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Monday, February 25, 2019

Daily update 2/25

Selling point hit?

Over the weekend Trump tweeted that he would not raise the tariffs on March 1. That was no surprise given what happened last week.  That caused a huge jump in the Chinese stock market, but only a modest gap up in the U.S.  SPX got within 3 points of its Oct. high before the sellers took charge the rest of the day.  Breadth was slightly negative after being +68% in the morning.  New highs dipped to 147.  New lows were up a tad to 10.  Volume was up a bit with SPX closing well below its open.  That would classify it as a distribution day. 

The futures pushed higher overnight, but ran into the stiffest resistance we have seen on this entire rally as the selling lasted into the close. 

The green count remains above 50.  The intermediate indicator is amazingly overbought.  Rallies to lower highs rarely get this indicator up this high. 

As mentioned a few times the market is crazy overbought.  SPX may have finally hit the point that will bring out some sellers. 

All the good news is pretty much out now I think.  The FED is on hold with rate hikes.  They are even talking about winding down QT before year end.  It appears the U.S. and China will come to a trade agreement.  What good news is left?  On the other hand, all the bad economic news the market has been ignoring is still out there.  I do not see anything yet that indicates a turn around in the global economy.  The global slowdown appears to be starting to drag the U.S. down with it.  The outlook for the U.S. economy is way worse than it was at the Dec. low.  The unemployment rate is up to 4.0% from 3.7%.  A rise of .50% from a low point has always been followed by a recession in the last 70 years regardless of the starting point.  That means a rise to 4.2% in the coming months would mean extremely high odds a recession is imminent.  Will people be willing to just keep piling into stocks with that risk hanging out there?  Maybe, but is it likely.


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