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Tuesday, October 23, 2018

Daily update 10/23

Turn around Tuesday strikes again.

After the big gap down opening SPX tested below the 10/11 low.  After a little bit of overshoot buyers stepped in.  They closed the gap, but did not get a positive close.  Breadth was -67%.  New highs were 10 while new lows jumped up to 479.  That was a little less then the 519 new lows on the 10/11 low.  A slight positive divergence.

The futures are down a bit after hours.  The last bar of the trading day was a bullish engulfing bar.  Potentially positive with upside follow through.

The red count just barely crossed 50.  There is a sizable positive divergence with the 10/11 low.

For today the retest was successful.  There are some clear short term positive divergences that could be signaling a short term bottom.  The bulls still need confirmation of today's sort of reversal.  SPX did not get green so in effect it was still a down day.  A late Oct. bottom and rally into the election is a common pattern in mid term election years.  Maybe we are setting up for that.  The setup is there.  The bulls just need to show up and make it happen.  If for some reason that does not happen the positive divergences will end up meaning there is plenty more room to run on the downside. 

Interesting headline from Japan.

Former Bank of Japan Governor Masaaki Shirakawa cautioned that monetary policy can't provide a quick fix for the Japanese economy, adding that growing global debt might lead to the next economic crisis. 

The BOJ has been printing money since 2001.  It almost sounds like they might have figured out after nearly two decades it does not solve the problem of too much debt.  Ray Dalio talks about the theory of a beautiful deleverage where central banks print money in just right amount to keep the economy going while people deleverage.  The problem is that the low interest rate environment causes more debt and there is no actual deleveraging.  


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