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Friday, September 28, 2018

Daily update 9/28 Timing Is Everything: Liquidity Cut Amid Global Slowdown

Quarter three ends with a whimper.

No downside follow through from the post FED reversal so far.  Breadth was +53%.  New highs were 60.  New lows increased to 130.  Troublesome.

The futures are trapped between the 20 and 50 SMAs.  Winding up for a big move?

The red count slipped a bit, but remains above the green line.

We got the down week that history said we should expect.  It was not much of a down move though.  Oct. is traditionally the most volatile month of the year.  There has not been much volatility for months now.  Will it stay that way?

Here is latest article from ECRI on the global economy.  Apparently their long lead indexes have not turned up yet.  Timing Is Everything: Liquidity Cut Amid Global Slowdown

That is one fizzy soda!

Have a great weekend.


Thursday, September 27, 2018

Daily update 9/27 Negative earnings guidance

Upgrades of AMZN and AAPL brought out some buyers this morning.  However, mid day the sellers showed up and SPX dribbled down the rest of the day.

Today left an upper tail on the candlestick.  That is two in a row.  Breadth was +51%.  New highs dropped to 39.  New lows increased to 110.  That can't be a positive.

The futures rallied back above the 20 SMA this morning, but could not hold up there.  Technically we do not have confirmation of a break of the 20.  A failure like today to overcome it is a negative though. 

The red count ticked up a little, but remains below 50.  The intermediate indicator is the lowest it has been since July when the market was rallying off the June low. 

Both the short and intermediate bull pressure lines have negative crossovers.  The long term line is barely positive.

Both the 10 DMA lines and the McClellan oscillator are negative.

XLF continued lower after its break out failed. 

Market internals appear to be unfavorable.  Will the bears really take charge is the question.  The market has been vulnerable before, but the sellers never showed up in force.  This is probably not a good time to be complacent just in case.  SPX  needs to close above yesterday's high (2931) to get out of trouble. 

I heard some comments from Trump that indicated the negotiations with Canada were not going particularly well.  SPX broke out to new highs on news of a deal with Mexico and positive prospects on a deal with Canada.  That rosy scenario investors were expecting might not happen.  For a long time any bad news has been short lived while people rush in to buy on good news.  I keep hearing people say they expect cooler heads to prevail in all these trade negotiations before anything bad happens.  My problem with that logic is that I can't see any cooler heads among the personalities involved in negotiations with either China or Canada.  Will the market loose patience at some point?

Mostly what I see in the media is how great the earning are.  I was surprised to see so much negative guidance.

We have not seen this many companies with negative guidance since 2016.  Maybe tariffs are overrunning tax cuts now.  We clearly had a long period of below average negative guidance since 2016.  Maybe that is now over.  The above average negative guidance back in 2014 didn't stop the market from going up.  However, stocks are more highly valued then back in those days.  We are in a rate hike cycle and the FED is shrinking its balance sheet.  So the environment is different this time.  We will have to wait and see if that makes a difference or not.


Wednesday, September 26, 2018

Daily update 9/26

They first loved the FED announcement, then they rethought things.

The post FED rally took SPX up to fill the 9/24 gap down.  The sellers showed up there in force and sent SPX to new lows.  Breadth was -59%.  New highs were only 60.  New lows came in at 104.  Based on the history previously mentioned a pullback should not be a surprise.

The futures dropped below the 20 SMA, but found support at the 50 SMA and the lower channel line.  Will they bounce or break here?

The red count crossed the green line, but is still below 50.

The stage is set for the bears to take control in the short term.  Will they step up this time?  The selling pressure has been miniscule since the April low.  The internals have been weak for months indicating buying pressure is tepid.  I don't know that necessarily means selling pressure is going to pick though.  On the other hand, I know that mid term election years often have sizable sell offs some time before the election.  If there is follow through selling from today's reversal bar a logical target is the lower channel line.  A slight penetration of that line would be normal since SPX got above the upper line and came right back in.  It did that twice even.  Beyond that we will have to see what happens. 


