.  Will the bulls keep pushing or will the sellers show up again?

The green count moved back to overbought with today's strength.

SPX is short term overbought just below a key level everybody is watching.  They were sure happy late in the day on CNBC.  Maybe a little too happy.  With today's rally being so narrow I don't know if SPX is going to blast right through 2800.  In a truly strong market the short term overbought condition would not be a problem.  Since the Feb. sell off the market has struggled when overbought rather then keep chugging along like years past.  I don't see anything that indicates things are definitely different this time.  It may be different now, but I can't tell.

The market can be fickle in relation to news events.  Sometimes the market totally reverse a news event only to reverse again in the direction of the news.  It won't surprise me if that happens here due today's action.  It felt like a rotation day as money moved into big cap tech stocks.  I guess the thinking is they will be less affected by a trade war.  If that was the case the market might be taking trade war fear more serious then it appeared today.  We will just have to see what happens over the next few days.  Maybe the bulls will just keep on buying.

Bob