It has been an amazing year considering how 2018 ended. Despite a slowing economy and trade tensions the market kept on pushing higher. Since the announcement of a phase one trade deal with China selling pressure completely evaporated. Everybody is content to ride the up move which appears to be driven by the retail investor. I have not seen a tick accumulation signal since last July. This is by far the longest period without a signal since the 2009 low. I think people are waiting until next year to take profits for tax purposes. It is likely there will be some profit taking at some point early next year. With the FED continuing QE (even if they say it is not QE it is QE) it probably won't be too deep of a pullback or last too long. The question is how long will the FED continue the current QE program. If they stop there could always be a bigger pullback.
The rhetoric this week on CNBC has largely been about how the market can continue this big run next year. Two times I heard the host make comments about everybody being so positive. Then they asked their guest what could go wrong. Each time the answer was the economy could grow fast enough the FED would raise rates. Given the current situation I would say the odds of that are very low.
If something does go wrong next year it will be the economy slowing too much. We are still in a manufacturing slowdown (which started about Oct. 2018) and Boeing has scheduled production cuts in Q1. That will likely hit the data, but I don't know how much. Neither the transports nor the R2000 indexes have made a new high yet. XLF has managed to get above its 2018 high which is a positive. China has said multiple times they expect their economy will see downside pressure next year. Europe has stabilized some, but there is no sign yet of upside acceleration.
The rhetoric is almost universally bullish. This morning I was told there was plenty of precedent for another good year in stocks next year after this strong year. The market seems to be predicting the global economic slowdown bottomed in Q3 2019. People are expecting the global economy to pick up from here and hence improve profits. I am not smart enough to predict whether that will happen or not. I think the transports still need to confirm the outlook. They really need to make a new high. Until that happens we have a similar scenario to 2000. The transports topped in 1999 while the rest of the market kept on going into 2000. The yield curve inverted in 1998, but the recession did not hit until 2001. It is slightly different in that so far the transports topped before the yield curve inversion. However, the inversion opened the window to a U.S. recession usually within 18-24 months. Will a recession hold off until at least 2021? I wish I knew the answer. If the downturn in the global economy is truly over the transports should end up making a new high. Until that happens I will keep an eye on the economic data and see how it progresses.
I hope everybody had a wonderful Christmas that celebrates that holiday. I wish everyone a wonderful new year.
Bob
P.S.
The book project is coming along nicely. I should be done with the rough draft in a few weeks.
Once in a while the Lord puts a song in my head when I wake up.
Recently I woke up to "What the world needs now is love sweet love". I probably have not heard that song in decades, but I
could not agree more! It is impossible to be angry, anxious or hateful and be happy at the same time. It is very easy to be happy when one is forgiving, grateful, thankful, and helping others. Each of us can choose the type of attitude we want to have. Nobody can force you to be unhappy unless you let them.
Objective analysis from a Wall Street outsider.
Thursday, December 26, 2019
Monday, December 2, 2019
Update 12/2
This was the first serious down day since way back in the first half of Oct. I am glad I was not trying to find things to write about during this up move.
The first bit of news was a story out of China that there would be no phase one deal that does not include the removal of current tariffs. The next bit of news was poor economic data at 10 AM. That added considerably to the selling. Breadth was -71%.
The futures have been soaring right along. They found support at the 50 SMA. This is the first negative DI cross since mid Oct.
There is a slight negative cross in the red/green count. That is also the first one since mid Oct. The red count is still well below 50.
SPX found its low this morning. There was some selling late in the day, but not enough to make a new low. It will take more selling then that to turn the market down. However, this is the first time the bears have had a chance to do anything to this market lately. We need to watch the next few days to see how this plays out. The VIX spiked up sharply today as people loaded on the hedges. It is too soon to tell if this is a start of a VIX spike or not. The ultimate resolution may depend on whether Trump decides to increase tariffs or not.
Trump figured out that if he keeps saying China wants to make a deal the market will go up. Someday that effect might wear off. It seems to be clear they are not close to an agreement on a phase one deal. The market has had a short attention span for any negative trade comments up to this point. However, we are getting closer to the Dec. 15 date which still is scheduled to increase tariffs. I don't have a clue what is going to happen. I can see where money managers might want to lighten up a little and take some profits from this rally. A 5% pullback is not out of the question. If the tariffs go into affect then probably a much bigger one. Of course one good positive tweet could send the market to new highs. Be nimble and be quick or be on the sidelines in the short term.
Bob
The first bit of news was a story out of China that there would be no phase one deal that does not include the removal of current tariffs. The next bit of news was poor economic data at 10 AM. That added considerably to the selling. Breadth was -71%.
The futures have been soaring right along. They found support at the 50 SMA. This is the first negative DI cross since mid Oct.
There is a slight negative cross in the red/green count. That is also the first one since mid Oct. The red count is still well below 50.
SPX found its low this morning. There was some selling late in the day, but not enough to make a new low. It will take more selling then that to turn the market down. However, this is the first time the bears have had a chance to do anything to this market lately. We need to watch the next few days to see how this plays out. The VIX spiked up sharply today as people loaded on the hedges. It is too soon to tell if this is a start of a VIX spike or not. The ultimate resolution may depend on whether Trump decides to increase tariffs or not.
Trump figured out that if he keeps saying China wants to make a deal the market will go up. Someday that effect might wear off. It seems to be clear they are not close to an agreement on a phase one deal. The market has had a short attention span for any negative trade comments up to this point. However, we are getting closer to the Dec. 15 date which still is scheduled to increase tariffs. I don't have a clue what is going to happen. I can see where money managers might want to lighten up a little and take some profits from this rally. A 5% pullback is not out of the question. If the tariffs go into affect then probably a much bigger one. Of course one good positive tweet could send the market to new highs. Be nimble and be quick or be on the sidelines in the short term.