Tuesday, September 25, 2018

Daily update 9/25 SPY option data

Gap up sold into.

Intraday strength was sold all day.  Not hard, but constant hitting of the bids.  Breadth was -54%.  New highs were up a bit to 76.  New lows were up quite a bit to 134.  Not good.

The futures are holding on to 20 SMA support so far.  They are up a few points at the moment. 

The counts are right on top of each other.  Sometimes this will spark the bulls into buying. 

The FED is up on tap tomorrow.  We will see how the market reacts to the rate hike and go from there.  The transports and financials saw follow through selling today.  The SOX joined in the selling party at -1.7%.  The cracks in the rally are getting a little bit wider.  If the bulls don't pick it up soon the market could be in for another dip.

Commodity prices and global markets have bounced off their oversold lows.  I can't say yet whether that is a statement on the global economy or just a bounce.  I am watching it to see what is what.  If global markets put in a good bottom it could bode well for U.S. markets to continue the rally.  I would feel much better about that being the case if ECRI would tell us their long lead global indicators had turned up like they did in 2016.  At the last report I saw early this month they said they were still falling.

The SPY option data shows the 285 strike has the most support, but is not very strong.  I can't recall in the time I have been doing this not having a put strike over 100,000 options.  At the moment we do not have nearly as strong option support as we have been having.  The call options show strong resistance at 295 and very strong resistance at 300.


Monday, September 24, 2018

Daily update 9/24

The odds for a down week played out for one day anyway.

SPX closed right near the upper channel line.  Breadth was -66% which was the most negative reading since back in July.  New highs dropped way down to 48.  New lows picked up considerably to 103.  A possible double top forming with that late Aug. high. 

The futures gapped down on the open and eventually tested the 20 SMA.  However, the buyers came in to support the market.  The futures ended the regular session only 3 points below the open.  The selling was not too heavy despite the very negative breadth.

The green count took a hit, but is slightly above the red line. 

XLF broke out to multi month highs last week, but came right back in.  Its looking like a failed break out.

The transports made it above the Jan. high and messed around there for a couple of weeks.  However, they got smacked today and now this is a possible failed break out.

I have lost track of how many times I said this market can't seem to pull itself together to make a sustained move higher.  It still looks that way to me despite the Dow making a slight new high.  It just can't get all cylinders firing at the same time.  One day off an intraday new high in SPX there were 103 new lows.  That kind of thing does not happen in a healthy market.  I imagine the escalation of the trade situation with China contributed to the fall of the transports.  The market has been largely ignoring it, but maybe that won't be the case forever.

The FED meeting on Wed. is expected to bring another rate increase.  The market has struggled after prior hikes for about a month.  I am not sure if that is widely known or not.  If it is known the bulls might not be real ambitious the next two days.

The major indexes have all made it above the Jan. high in the last few months.  However, the market has not really taken off.  If the major indexes all fall back below their Jan. highs we would be left with a serious looking bull market topping pattern.  Even if that were to happen it would not necessarily mean the market would fall out of bed in the near future.  The reason for topping would likely be the global economic situation.  However, the U.S. economy is still going reasonably strong.  The market might not go down all that much until it smells the U.S. economy getting into trouble.  That could still take months.  First things first though.  Lets get through the rate hike and see how the market responds.


Friday, September 21, 2018

Daily update 9/21

Lagging indexes COMPX and R2000 were relatively weak today.

Sellers came out early on the gap up and started hitting the bids.  Breadth started out +60% at 10 AM, but was slightly negative at the close.  XLF was also weak today.  SPX is still above the upper channel line for the moment.  Will it stay there or come back in?

The futures ended the day just above the upper channel line.  Will they bounce from there or come back inside?

The green count was up slightly and remains well below overbought.

