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Tuesday, March 12, 2019

Daily update 3/12

Resistance met.

SPX essentially found its high early in the day.  It tested that high two more times during market hours, but pulled back each time.  There was clear resistance today just below 2800.  Breadth was +56%.  New highs expanded to 145 which is pretty good.  New lows came in at 15. 

The futures confirmed a break of the 50 SMA, but just barely.  They have not made any more progress though.

The red count dropped below 50, but is still above the green line.  The bulls are not in the clear yet.

When the data for the climax low dropped out (as seen by the linear regression line) of the long term bull pressure data the green line eclipsed two key levels.  This much strength was not seen in the last two bear markets. 

This is rather complicated.  The breadth data for the advance/decline line (which made a new high) and the my bull pressure lines indicate we should not be in a bear market.  The VIX says we probably are.  There are a few other confirming indicators I look at that have not given the all clear yet.  I cannot recall a sell off that hard as we saw in Dec. end without a retest of the low.  That retest might make a higher low, but there has always been some kind of test.  The recent pullback was not deep enough to be a retest. 

What makes things really complicated is the global economic growth keeps getting downgraded by various organizations around the world.  I just recently saw a downgrade from 4% to 2.1% growth for 2019 for the global economy.  That would be the weakest growth since the global recession.  If I remember correctly 2% global growth is considered a global recession.  Leading indexes are still falling so I think we can expect 3 months of weaker global data is already in the pipeline.  I believe SPX will have a tough time getting above the recent highs until people can see the global economic slowdown is coming to an end.  I have commented for years in this blog that I expected the end of the bull market to be caused by global economic problems.  That would catch many investors by surprise.  That is definitely still a possibility.  I don't believe this situation has ever existed before.  It is usually the U.S. that leads the global economy into and out of trouble.  Globalization has changed everything though.  History is of no use here.  I am monitoring the economic data closely.  Currently the U.S. seems to be catching down to the global economy, but I can't be sure how much affect the government shutdown was on the data.

If the China deal gets put off for too long or cancelled the market will not like it.  If some kind of deal gets signed that does not take the tariffs off the market won't like that either.  I don't think that is likely though. 

In the next several weeks some kind of retest of the low seems likely.  The result of such a test will help determine the long term course of the market.  A solid break out above the recent highs would change the outlook.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.