Bob
Friday, November 1, 2019
Update 11/1
SPX ends the week at a new high along with COMPX. The Dow is within spitting distance of its high.
A stronger than expected employment report brought out some buyers today. New highs were 182. That is about the same numbers we saw 10/21 and 10/22. I don't think that number tells us anything about whether this break out will stick or not. We still have a narrow market until more indexes make new highs.
The green count is above 50, but not overbought.
We still have the same situation as last summer when SPX made a new high. The weak sister indexes IYT, IWM and XLF are still well below their highs. XLF is making progress, but IWM and IYT not so much.
The market seems to be discounting the so called phase one deal with China. If something goes wrong which leads to more tariffs the market probably won't like that. The poor global economic data has not deterred buyers lately. Will that change down the road?
I have no idea what happens now. There are cracks in the market, but they have been there for many months without causing a problem. I do not see any sign of major buying on the part of money managers. I think the fate of this rally lies in the hands of retail investors. I don't have a clue whether they will continue piling in or not. We will have to wait and see.
Have a great weekend. Peace.
Bob
A stronger than expected employment report brought out some buyers today. New highs were 182. That is about the same numbers we saw 10/21 and 10/22. I don't think that number tells us anything about whether this break out will stick or not. We still have a narrow market until more indexes make new highs.
The green count is above 50, but not overbought.
We still have the same situation as last summer when SPX made a new high. The weak sister indexes IYT, IWM and XLF are still well below their highs. XLF is making progress, but IWM and IYT not so much.
The market seems to be discounting the so called phase one deal with China. If something goes wrong which leads to more tariffs the market probably won't like that. The poor global economic data has not deterred buyers lately. Will that change down the road?
I have no idea what happens now. There are cracks in the market, but they have been there for many months without causing a problem. I do not see any sign of major buying on the part of money managers. I think the fate of this rally lies in the hands of retail investors. I don't have a clue whether they will continue piling in or not. We will have to wait and see.
Have a great weekend. Peace.
Bob
Friday, October 25, 2019
Update 10/25
SPX testing the all time high.
SPX opened lower, but buyers showed up quickly. It got fractionally below the all time high before stopping. Breadth was only +54% which is a bit weak for the size of the move up.
The futures have been finding support at the 20 SMA. There is quite a bit of congestion up here in this area.
The green count is above 50 and below overbought. I don't think this chart tells us much about whether we are going to break out and go higher or not.
SPX is testing the highs, but we still have the same problems we have had for months. The global economy including the U.S. is still weakening. The weak sister indexes IWM, IYT, and XLF are still lagging. There has been no tick accumulation signal signal 7/18. That is the longest stretch in this entire bull market. On the positive side we are now moving into the seasonally strongest time of the year. Will that take the market higher?
Next week the FED is expected to cut rates again. The market has sold off after both of the previous cuts. With it be different this time?
If the market is going to continue higher I believe the lack of tick signals means it will have to be retail investors doing the bulk of the buying. I can understand the lack of confidence by money managers. The economic data points to a synchronized global slowdown. Until the economy turns around there is risk of a global recession. The China trade situation is still up in the air. I have heard the Chinese are asking for relief from the tariffs. I have not heard any willingness on the U.S. side for that. Will the so called phase one deal actually happen. I am a little skeptical, but we will see. The fate of the market seems to be in the hands of individual investors. Will they show up and keep pushing the market higher? Beats me. We will have to see how the market reacts on this test of the highs.
Have a great weekend. Peace.
Bob
SPX opened lower, but buyers showed up quickly. It got fractionally below the all time high before stopping. Breadth was only +54% which is a bit weak for the size of the move up.
The futures have been finding support at the 20 SMA. There is quite a bit of congestion up here in this area.
The green count is above 50 and below overbought. I don't think this chart tells us much about whether we are going to break out and go higher or not.
SPX is testing the highs, but we still have the same problems we have had for months. The global economy including the U.S. is still weakening. The weak sister indexes IWM, IYT, and XLF are still lagging. There has been no tick accumulation signal signal 7/18. That is the longest stretch in this entire bull market. On the positive side we are now moving into the seasonally strongest time of the year. Will that take the market higher?
Next week the FED is expected to cut rates again. The market has sold off after both of the previous cuts. With it be different this time?
If the market is going to continue higher I believe the lack of tick signals means it will have to be retail investors doing the bulk of the buying. I can understand the lack of confidence by money managers. The economic data points to a synchronized global slowdown. Until the economy turns around there is risk of a global recession. The China trade situation is still up in the air. I have heard the Chinese are asking for relief from the tariffs. I have not heard any willingness on the U.S. side for that. Will the so called phase one deal actually happen. I am a little skeptical, but we will see. The fate of the market seems to be in the hands of individual investors. Will they show up and keep pushing the market higher? Beats me. We will have to see how the market reacts on this test of the highs.
Have a great weekend. Peace.
Bob
Friday, October 18, 2019
Update 10/18
Sorry for not updating more. I have been working feverishly on the book, but that is not the only reason. The truth is I do not know what to say. The market has been getting whipped around on headlines. I have been mostly day trading over the last few weeks due to unpredictability of news headlines. Some of those headlines have even caused big intraday moves. One must be nimble to trade in these conditions.
On news of a phase one deal with China SPX jumped above 3000. However, it has not been able to stay there so far. Is this a consolidation to go higher or another short term top forming? Breadth on this bounce has been ok, but nothing to write home about. If this market is going to break out and go higher we need to see stronger breadth readings.