The relative weakness in COMPX and R2000 is a bit disconcerting given that those indexes were already lagging.  Bulls much prefer to have those indexes leading on the upside.  Next week will be interesting.  Odds say there is a good chance of a down week.  SPX could use more upside to confirm this latest break out to new highs.  Will the bulls be willing to push prices higher from here?  Will the trade stuff really matter even though it looks like the market is ignoring it?  Lots of questions.  I guess we will find out the answers in time.

Have a great weekend.


Thursday, September 20, 2018

Daily update 9/20 Declining number of stocks traded

Dow finally closes at a new high.

Today probably ticked off the option sellers as SPY gapped up and over 291.  Breadth was +64%.  New highs came in at 85 as did new lows.  That is way too many new lows for a strong day like today at new highs.  SPX is above the upper channel line again.  Volume was relatively strong.  The last time SPX broke out of the channel it only rallied two more days before succumbing to gravity.  It will be interesting to see what happens this time.

The futures broke out of the channel overnight and pushed higher during regular hours.  It looks like a break out of a multi week consolidation.  Now we just have to see if it sticks.

The green count finally crossed 50.  Still below overbought levels should the market want to continue its run.

Overnight a Chinese official said they would be lowering import tariffs on most of their major trading partners in Oct.  I could not find any other details.  I believe the market looked at that as easing trade tensions.  Without details we can't really determine that.  I doubt the U.S. will be included.  At the moment the market is looking for reasons to buy and that was all it took to get the bulls going again.  COMPX and R2000 still have a ways to go to make a new high.  On 8/29 when SPX made its last new high those indexes were also making new highs.  There is a slight divergence here.  That only matters if this new high ends up failing.  On the downside the first warning would be a close back below the Aug. high of 2916.  Lets see what the bulls have in mind.

A lot of people talk about the narrowing of the stock market, but they usually are referring to FANG like stocks.  The entire market has been contracting for 20 years.  Here is a look at the number of companies traded up to 2017.

The number of companies traded last year was down 43% from the year 2000.  Meanwhile total capitalization is nearly double that of 2000.  More money in fewer stocks.  That is the very definition of a narrowing market.  The bear market in 2008 plunged much faster then the bear that started in 2000.  I often wondered if part of that wasn't the fact there were a lot less stocks in 2007.  What happens when the next bear market hits and everybody wants to take profits with even fewer stocks now?  I often hear people on TV talking about their clients all nervous and asking about whether we have hit the top.  They play this off as being bullish.  That may be true while the market is rising.  However, it also means there are a lot of people with their fingers on the sell button because they are bound and determined not to ride out another 50% crash.  Doesn't that guarantee another crash is coming?  This is why I am working so hard to try to recognize the top before everybody else does.  I want to alert my family, friends, and blog readers before the herd figures it out.  I expect a sudden rush to the exit at some point.


Wednesday, September 19, 2018

Daily update 9/19

SPY option resistance holds again.

The bulls really tried to push SPX higher today.  SPY made it slightly above 291.5, but was repelled.  The bulls tried again in the last hour, but failed again.  Breadth at 10 AM was +58%.  At the close it was -55%.  There was clear rotation going on as the sectors were mixed.  XLF had a very strong day along with GDX and XLB.  Tech and small caps were weak.  New highs contracted to 72.  New lows contracted to 92, but were still higher then the new highs.

The futures got slightly above yesterday's high, but failed to stay there.  So far option resistance has been like a brick wall.

The green count went sideways today, but the red count picked up a bit. 

SPX is right near its high, but COMPX and R2000 are not.  R2000 is even slightly below its June high.  The market still appears to be having trouble getting itself together to go up.  So we wait and see what happens.


Tuesday, September 18, 2018

Daily update 9/18

It could have been worse.  Tariffs were only 10% instead of 25% so buy some stocks.  Asian markets were up and China was up strongly.  That allowed Europe to be up and the U.S. also.  I am sure some of the early buying was removing hedges that were put on the last two days after news hit that more tariffs were coming.  Bob Pisani noted that China was up big because of rumors of massive  government stimulus coming not because the tariffs were less then expected. 

