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Thursday, December 13, 2018

Daily update 12/13

On Tuesday I wrote "If SPX can stay above yesterday's low on a closing basis for another couple of days it might embolden some buyers."  SPX has accomplished that.  Now it is up to the buyers to show up.

SPX has gapped up the last three days in a row.  The sellers have come out each day.  SPX is higher then it was three days ago despite the sellers taking whacks at it.  It spent most of the day below yesterday's low and did test lower, but did not break down.  It bounced late in the day to get back off the low.  Breadth was -63%.  New highs were 28.  New lows spiked up again to 363.

The futures tested lower, but ended the day within the range of the last four bars.  The white bar after the green bar has not sent the market spiraling down yet.  Maybe it won't this time.

The red count is above 50 and below overbought.  The green count turned up a bit.  That is a slight positive. 

There was a lot of back and forth in the market today.  There was real money on both sides of the trade for a change.  I think there was some accumulation of stock amidst the selling.  That could provide a decent base for a rally as long as the bulls continue to hold the market up.  Small caps were down (IWM was -1.39%) so SPX held up because of the action in big cap stocks.  Many bottoms are led by big caps with the small caps catching fire after it is more obvious the market has turned.  We are in limbo here until the market breaks or the bulls catch fire.  If the bulls show up tomorrow watch for the VIX to close below 20.  The last two bounces took off after that happened.  I would expect that to work again as a good sign of a short term bottom.

The ECB announced they will end their bond buying program at the end of the month.  Global liquidity will dry up at a faster rate as the FED is doing maximum QT still.  Not a great backdrop next year.

I saw Jim Paulsen the chief investment strategist at Leuthold Group on CNBC today.  He is starting to get a bit worried about recession.  He mentioned credit spreads blowing out.  I have seen him a number of times over the years in this bull market.  Every time I saw him he was very positive on the buy the dip and longer term.  He was occasionally cautious in the short term expecting some pullback in the market.  He has obviously been right with the buy the dip mentality.  This is the first time I can remember seeing him really and truly cautious.  You never know if an optimist like him is a perma bull or not until things get rough.  He did not sound like a perma bull to me today.  I am beginning to think he might actually know what he is doing rather than just being bullish all the time and right until a bear market hits.  It is not often somebody so optimistic starts flipping so he might be worth paying attention to.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.