The futures have been sideways the last few days. They tested the 20 SMA today, but held. The 50 and 20-0 SMAs are close together. A break of those MAs would probably be a sign the market is rolling over again.
This week the IMF said the global economy is in a synchronized slowdown. That makes it harder to turn things around. The last JOLTS report showed the lowest number of job openings in the last 17 months. The U.S. is being dragged down a bit. China seems to be backing off from the deal that was announced but was not in writing. A deal is not a deal until it is signed. I don't think it is safe to assume that will happen this year. I can understand the hesitation to bid up stocks here. We will have to wait and see if some news can push SPX to new highs. If that happens then we will have to make sure it stays there. While we are waiting we have to watch for a roll over. I don't see anyway to predict what happens in the near term.
Have a great weekend. Peace.
Bob
On news of a phase one deal with China SPX jumped above 3000. However, it has not been able to stay there so far. Is this a consolidation to go higher or another short term top forming? Breadth on this bounce has been ok, but nothing to write home about. If this market is going to break out and go higher we need to see stronger breadth readings.
The futures have been sideways the last few days. They tested the 20 SMA today, but held. The 50 and 20-0 SMAs are close together. A break of those MAs would probably be a sign the market is rolling over again.
This week the IMF said the global economy is in a synchronized slowdown. That makes it harder to turn things around. The last JOLTS report showed the lowest number of job openings in the last 17 months. The U.S. is being dragged down a bit. China seems to be backing off from the deal that was announced but was not in writing. A deal is not a deal until it is signed. I don't think it is safe to assume that will happen this year. I can understand the hesitation to bid up stocks here. We will have to wait and see if some news can push SPX to new highs. If that happens then we will have to make sure it stays there. While we are waiting we have to watch for a roll over. I don't see anyway to predict what happens in the near term.
Have a great weekend. Peace.
Bob
Tuesday, October 1, 2019
Update 10/1 Risk of Recession Rising.
The manufacturing ISM number came in at 47.8 which was way lower than forecast and the lowest since June of 2009. That 2009 reading was just as the U.S. was exiting the great recession. Many of the manufacturing numbers from around the world were worse than last month. The global economy continues to weaken and it appears it is dragging the U.S. down with it.
There was a tick distribution signal today. Volume was also elevated. SPX closed below the 50 SMA. Breadth was -72%, but was +62% when the ISM number came out. Quite a strong reversal.
The futures show a confirmed break of the 50 SMA and closed below the 200.
Money managers were busy de-risking today and with good reason. Unlike most of the headlines in recent weeks this one was fundamental. My perception is that investors have been buying dips and holding on in hopes of a trade deal. They have been comfortable doing that because the economic data was okay. Now the risk is clearly rising with this low ISM number. The global economy may already be in recession. The question is how much more de-risking needs to get done in the short term. It is too soon to tell if this will cause a sea change in investors minds or not, but it could. Trade deal progress might be scrutinized much more now with the risk of holding stocks rising. The upcoming trade talks are now really, really important.
This kind of news headline is hard to game out. Many headline driven moves are retraced in the near future, but most headlines are not really and truly fundamental in the short term. This headline is clearly a negative and there could be more selling. We will see if the dip buyers continue to show the same enthusiasm as they have been or not.
Bob
There was a tick distribution signal today. Volume was also elevated. SPX closed below the 50 SMA. Breadth was -72%, but was +62% when the ISM number came out. Quite a strong reversal.
The futures show a confirmed break of the 50 SMA and closed below the 200.
Money managers were busy de-risking today and with good reason. Unlike most of the headlines in recent weeks this one was fundamental. My perception is that investors have been buying dips and holding on in hopes of a trade deal. They have been comfortable doing that because the economic data was okay. Now the risk is clearly rising with this low ISM number. The global economy may already be in recession. The question is how much more de-risking needs to get done in the short term. It is too soon to tell if this will cause a sea change in investors minds or not, but it could. Trade deal progress might be scrutinized much more now with the risk of holding stocks rising. The upcoming trade talks are now really, really important.
This kind of news headline is hard to game out. Many headline driven moves are retraced in the near future, but most headlines are not really and truly fundamental in the short term. This headline is clearly a negative and there could be more selling. We will see if the dip buyers continue to show the same enthusiasm as they have been or not.
Bob
Tuesday, September 24, 2019
Update 9/24
The market took a bit of a dive.
The combination of poor economic data and Trump giving a speech that was tough on China trade at the UN caused a bout of selling. The breadth was -66%. SPX closed just below the 20 SMA.
The futures ended the day below the 50 SMA. A confirmed break should indicate the market is in pullback mode.
The red count crossed above the green line and is above 50.
The 10 DMA breadth lines are right on top of each other. The volume lines have a negative cross. The McClellan oscillator is in the red.
The short term and long term bull pressure lines have a negative cross. The mid term lines are still positive.
There are plenty of negatives in the market internals. The bulls probably have one chance to save the market from a pullback. A close below today's low is likely to bring out the sellers again. This latest bounce was driven by head lines which did not lead to any accumulation in the tick indicator. There has been no accumulation since back in July. The ticks came close to a distribution signal today, but did not quite get there. The bears can take control here if they desire.
I believe the market is holding up well against weak economic data on hopes of a trade deal with China. I think such a deal to be extremely unlikely before the election. The market keeps going back and forth on whether a deal is likely or not. Any positive news causes a big rally and any negative news causes a sell off. We have no idea what the next headline will be. The global economic data continues to weaken. A global recession is definitely looming large if things don't turn around. So far there has been no sign of that happening. This is a very strange situation. Since WWII global recessions have largely been caused by the U.S. economy showing weakness first. They used to say when the U.S. catches a cold the rest of the world gets the flu. This reverse order is what I have been afraid of since the 2009 low. U.S. investors monitoring the U.S. data think everything is still ok, but we could get dragged down by the rest of the world this time.