SPX climbed to a new high for the current bounce, but failed to close above the 9/14 close.  SPY was above the 291 option resistance level early in the day, but closed back below it.  I think that will still be stiff resistance through Friday.  Breadth was only +53%.  The buying was very selective since SPX was up .54%.  New highs were up a bit to 90.  New lows were also up at 107.  That is a very high number with SPX this close to the all time high.  I saw numbers like that back in 2000.  There are a lot less stocks now then there was then.  On a percentage basis this worse. 

The futures tested the 9/14 high, but were turned back.  They were outside the upper channel line during that test, but closed back inside.  It is not clear the futures are ready to break out of the consolidation that has been going on all month and move higher.

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

The new lows outnumber new highs, the green count remains below 50, and both breadth indicators are negative.  The bulls need to prove they have the desire to push price through resistance.  The short term internals are not giving very good odds that will be the case.  I read today that since 1990 the market has been lower the week after Sept. option expiration (this week) 82% of the time.  In addition the FOMC meets on Wed. and is expected to raise rates.  Every rate hike in this series of hikes has seen a pullback except last Dec.  Of course that hike was overridden by the passage of tax cuts.  I guess the odds of next week seeing some pullback are pretty high.  Short term tops with weak internals like we have now often lead to roughly 5% pullbacks.  We still have the possibility of the deeper mid term election pullback happening also.  My point is don't be surprised if the market sells off in the next several weeks even if it seems like that is unlikely at this point in time.  I think the bulls need to get above the 8/29 high with some real vigor to keep this rally going.  We will see if they are up to the task or not.


Monday, September 17, 2018


It looks like Trump put a 10% tariff on $200 billion worth of goods.  That will go up to 25% on Jan. 1.  If China retaliates against our farmers he will put tariffs on another $267 billion of goods.  Futures are down about 11 points from the 4 PM close as I write this.


Daily update 9/17

Trade war talk ratchets up.

The rest of the world was considerably more negative then the U.S. at the open.  SPX resisted the downward pull somewhat, but could never overcome it.  Breadth was -58%.  QQQ and IWM were down over 1% showing considerable relative weakness.  New highs slipped to 75.  New lows picked up a bit again to 89. 

The futures ended the trading day slightly below the 50 SMA, but slightly above the 20.  They could never overcome the SPY option resistance at 290-1.

The green count turned down a bit.  It still has not crossed 50 on this rally attempt.

Neither the 10 DMA breadth lines or the McClellan oscillator got positive on this rally attempt. 

SPX found support on the pullback to the Jan. high.  However, the bounce off that support has been very weak.  None of the short term internals have confirmed the rally.  With today's close below Friday's low the market may be rolling over.  With the internals already weak it will be easier for the bears to get control if there is follow through selling. 

This afternoon Trump said there would be news on China after the close.  He seemed to imply it would be an increase in tariffs.  The market drifted lower after those headlines.  At this point I can't seem to find an announcement.  If there is such an announcement some time before the open it could dominate tomorrow's trade. 


Friday, September 14, 2018

Daily update 9/14

A consolidation on top of a consolidation.

The SPY 291 option resistance is holding SPX in check.  However, there seem to be plenty of dip buyers on every little intraday pullback.  Breadth was barely positive again.  New highs slipped to 106 while new lows remain very elevated at 84.  Something not bullish is going on under the covers.  New lows should not be that high.  I can't remember a time they were this high that was not followed by a correction of some sort (or bear market as in 2000).  In Oct. 2007 I complained about too many new lows with SPX near the high when they were in the 30s and 40s.  I keep looking for signs this break out is going to stick, but I can't find them.  The market keeps throwing up caution flags instead.

