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Monday, August 13, 2018

Daily update 8/13 Second Hand News: Facing a Second Derivative Economic Inflection Point?

Downside follow through.

SPX closed below the 20 SMA.  Breadth was -64%.  New highs dropped down to 43.  New lows increased again to 112.  SPX tested above yesterday's high early on, but found sellers.  That is generally a negative sign.  The close below yesterday's low shows the sellers had some enthusiasm.  No panic though. 

The futures closed below the 50 SMA, but have not confirmed a break yet.  However, the 50 is not providing as strong of support as it did in late July.  It looks more likely to break this time.

The red count is clearly above the green line now, but remains below 50.  The bears are trying to get a grip.

Both the short and intermediate bull pressure lines have negative crosses.  The long term line is not far away.  The selling pressure in the intermediate line is the highest since last April.  The rally since the April low has had very little selling pressure.  I have commented on that a number of times.  The selling pressure has picked up now.  The rally could be over.  The mid term election pullback might have started. 

Most everybody seems to agree that Turkey is not going to bring down the world's markets.  The problem is that the first signs of trouble are always ignored.  If memory serves me correctly the collapsing of some of Bear Stearns's hedge funds in 2007 was the first real trouble sign of the coming financial crisis.  That seemed inconsequential at the time.  I have pointed out XLF has not been acting right.  Financial stocks around the globe have also gone down considerably.  While Turkey itself might not crater the global economy it could be a symptom of deeper problems.  It is not the only emerging market economy experiencing trouuble.  The pundits will be out telling us all not to worry.  They may be right, but what if they aren't.  With financial stocks around the globe not acting right and the global economy slowing down there could be trouble not too far down the road. 

I was thinking SPX would fill Friday's gap down before proceeding with the fall correction.  Maybe that will still happen, but with the way investors sold the morning rally I don't know.  I think it is unlikely SPX makes that new high anytime soon.  The bears seem to be getting control again.

Some interesting thoughts on the economy.  Second Hand News: Facing a Second Derivative Economic Inflection Point?


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