The weak sister indexes IYT, IWM, and XLF are still lagging behind. There are enough internal divergences that we could be looking at a very important top if the market sells off here. I thought so last fall and there was a significant sell off. However, the economic data was still good last fall and investors bought the dip. The economic data is much weaker this time with the last ISM manufacturing number below 50. The global data is much weaker than it was last fall. If the market takes another big tumble like late last year I don't think it will be coming back so fast this time.
Bob
The combination of poor economic data and Trump giving a speech that was tough on China trade at the UN caused a bout of selling. The breadth was -66%. SPX closed just below the 20 SMA.
The futures ended the day below the 50 SMA. A confirmed break should indicate the market is in pullback mode.
The red count crossed above the green line and is above 50.
The 10 DMA breadth lines are right on top of each other. The volume lines have a negative cross. The McClellan oscillator is in the red.
The short term and long term bull pressure lines have a negative cross. The mid term lines are still positive.
There are plenty of negatives in the market internals. The bulls probably have one chance to save the market from a pullback. A close below today's low is likely to bring out the sellers again. This latest bounce was driven by head lines which did not lead to any accumulation in the tick indicator. There has been no accumulation since back in July. The ticks came close to a distribution signal today, but did not quite get there. The bears can take control here if they desire.
I believe the market is holding up well against weak economic data on hopes of a trade deal with China. I think such a deal to be extremely unlikely before the election. The market keeps going back and forth on whether a deal is likely or not. Any positive news causes a big rally and any negative news causes a sell off. We have no idea what the next headline will be. The global economic data continues to weaken. A global recession is definitely looming large if things don't turn around. So far there has been no sign of that happening. This is a very strange situation. Since WWII global recessions have largely been caused by the U.S. economy showing weakness first. They used to say when the U.S. catches a cold the rest of the world gets the flu. This reverse order is what I have been afraid of since the 2009 low. U.S. investors monitoring the U.S. data think everything is still ok, but we could get dragged down by the rest of the world this time.
The weak sister indexes IYT, IWM, and XLF are still lagging behind. There are enough internal divergences that we could be looking at a very important top if the market sells off here. I thought so last fall and there was a significant sell off. However, the economic data was still good last fall and investors bought the dip. The economic data is much weaker this time with the last ISM manufacturing number below 50. The global data is much weaker than it was last fall. If the market takes another big tumble like late last year I don't think it will be coming back so fast this time.
Bob
Friday, September 13, 2019
Update 9/13
Test of the highs.
SPX formed back to back doji days. Breadth was slightly positive yesterday, but -54% today. New highs were 89. They peaked back on 9/4. New lows have been 25 or less on this rally. They are well contained because this year's laggards have been big winners on the rally. The money has been coming from this year's big winners which is why the new high numbers are muted.
The futures made it up to an area of congestion from back in July. A stall here is normal.
The green count has dropped out of overbought and remains well above 50. The intermediate indicator recovered strongly.
Based on the normal market internals things look fine. Breadth is good and the intermediate indicator climbed well above 50 which usually means the correction is over. With the advance/decline line at new highs SPX should do the same. I have questions about what happens after that though. Last week I talked about tick buy and sell signals. That really was not a good name. It is more appropriate to talk about accumulation and distribution signals. I am busy putting the signals on an SPX chart so I can study them better. Since this rally did not trigger the accumulation threshold I had set I started looking at an almost signal. For accumulation a green up is a full signal, a yellow up arrow is an almost signal. A green up arrow with a circle on it is a very strong accumulation signal. For distribution the red down arrow is a full signal, a light red down arrow is an almost signal. A red down arrow with a circle on it is a strong distribution signal. In my studies I find these signals are sometimes buying and selling climaxes. Sometimes accumulation signals happen on down days. The distribution signals sometimes happen on up days. Some days have both signals. Those are few, but they do happen. Without further ado here is a look at the signals for about the last year.
The low last Dec. was followed by 4 strong and 2 regular accumulation signals as the big boys piled in. We have not had an accumulation signal since 7/18. Since that time we have had 1 strong, 3 regular, and 1 almost distribution signals. I have put the signals on the chart back to the middle of 2012. I can tell you that this pattern is different than any I have seen. When SPX spends time like it did below the 50 DMA there have always been accumulation signals. Since the Trump tweet about additional tariffs there have been no accumulation signals at all. This rally happened on news headlines and we know those moves are often retraced. The headlines did not move the money managers to pile in so the odds of retracing this move are probably pretty high. I would not expect that to happen until after the FED cuts rates next week though. SPX could easily make new highs before that. If we start seeing distribution signals again then the recent low might be in jeopardy of breaking. For now the bulls are in control so we wait and see how far they want to push things.
Have a great weekend. Peace.
Bob
SPX formed back to back doji days. Breadth was slightly positive yesterday, but -54% today. New highs were 89. They peaked back on 9/4. New lows have been 25 or less on this rally. They are well contained because this year's laggards have been big winners on the rally. The money has been coming from this year's big winners which is why the new high numbers are muted.
The futures made it up to an area of congestion from back in July. A stall here is normal.
The green count has dropped out of overbought and remains well above 50. The intermediate indicator recovered strongly.
