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Monday, March 4, 2019

Daily update 3/4

Sellers showed up on the gap up.

I do not know what sparked the round of profit taking this morning.  SPX got above the Nov. high briefly before the selling started.  The selling was significant taking SPX below the low of the last 6 days, but was over mid day.  Breadth was -54%.  New highs dipped down to 117.  New lows remain low at 14.

The futures got all the way down to the 50 SMA before finding support.  They ended the day a little below the 20 SMA.

The lines have come together again.  The power is up for grabs.

What are we supposed to make of today's action?  Some people decided it was time to take some profits when SPX tested the Nov. high.  Other people decided it was time to scoop up some bargains after SPX had taken out the lows of the last six trading days.  The end result is that SPX spent one day above 2800 then dropped back below it.  Will the bulls or bears show up tomorrow?  Beats me.  The only thing I know for sure is there were sellers waiting for SPX to top the Nov. high.  I do not know if they finished up today or not.  I have to say today was inconclusive.  However, further downside tomorrow could tip the scales into a pullback of some sort.  That seems way overdue.

I can't get any kind of a read on this deal with China.  I can see that China is anxious to get the tariffs off because some companies are rethinking the Chinese supply chain idea.  There was talk of China passing some kind of rules on intellectual property in the next couple of weeks.  I heard something about comments from the U.S. that we would put the tariffs back on if China did not live up to whatever agreement we get in the end.  That brought out comments from China indicating they took offense to that.  The Chinese government has a poor track record of living up to their agreements so I can understand the thought the U.S. would reinstate tariffs if needed.  I do not understand how any comprehensive deal with China that includes structural changes in China with regard to IP and corporate espionage could be wrapped up in this short of time.  These are complicated issues.  Any agreement needs some way to be verified that China is living up to it.  That seems like a thorny issue.  I don't know if we are going to get a fluff deal, something meaningful or no deal at all.

I do not believe the tariffs on China are what ails the global economy as many stock investors seem to think.  That would not explain what is going on in Japan and Europe.  That weakness seems to be auto sector related.

This is a complicated situation.  I am glad I am not a professional money manager.


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