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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.


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