Based on the normal market internals things look fine. Breadth is good and the intermediate indicator climbed well above 50 which usually means the correction is over. With the advance/decline line at new highs SPX should do the same. I have questions about what happens after that though. Last week I talked about tick buy and sell signals. That really was not a good name. It is more appropriate to talk about accumulation and distribution signals. I am busy putting the signals on an SPX chart so I can study them better. Since this rally did not trigger the accumulation threshold I had set I started looking at an almost signal. For accumulation a green up is a full signal, a yellow up arrow is an almost signal. A green up arrow with a circle on it is a very strong accumulation signal. For distribution the red down arrow is a full signal, a light red down arrow is an almost signal. A red down arrow with a circle on it is a strong distribution signal. In my studies I find these signals are sometimes buying and selling climaxes. Sometimes accumulation signals happen on down days. The distribution signals sometimes happen on up days. Some days have both signals. Those are few, but they do happen. Without further ado here is a look at the signals for about the last year.
The low last Dec. was followed by 4 strong and 2 regular accumulation signals as the big boys piled in. We have not had an accumulation signal since 7/18. Since that time we have had 1 strong, 3 regular, and 1 almost distribution signals. I have put the signals on the chart back to the middle of 2012. I can tell you that this pattern is different than any I have seen. When SPX spends time like it did below the 50 DMA there have always been accumulation signals. Since the Trump tweet about additional tariffs there have been no accumulation signals at all. This rally happened on news headlines and we know those moves are often retraced. The headlines did not move the money managers to pile in so the odds of retracing this move are probably pretty high. I would not expect that to happen until after the FED cuts rates next week though. SPX could easily make new highs before that. If we start seeing distribution signals again then the recent low might be in jeopardy of breaking. For now the bulls are in control so we wait and see how far they want to push things.
Have a great weekend. Peace.
Bob
Friday, September 6, 2019
Update 9/6
SPX broke out of its recent range yesterday and held on to those gains today.
SPX needs to close above yesterday's high to confirm the break out. The breadth yesterday was only +64% which is not particularly strong for a break out. The volume was decent, but nothing to write home about.
The futures are free and clear of their MAs. However, they are in an area of prior congestion.
The green count has now reached overbought levels. However, the intermediate indicator is still below 50. Not quite an all clear here yet.
We got close to a tick buy signal on 8/28, but not quite. Almost signals sometimes see follow through, but all big moves that I have studied all had a full signal. I suspect this rally is not the start of a big up move. You might recall the down move started with a Trump tweet about new tariffs on 8/1. As we know news induced moves often get retraced. That could be what is happening here. SPX has now reached about the middle of that day's price bar. Yesterday the market rallied for about an hour after the open. It has been sideways since with what looks like pretty stiff resistance near the highs yesterday and today. I would bet a lot of that first hour buying was short covering. I do not have any evidence a big move to the upside is under way, but we could still retrace the rest of the move up to the 3000 area. One problem is that this move is also on news. The first day was on the Hong Kong government killing the bill that started all the protests they have been having. That was followed the next day by news from China that they had agreed to trade talks. Are those news moves going to be retraced? The down move was about tariffs which did actually go in effect and was real fundamental news. The up move is based on talking and is not fundamental in nature.
For bulls the question is whether the .25 rate cut coming from the FED mid month will be enough to propel the market higher. That is about all the bulls have in their pocket. The global economic data this week was very weak. Even the U.S. ISM manufacturing number dropped below 50 (into contraction) for the first time since 2016. There was also bad news out of India which has been a bright spot in the global economy.
A full buy signal will change the outlook. Without that I don't think SPX is headed for a break out and a significant move up. It might make new highs here, but with the market short term overbought I don't think that is a guarantee. A close by SPX back below the 50 DMA would signal a failed upside break out and could bring out some sellers. Until that happens the bulls have the ball lets see how far they decide to run with it.
Have a great weekend. Peace.
Bob
SPX needs to close above yesterday's high to confirm the break out. The breadth yesterday was only +64% which is not particularly strong for a break out. The volume was decent, but nothing to write home about.
The futures are free and clear of their MAs. However, they are in an area of prior congestion.
The green count has now reached overbought levels. However, the intermediate indicator is still below 50. Not quite an all clear here yet.
We got close to a tick buy signal on 8/28, but not quite. Almost signals sometimes see follow through, but all big moves that I have studied all had a full signal. I suspect this rally is not the start of a big up move. You might recall the down move started with a Trump tweet about new tariffs on 8/1. As we know news induced moves often get retraced. That could be what is happening here. SPX has now reached about the middle of that day's price bar. Yesterday the market rallied for about an hour after the open. It has been sideways since with what looks like pretty stiff resistance near the highs yesterday and today. I would bet a lot of that first hour buying was short covering. I do not have any evidence a big move to the upside is under way, but we could still retrace the rest of the move up to the 3000 area. One problem is that this move is also on news. The first day was on the Hong Kong government killing the bill that started all the protests they have been having. That was followed the next day by news from China that they had agreed to trade talks. Are those news moves going to be retraced? The down move was about tariffs which did actually go in effect and was real fundamental news. The up move is based on talking and is not fundamental in nature.
For bulls the question is whether the .25 rate cut coming from the FED mid month will be enough to propel the market higher. That is about all the bulls have in their pocket. The global economic data this week was very weak. Even the U.S. ISM manufacturing number dropped below 50 (into contraction) for the first time since 2016. There was also bad news out of India which has been a bright spot in the global economy.
A full buy signal will change the outlook. Without that I don't think SPX is headed for a break out and a significant move up. It might make new highs here, but with the market short term overbought I don't think that is a guarantee. A close by SPX back below the 50 DMA would signal a failed upside break out and could bring out some sellers. Until that happens the bulls have the ball lets see how far they decide to run with it.
Have a great weekend. Peace.
Bob
Friday, August 30, 2019
Update 8/30
SPX still under the 50 DMA.
