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Thursday, October 18, 2018

Daily update 10/18 But what if it is the start of a bear

Sellers reappear.

SPX sold down below the 10/16 low and below the 200 SMA.  Dip buyers came to the rescue and got the close just at the 200.  Breadth was -74%.  New highs were 7.  New lows picked up to 245. 

The futures ended up below the 20 SMA.  However, there was a significant bounce off the lows.

Despite the move down the red count dropped below 50.

SPX closed above the 10/16 low as well as the 200.  I think that keeps the door open for the bounce to continue.  I don't know if the bulls will step through that door though.  It is not clear to me if this was a bump in the road or the start of a retest.  I have mixed signals here.  Breaking today's low should continue lower for the retest.  If the bulls show up in the morning maybe today's late day bounce keeps bouncing.

Last night I highlighted an article saying why it is unlikely we are starting a bear market.  I have to say that what the article said about the economic data is generally true.  The problem we have today is the global economy, not the U.S. economy.  The rest of the world is in a synchronized slow down.  Their stock markets and industrial metals prices seem to confirm that as true.  Even so that might not be terrible if the global economy turns back up.  However, there is no word from ECRI saying their long lead indexes have turned up.  In the U.S. the auto and housing sectors have already started to slow.  If the global economy starts to drag on the U.S. our economy could slow faster than people expect.  The most troublesome thing I see is that global financial stocks are not acting well.  It isn't just XLF that is in poor shape.  It will take a while and lower prices to confirm we are in a bear market.  Maybe we see strength come in and the indexes make new highs and clear the air.  What if that does not happen?  Time to be vigilant and watch closely.


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