Daily update 2/1

Consolidation day.

SPX crossed the 100 SMA this morning, but failed to stay there.  Breadth was +54%.  New highs were 99.  New lows were low again at 10.  After two big up days a pause was to be expected.

The futures stayed in a narrow range since yesterday afternoon.

The green count slipped a bit.  It remains above 50 and below overbought (just barely).

Last night I mentioned yesterday might have been a buying climax.  I failed to mention that I would consider a close below yesterday's low in the next several days confirmation. If the market keeps on rising just forget I mentioned it. 

Bear market rallies are sharp and make many believe the worst is over.  Unfortunately they are very similar to the first rally in a new bull market.  The difference of course is the final outcome.  New bull markets keep going up while bear market rallies roll over and hit new lows.  I still believe this is a bear market rally.  The rally is built on nothing but talk.  The FED is pausing (talk) because the economic data around the globe is getting weak.  Yes, the FED will adjust QT (talk) if conditions warrant it, but exactly what does that mean.  It means if things fall apart they will do something.  It is not like the FED ever sees trouble coming and gets out ahead of it.  Just look at the history.  There might be a trade deal with China (talk).  Currently both sides are pretty far apart.  A deal may or may not happen and there is no telling when.  The earnings reports that have come in so far have caused analysts to lower full year expectations to 0-5% earnings growth.  A look at the history of analysts will show that Jan. estimates are almost always too high.  If they are high again earnings could actually decline this year.  Leading indicators around the globe are still falling.  The economy is more likely to slow in the next few months than accelerate.  Downside risk remains. 

On the global data front.

• South Korea reported its second consecutive monthly decline in exports in January with semiconductor exports falling more than 23.0% year-over-year. 
• China's January Caixin Manufacturing PMI 48.3 (expected 49.5; last 49.7)
• Participants received a set of Manufacturing PMI readings today with reports from Italy (47.8) and Germany (49.7) dipping deeper into contractionary territory
• Bundesbank President Jens Weidmann said the European Central Bank should continue moving toward policy normalization despite weaker growth, adding he does not expect a sudden slump in activity.

Despite obviously weak data in Europe there is pressure for the ECB to do nothing.  This is not like late 2015 and early 2016.

Have a great weekend.

Bob