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Thursday, February 21, 2019

Daily 2/21

Bad economic data slightly overpowered positive trade talk.

There was a last hour rally to lift SPX off the lows of the day.  Breadth was -59%.  New highs dropped way down to 88.  New lows remained low at 8.  The dip buyers were still active today, but the sellers were busy selling into strength.

The 20 SMA held as support.  The futures have not had a confirmed break of that MA this entire rally.  That is an unusually long time without the market being at new highs.  It will be interesting to see what happens once we get a break.

The green count slipped out of overbought again.  It remains well above 50.

Today's economic data was weaker than expected.  The Philly FED manufacturing index was even negative.  The conference board's LEI has been flat since Sept.  That is not encouraging for a turn up in activity in the next few months.  The last rate hike from the FED has months to go before working through the economy.  I heard some comments from ECRI saying there is no turn up in their Chinese long lead indicators yet.  The Eurozone is still slowing.  Japan may be in recession.  That is the reality.  The market has been living in fantasy land hoping everything works out just fine.  We don't know whether that will be the case yet.

SPX has stopped here at resistance, but it has not turned around yet.  Dip buyers keep showing up on weakness.  Until the sellers overpower the dip buyers there is not much to talk about.

There is a lot of happy talk on trade talks with China in the media.  I can't really get a read on what is going on.  I think there are opposing camps inside the administration on exactly how hard to push things.  It is not at all clear whether the March 1 deadline is really a deadline or not.  Will tariffs be raised or not.  I think a positive resolution has been the biggest driver of this rally and is probably largely priced in.  Obviously if tariffs end up being increased the market is not going to like that.  If negotiations blow up the market is not going to like that.  How long is it going to take to get resolved?  Nobody knows. 


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