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Tuesday, April 23, 2019

Daily update 4/23

SPX has arrived.

SPX made a new all time high (ATH) close by 3 points.  Breadth was +72%.  New highs were 133.  New lows dropped to 20.  That is actually a little elevated for a  new high.  They are usually single digits.  So far I have been unable to find a V bottom from a near 20% drop straight up to new highs like this.  I think this is unprecedented.

The futures finally made the bounce off the 20 SMA.  It just took a good batch of earnings reports.

This next chart made me do a double take and I even made it recalculate to make sure it was correct.

Despite today's thrust the green count actually fell.  I did not expect that.  Time will tell if it means something.

Bob Pisani was interesting today.  Apparently people are no longer worried about an earnings recession or an economic recession in 2020.  I don't know about the earnings recession, but I can tell you there is nothing that can look ahead over 18 months and indicate there will be no recession.  I believe people are looking at the global stock rally and saying that indicates the global economy will recover and there will be no global recession.  That may indeed be the case, but sometimes the stock market gets things wrong.  The economy is like markets, it does not go in a straight line.  The most recent data has not gotten worse, but by no means has there been an all clear on the upside.  It will probably take 2-3  months of improvement before we will know if the stock market made a good prediction. 

At this moment in time neither of the Dow indexes have made a new high yet.  XLF and R2000 are still well off their old highs.  XLF actually topped back in Jan. 2018.  It makes me wonder with all this celebration when there are still questions about the stock market.  Now that SPX has made it back to the highs investors have a decision to make.  Will they hold them or will they take some profits?  Since there has been no significant selling on this rally I don't think SPX will be able to get too much into new high ground before pulling back or consolidating.  We need to keep an eye on the Dow indexes to see if they also make new highs.  DJ-30 is pretty close.  However, they both need to do it to clear the Dow sell signal they issued back in Dec. 

With May approaching there will be talk of sell in May and go away.  That has not been effective very often in this bull market.  I think a large part of that has been because the second quarter has usually been the strongest quarter of the year.  I believe that has been because of the sizable tax refunds people have been getting.  That did not happen this year.  Many people were complaining they even had to pay in.  There is still a chance the economy slows some over the next few months.

I have no idea how this will work out.  I do not believe we have an all clear sign that indicates there is nothing but blue skies ahead.  SPX has a unique chart pattern as far as I can tell so history is not much of a guide as to the outcome.  There seems to be plenty of optimism.  Sometimes that is a bad sign.  However, sometimes people are actually right to be very optimistic.   There definitely is no talk of a wall of worry to climb (even though there are things people maybe should be worried about).

In the short term, market internals are weak at this new high.  Sometimes (not always) that means a pullback is forthcoming.  If that happens it should not be a surprise.


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