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Monday, April 1, 2019

Daily update 4/1

Selective hearing?

After gapping up the buyers kept pushing SPX higher.  It ended just a few points below the Jan. 2018 high.  Breadth was +74%.  New highs were 173.  New lows dropped way down to 9.  Once again SPX is above the highs from last fall.  Will it stick this time?

The futures managed a slight new high.  Now we wait and see if they are able to stay there.

The green count reached overbought levels.  On the first break out attempt that was not the case.  Will the buyers keep coming in?

The selective hearing of this market is interesting.  Global markets rallied because the China manufacturing PMI came in at 50.5 after several months of being below 50.  The market ignored worsening data PMIs from the Eurozone especially Germany.  The Eurozone economy is bigger than China and it imports a lot more stuff from China than the U.S. does.  It will take more than just one month to know whether China has turned the corner or not.  The latest global trade data shows more weakness of late.  That is why I say the market seems to have selective hearing.  It is grabbing on to anything it can find that is positive and ignoring anything negative.  What is being ignored is the weakest global economic data since the end of the great recession.  Will the global economy turn around or get weaker still?  I don't think anybody knows for sure.  I know there is still downside risk, but I don't know when/if that risk will be realized. 

We now have a short term overbought market with three open gaps since the early March low.  Will the bulls keep piling in?  The 50 SMA crossed above the 200 SMA today giving us the proverbial golden cross.  Those are generally positive, but the one in late 2015 did not stick and SPX went back to new lows in early 2016.  The global economy is far weaker then it was in late 2015.  There seems to be considerable complacency about this situation.  That could always come back to bite the market if the coming earnings season sees companies warning about the rest of the year.  Everybody claims expectations have been lowered enough for companies to beat.  The trouble is the market has run up in to earnings instead of down.  Will the beats be big enough to justify the prices?


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