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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.


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