Here we are back at the top of the Aug. trading range again. The sellers started right from the open after a sizable gap up on no news. The buyers stepped in after a sizable sell off in the morning. However, the rebound never made it back to the morning highs. Breadth was +52%.
The futures are struggling with the 200 DMA. They closed back below that MA to end the week. The resistance that has been in this area all month appeared to still be there today.
The green count is above the red line, but is still below 50. It is also well below the green count from the last time we were in this area. The intermediate indicator remains below 50 so there is still downside risk here.
I have not seen a tick buy signal yet. The internals are not clearly building up steam for an upside break out either. I have not heard any word about cancelling the next round of tariffs scheduled to go in effect Sunday night. I think it will probably take a positive news event to break out on the upside next week. I don't know what that might be, but a tweet could always change things. If the market turns back down the odds of breaking the Aug. lows are pretty high. It is rare to spend this much time below the 50 DMA and not hit the 200 DMA. I would not blame money managers for not wanting to pile in with all that is going on. The July monthly price bar was a doji and this month closed below the July low with an increase in volume. That has negative connotations.
Maybe this cartoon explains why the 50th reunion of Woodstock was cancelled.
Have a great weekend. Peace.
Bob
Here we are back at the top of the Aug. trading range again. The sellers started right from the open after a sizable gap up on no news. The buyers stepped in after a sizable sell off in the morning. However, the rebound never made it back to the morning highs. Breadth was +52%.
The futures are struggling with the 200 DMA. They closed back below that MA to end the week. The resistance that has been in this area all month appeared to still be there today.
The green count is above the red line, but is still below 50. It is also well below the green count from the last time we were in this area. The intermediate indicator remains below 50 so there is still downside risk here.
I have not seen a tick buy signal yet. The internals are not clearly building up steam for an upside break out either. I have not heard any word about cancelling the next round of tariffs scheduled to go in effect Sunday night. I think it will probably take a positive news event to break out on the upside next week. I don't know what that might be, but a tweet could always change things. If the market turns back down the odds of breaking the Aug. lows are pretty high. It is rare to spend this much time below the 50 DMA and not hit the 200 DMA. I would not blame money managers for not wanting to pile in with all that is going on. The July monthly price bar was a doji and this month closed below the July low with an increase in volume. That has negative connotations.
Maybe this cartoon explains why the 50th reunion of Woodstock was cancelled.
Bob
Friday, August 23, 2019
Daily update 8/23 Bear dead ahead?
This is the third day this month with 90% of the volume in down stocks. That is not a bull market phenomenon. I have been talking about the market possibly making a major top since last summer. There has been lots of ups and downs, but the market is still lower than it was in Jan. 2018. I think these down days happened because investors have finally figured out that there will be no trade deal. There will be a nasty trade war instead . I have been saying all along China does not want to make a deal. They just want Trump to go away. That is not happening so expect things to get ugly and I don't think the market will like it. I know, I know, everybody thinks Trump cares what the stock market does. I don't think that is true. Sure, he brags about it when it goes up, but that is just because he has a huge ego and brags about everything. He also knows the market went up over 40% after he got elected so he thinks he is playing with house money so to speak. Things will have to get pretty bad before he will worry about the stock market.
The market is still in a trading range, but the down moves have been much stronger internally than the up moves. Breadth was -83%. New highs were 139. New lows spiked up to 185.
I had a fresh tick sell signal today. That probably indicates the half baked rally we have been having the last few weeks has ended. The objective of working off the deep oversold condition we had at the 8/5 low has been fulfilled. We might bounce early next week, but unless I get a tick buy signal I expect lower prices ahead. I think SPX will break the lows from earlier this month and continue down to the 200 DMA at least.
The weak sister indexes never pulled themselves together to make a run at new highs. Now we have some serious selling going on. It looks likely the top that has been forming since Jan. 2018 is complete. I would expect major turbulence ahead.
Have a great weekend. Peace.
Bob
The market is still in a trading range, but the down moves have been much stronger internally than the up moves. Breadth was -83%. New highs were 139. New lows spiked up to 185.
I had a fresh tick sell signal today. That probably indicates the half baked rally we have been having the last few weeks has ended. The objective of working off the deep oversold condition we had at the 8/5 low has been fulfilled. We might bounce early next week, but unless I get a tick buy signal I expect lower prices ahead. I think SPX will break the lows from earlier this month and continue down to the 200 DMA at least.
The weak sister indexes never pulled themselves together to make a run at new highs. Now we have some serious selling going on. It looks likely the top that has been forming since Jan. 2018 is complete. I would expect major turbulence ahead.
Bob
Friday, August 16, 2019
Update 8/16 Negative Is The New Subprime
Bounce.
There was no bad news to keep the bulls from capitalizing on yesterday's test of the 8/5 low. Breadth was +76%. The volume was 88% in up stocks which is very good. Another day like that might end the correction.
The futures rebounded nicely, but remain below the 200 SMA. We don't have a green bar on this rally attempt yet. The DI lines still do not have a positive cross. In other words, the bulls still have work to do.
The red barely turned down and remains above 50.
Today's rally is a good start on a turnaround, but there is still work to be done. The bulls need to keep the buying pressure up next week.
I have always thought the NYSE tick indicator held the key to real buying and selling pressure. I tried for nearly two decades to figure it out on and off. However, I just could not get it. I was recently made aware of a way to look at them to get the very information I was after. After studying much history I have determined it works. The ticks can give amazing buy and sell signals. The market can go for months after a buy signal with no sell signals. The signals usually happen very near the high and low of important turning points. There was a buy signal on 6/3 which was a down day and the final low of the pullback. The market rocketed up the next day and kept on going. For the lack of a better term I will call these signals tick buy and sell signals. How creative is that! In our current situation there was a sell signal on 8/1 after the tariff tweet. None of the big rally days (including today) have given me a tick buy signal. There was a fresh sell signal at the low yesterday. That may turn out to be a sign of capitulation after today's bounce, but that remains to be seen. With this setup a buy signal could produce a decent rally. Until that happens we need to be alert as the market could still roll over and make new lows. I will do updates on the days I see a signal.
