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Monday, January 28, 2019

Daily update 1/28

We had a gap down on poor earnings, but not a lot of people were interested in selling into the weakness.

SPX is showing an island gap reversal at the moment.  Whether today's gap down gets filled or not remains to be seen.  Breadth was -54%.  New highs dipped to 39.  New lows were stable at 22.  SPX remains above the 50 SMA.

The futures dipped below the 20 SMA, but have not confirmed a break yet.  The 50 SMA is coming up fast.  That will either get broken or slap the futures up through the 200 SMA.

Both counts picked up today.  The green count remains above the red line.

I heard a very strange round table on CNBC today.  There was a discussion on the FED's balance sheet.  I detected considerable optimism that the FED would reduce the size of the balance sheet run off soon.  One participant even thought it might be at the Wednesday meeting.  I suspect this is predicated on the WSJ article I mentioned last week.  I did not read the article, but I am quite sure there would be no change in the balance sheet run off without a number of FED people giving speeches that they supported that.  Unless I totally misread Powell he is not going to be signaling policy moves to the WSJ.  I have heard no such talk so far.  I don't know if that is an expectation among money managers or not.  If so there could be some disappointment if the FED does not make a change.  This caught me totally off guard.  I do not understand why such an expectation would be present at all.  I guess we will see what happens.

Many of the companies that have missed earnings have been blaming China.  NVDA said there was a massive slow down in China for their business.  That could put pressure on China to make a deal.  It will also make the Trump administration more likely to go for the throat which certainly is not going to make a quick deal.  From what I hear there is serious desire to get the Chinese to stop stealing IP.  The U.S. team wants some way to verify that.  That would certainly take a lot of negotiation.  I sense some thinking that there will be a deal fairly soon.  I am not sure that is valid thinking.  I guess we will see what happens on that one also.

The market is still consolidating here.  It is trying to decide whether to keep going higher or turn back around.  Bears want to see a close below the 50 DMA.  Bulls want to see SPX take out its recent high and keep going.  This might not be settled until after the FED meeting concludes.


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