Daily update 10/29 The Last Two Times The US Economy Was This Strong, A Recession Was Less Than A Year Away

Craziness.

After a gap up SPX was up well more then 1%.  Then the collapse started.  Late in the day SPX was down well more then 1%.  We just don't see that kind of action in a normal bull market.  We are in a very severe correction or a new bear market.  Breadth was +79% early in the day, but ended at -55%.  New highs picked up to 19.  New lows dropped considerably to 390.  Interesting since SPX dipped well down to new lows for the pullback.

The futures made a new closing low for this pullback.  That last bar was quite big.  I want to show the action on a 5 minute chart because it was spectacular to end the day.

The blue bar in the circle had a 17.25 point range high to low.  The next bar was even more wild.  It had a range of 29.25 points.  The end of the day also saw a surge of volume on the rebound.  Once again traders are trying to catch a bottom.

The red count remains in oversold territory.

The TRIN was 1.02 so no panic again today.  There seems to be no end to the sellers.  Definitely no real panic.  Therein lies the problem.  It seems like there should be some fear out there.  I just don't sense that.  The market can bounce for a few days because it is oversold, but I don't see any sign this would be a durable bottom from here.  The last rally to the Sept. high looked technically weak like it was a terminal rally in this bull market.  The sell off this month has done nothing to contradict that idea.  It looks more like it is reinforcing the idea we could have started a bear market.  The underlying economy is still ok for now, but something is bothering investors.  It could be that people are figuring out that neither Trump nor Xi are going to back down and settle things between China and the U.S. anytime soon.  If that is the case I would not expect this turmoil to end anytime soon either. 

The FANG stocks were clearly responsible for the market's turnaround from this morning.  There is a massive run for the exits.  How much longer it lasts is impossible to say at this time.  The hedge funds had loaded up on these stocks beyond belief.  The rest of the market is not going to put in a serious bottom until that selling is over.

Interesting read from ECRI.  The Last Two Times The US Economy Was This Strong, A Recession Was Less Than A Year Away

Bob