I really do not understand why the pundits act as if all the negative rates on global bonds is perfectly normal. Not a problem at all. Some people even try to say it is a positive. If negative rates are so good why is the European economy bordering on recession instead of flying high? Here is a more realistic look (at least the way I think) at it. Negative Is The New Subprime
Have a great weekend. Peace.
Bob
There was no bad news to keep the bulls from capitalizing on yesterday's test of the 8/5 low. Breadth was +76%. The volume was 88% in up stocks which is very good. Another day like that might end the correction.
The futures rebounded nicely, but remain below the 200 SMA. We don't have a green bar on this rally attempt yet. The DI lines still do not have a positive cross. In other words, the bulls still have work to do.
The red barely turned down and remains above 50.
Today's rally is a good start on a turnaround, but there is still work to be done. The bulls need to keep the buying pressure up next week.
I have always thought the NYSE tick indicator held the key to real buying and selling pressure. I tried for nearly two decades to figure it out on and off. However, I just could not get it. I was recently made aware of a way to look at them to get the very information I was after. After studying much history I have determined it works. The ticks can give amazing buy and sell signals. The market can go for months after a buy signal with no sell signals. The signals usually happen very near the high and low of important turning points. There was a buy signal on 6/3 which was a down day and the final low of the pullback. The market rocketed up the next day and kept on going. For the lack of a better term I will call these signals tick buy and sell signals. How creative is that! In our current situation there was a sell signal on 8/1 after the tariff tweet. None of the big rally days (including today) have given me a tick buy signal. There was a fresh sell signal at the low yesterday. That may turn out to be a sign of capitulation after today's bounce, but that remains to be seen. With this setup a buy signal could produce a decent rally. Until that happens we need to be alert as the market could still roll over and make new lows. I will do updates on the days I see a signal.
I really do not understand why the pundits act as if all the negative rates on global bonds is perfectly normal. Not a problem at all. Some people even try to say it is a positive. If negative rates are so good why is the European economy bordering on recession instead of flying high? Here is a more realistic look (at least the way I think) at it. Negative Is The New Subprime
Have a great weekend. Peace.
Bob
Thursday, August 15, 2019
Update 8/15 Recession Watch (or Distant Early Warning?)
SPX retested the 8/5 low today and bounced.
SPX came within 3 points of the 8/5 low, but rebounded fairly sharply. Breadth was slightly positive. Volume was pretty strong.
There is a slight positive divergence in the red/green count chart on this retest.
There is a noticeable divergence in the short term bull pressure lines.
Yesterday and 8/5 saw 90% of the volume in down stocks. That is a rare thing to happen. In bull markets those type of days rarely happen this close in proximity. This could be a sign of trouble for the market longer term. However, in the short term 90% downside days tend to be exhaustive and lead to bounces. Since there are some positive divergences on this retest of the low a bounce here would not be surprising. If that occurs we will have to see how strong the buying is. Another failure at the 50 DMA could bring on considerably more selling pressure and probably break these lows. If we continue down, the next support level would be the 200 DMA about 40 points lower.
Interesting article. Recession Watch (or Distant Early Warning?)
Peace,
Bob
SPX came within 3 points of the 8/5 low, but rebounded fairly sharply. Breadth was slightly positive. Volume was pretty strong.
There is a slight positive divergence in the red/green count chart on this retest.
There is a noticeable divergence in the short term bull pressure lines.
Yesterday and 8/5 saw 90% of the volume in down stocks. That is a rare thing to happen. In bull markets those type of days rarely happen this close in proximity. This could be a sign of trouble for the market longer term. However, in the short term 90% downside days tend to be exhaustive and lead to bounces. Since there are some positive divergences on this retest of the low a bounce here would not be surprising. If that occurs we will have to see how strong the buying is. Another failure at the 50 DMA could bring on considerably more selling pressure and probably break these lows. If we continue down, the next support level would be the 200 DMA about 40 points lower.
Interesting article. Recession Watch (or Distant Early Warning?)
Peace,
Bob
Friday, August 9, 2019
Update 8/9
Nice oversold bounce yesterday. It might have a little more room to go, but I don't think the sell off is over yet.
Yesterdays rebound saw a breadth reading of +80% which is good, but Monday's breadth was -90%. That kind of negative breadth reading can be the kick off of a bear market. The tip off that the bull isn't over is when the bulls pull off a day with breadth above 85%. The closer to 90% on the upside the better.
The futures ripped up through the 200 SMA yesterday. They have not confirmed a break above that MA yet. However, they dipped significantly below the 200 today, but were able to bounce back strongly. That suggests there might be more upside in the short term.
The red count dropped back to near 50 and has worked off the extreme oversold condition from Monday. The problem here is the intermediate indicator is below 50 again. That usually means the first low will be retested and possibly exceeded.
If SPX gets through the 50 DMA then the 20 DMA becomes the next target. If we get there I will reevaluate, but at the moment I don't think it will get much further than that. There is no law that SPX must get through the 50 DMA either so we need to be cognizant that the market could roll back over without much more upside.
I heard Bob Pisani today saying he thinks the next round of tariffs will get delayed. He did not indicate why he thought that though. I have not heard anything yet that makes me believe that will be the case. I could be wrong, but I think Trump's patience is starting to get a little thin with Xi. I think China will have to do something real to delay the tariffs and I have not seen anything that would indicate that will happen.
