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Friday, July 19, 2019

Update 7/19

Consolidation at the highs.

SPX stuck its head above 3000 at the open, but sold off immediately and stayed below it the rest of the day.  Breadth was -56%.  New highs were strong at 189.  New lows were unusually high at 64.  That is the third day in a row they have been 60 or above which is pretty odd this close to the highs.

The futures traded down about 8 points from the 4 PM close after hours.  They look like a potential head and shoulders top since the beginning of the month.  

The red count is above the green line, but is still below 50.

In economic news the LEI was reported this week as the biggest drop since Feb. 2016.  Here is what they said.

NEW YORK,July 18, 2019...The Conference Board Leading Economic Index®(LEI)for the U.S. declined 0.3 percent in June to 111.5 (2016= 100), following no change in May, and a 0.1percentincrease in April. “The US LEI fell in June, the first decline since last December, primarily driven by weaknesses in new orders for manufacturing, housing permits, and unemployment insurance claims,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “For the first time since late 2007,the yield spread made a small negative contribution. As the US economy enters its eleventh year of expansion, the longest in US history, the LEI suggests growth is likely to remain slow in the second half of the year.”

There is no sign of a turn up in economic growth in this second half so far.  The FED certainly has cover to cut rates by .25.  The economy may be starting to struggle now.  The global economy continues to be weak.

After the July opening pop the market has struggled.  It sideways for the month.  So far the selling has been muted.  The weak sister indexes (IYT, IWM, and XLF) are still well off their old highs.  Some stocks are doing very well after earnings and others are getting creamed.  I think this has put a bit of a damper on buying enthusiasm.  While SPX is consolidating so far this month that consolidation could turn into a top at some point.  The economic data over the next few months could influence the market more than it has since late 2015 and early 2016.  Downside risk remains until the economy turns back up strongly.  Something that might not happen anytime soon.

Have a great weekend.


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