The futures were hanging around the daily high when a headline hit about Trump wanting to put on another $200 billion of tariffs on China.  That sent the futures down to test yesterday's low.  They found buyers one tick above that low and rallied slowly all afternoon.  That is bullish action to test a prior day low and bounce back.

The green count remains below 50.

There is a hesitation to chase price here.  Investors clearly prefer to buy dips.  Selling activity remains muted outside of China trade war related headlines.  I don't really know what to say.  The rally looks feeble, but up is up.  Until something comes along that causes real selling SPX seems likely to drift higher.  If they go ahead with the tariffs that may change things.  For some reason I cannot fathom it seems most people think the China situation will get quickly and peacefully resolved.  I have expressed my thoughts previously.  Needless to say I will be shocked if this gets resolved quickly.  I am sure the market won't like the escalation.  How much it won't like it I have no idea.  I heard David Tepper yesterday saying SPX could be down anywhere from 5 to 20%.  That narrows it down nicely.  He also mentioned he was about 25% long in relation to SPX stocks and is holding a cash reserve.  The trade situation was his number one worry.

SPX seems to be limping higher.  I can't shake the feeling it is possible we are tracing out a bull market top.  The divergence between what the U.S. is doing and what foreign markets are doing is probably the biggest ever.  On the flip side the U.S. economy is strong enough that a bull market top should be very low odds at this time.  The question is will the U.S. hold up long enough for the rest of the world to turn back up or will the rest of the world drag the U.S. into the mud.  Beats me.

Have a great weekend.


Thursday, September 13, 2018

Daily update 9/13

Upside follow through.

Another big cap supported move.  Breadth was barely positive.  New highs increased to 135, but new lows remained high at 78.  Volume increased considerably.  With breadth so weak today I am not sure that is a positive.  Hard to say.

The futures have climbed above the upper channel line.  Will they be able to stay out there?

The green count recrossed the red line.  It remains below 50.

The futures ended the regular session 5 points above the open.  The bulls won the day on an increase in volume.  That sounds good.  However, the high number of new lows and barely positive breadth somewhat tainted the results.  In addition XLF, R2000, and IYT were slightly red.  We are not seeing strong buying conviction here.  I think the trade situation is holding back money managers at least somewhat.  I can understand that.  I don't think the situation with China will be easily resolved.  Trump doubled down on that with a tweet today saying something about him not being under any pressure to make deal while noting China's stock market is down big time.  At some point this could end up haunting the market.  However, the old saying "it does not matter until it matters" applies.  We might wake up some day and it matters.  When or if that happens is unknown.  Just looking at price it would seem SPX should still go higher and retest the recent high.  A  number of global indexes appear to be making oversold bounces.  That could help get the futures off to a positive start if the rest of the world's markets are up overnight.  I still don't see the market as getting its act together to make a big sustained push higher.  There is always something wrong on every positive day.  Its like the engine is not firing on all cylinders.  The cylinders that aren't firing keep changing from day to day though.  It is peculiar action with SPX at new highs.


Wednesday, September 12, 2018

Daily update 9/12

Consolidation on top of the old consolidation.

The market was a bit volatile intraday.  The sellers took a whack early and sent SPX back down into the trading range it broke out of yesterday.  News hit mid day about possibly restarting trade talks with China that sent SPX above yesterday's high.  The sellers came out and SPX tested into the old trading range again.  After a bounce it made another test down, but found buyers once again.  Not much change at the close considering the travel range.  The breadth was +53%.  New highs were stable at 96 while new lows dropped considerably to 73.

The futures oscillated around the 50 SMA and ended the regular session just above it.

The green count turned up slightly, but remains below the red line.

There were some sellers out and about after yesterday's rally.  However, there were enough dip buyers to absorb the selling.  Since mid day yesterday the market has been forming another consolidation.  The bulls have not quite got control back yet.  They are slowly working on it though.  Unless a particular sell catalyst comes along I expect they will accomplish the task eventually. 



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