The big picture here is very troubling. Last fall we had an internally weak march to new highs that looked like a terminal leg in a bull market. That was followed by a really sharp sell off. However, during all that the U.S. economy was still doing pretty well. I think that allowed the bulls to get SPX back to a new high again. The rally started strongly off the Dec. low, but the last leg up in June and July was internally weak again. The weak sister indexes IYT, IWM, XLF still have not reached new highs. The U.S. economy is significantly weaker now than it was last fall. The 90% down day on Monday might have been the kick off to a bear market. It is important for the bulls to show some real strength sometime in the next few weeks to cancel out the current bearish looking setup.
Have a great weekend.
Bob
Yesterdays rebound saw a breadth reading of +80% which is good, but Monday's breadth was -90%. That kind of negative breadth reading can be the kick off of a bear market. The tip off that the bull isn't over is when the bulls pull off a day with breadth above 85%. The closer to 90% on the upside the better.
The futures ripped up through the 200 SMA yesterday. They have not confirmed a break above that MA yet. However, they dipped significantly below the 200 today, but were able to bounce back strongly. That suggests there might be more upside in the short term.
The red count dropped back to near 50 and has worked off the extreme oversold condition from Monday. The problem here is the intermediate indicator is below 50 again. That usually means the first low will be retested and possibly exceeded.
If SPX gets through the 50 DMA then the 20 DMA becomes the next target. If we get there I will reevaluate, but at the moment I don't think it will get much further than that. There is no law that SPX must get through the 50 DMA either so we need to be cognizant that the market could roll back over without much more upside.
I heard Bob Pisani today saying he thinks the next round of tariffs will get delayed. He did not indicate why he thought that though. I have not heard anything yet that makes me believe that will be the case. I could be wrong, but I think Trump's patience is starting to get a little thin with Xi. I think China will have to do something real to delay the tariffs and I have not seen anything that would indicate that will happen.
The big picture here is very troubling. Last fall we had an internally weak march to new highs that looked like a terminal leg in a bull market. That was followed by a really sharp sell off. However, during all that the U.S. economy was still doing pretty well. I think that allowed the bulls to get SPX back to a new high again. The rally started strongly off the Dec. low, but the last leg up in June and July was internally weak again. The weak sister indexes IYT, IWM, XLF still have not reached new highs. The U.S. economy is significantly weaker now than it was last fall. The 90% down day on Monday might have been the kick off to a bear market. It is important for the bulls to show some real strength sometime in the next few weeks to cancel out the current bearish looking setup.
Have a great weekend.
Bob
Friday, August 2, 2019
Update 8/2
Test of the 50 DMA.
SPX dipped its foot below the 50 SMA this morning, but bounced back. Breadth was -59%. New highs slipped to 156, but were still strong. New lows continued higher to 163. That is very elevated this close to the highs.
The futures found support at the 200 SMA, a good place to bounce from.
I think the dip buyers were busy this afternoon snapping up the bargains. The VIX touched 20 which could bring out more buyers on Monday. The 50 DMA is a logical place to bounce from as well. This move down from yesterday afternoon was news induced. As we know many times those moves are retraced. A bounce next week seems likely. The bulls need to show strong buying though if the market is going to continue to new highs and beyond. The bears showed real interest in selling for a change. A failed rally attempt would be likely to induce more selling. Next week will be important.
Have a great weekend. Peace.
Bob
SPX dipped its foot below the 50 SMA this morning, but bounced back. Breadth was -59%. New highs slipped to 156, but were still strong. New lows continued higher to 163. That is very elevated this close to the highs.
The futures found support at the 200 SMA, a good place to bounce from.
I think the dip buyers were busy this afternoon snapping up the bargains. The VIX touched 20 which could bring out more buyers on Monday. The 50 DMA is a logical place to bounce from as well. This move down from yesterday afternoon was news induced. As we know many times those moves are retraced. A bounce next week seems likely. The bulls need to show strong buying though if the market is going to continue to new highs and beyond. The bears showed real interest in selling for a change. A failed rally attempt would be likely to induce more selling. Next week will be important.
Have a great weekend. Peace.
Bob
Thursday, August 1, 2019
Update 8/1
Potential trouble.
The bulls came out to buy yesterday's sell off. They were doing just fine until news of more tariffs hit the market. Breadth was -64%. New highs were 258. New lows spiked up to 129.
This morning's rebound took the futures back up to the 20 SMA retracing yesterday's FED induced sell off. However, the tariff news sent the market below yesterday's low.
The red count crossed 50 giving the bears a chance to take control.
On the monthly chart SPX made a somewhat bearish looking doji bar at the highs in July. There is clearly a possible expanding volatility top formation going on. Is the market still forming a massive bull market top?
There was significant intraday selling for the first time since this rally started in early June. The bulls definitely need to show up in force now. Another downside thrust is likely to put the market into pullback mode like we saw in May. Given the weak internals the last few weeks that could happen.
Bob
The bulls came out to buy yesterday's sell off. They were doing just fine until news of more tariffs hit the market. Breadth was -64%. New highs were 258. New lows spiked up to 129.
This morning's rebound took the futures back up to the 20 SMA retracing yesterday's FED induced sell off. However, the tariff news sent the market below yesterday's low.
The red count crossed 50 giving the bears a chance to take control.
On the monthly chart SPX made a somewhat bearish looking doji bar at the highs in July. There is clearly a possible expanding volatility top formation going on. Is the market still forming a massive bull market top?
There was significant intraday selling for the first time since this rally started in early June. The bulls definitely need to show up in force now. Another downside thrust is likely to put the market into pullback mode like we saw in May. Given the weak internals the last few weeks that could happen.
Bob
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