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Friday, July 26, 2019

Update 7/26

SPX limps higher.

The market gapped higher on earnings today and after some sideways trading for a couple of hours managed to push slowly higher.  Breadth was good at +65%.  New highs were good at 203.  New lows were oddly high at 83.  In a strong rally new lows should be under 10 with SPX at a new high especially after a gap up.  I do not know why the lows were so high, only that it is odd.

The futures consolidated around the prior resistance area of 3018, but mid day pushed higher.

Besides the number of new lows this chart gives us another oddity.  The green count is still below 50 and even slightly below where it was two days ago.  This new high must be pretty thin.  Will it broaden out or turn back down?

The breadth chart shows the 10 DMA lines barely have a positive cross.  The McClellan oscillator is barely positive also. 

I believe investors are largely all in waiting on the rate cut next week.  I can't imagine anybody wanted to sell before that event.  The question is will there be a sell the news reaction.  The market looks like it could use a pullback.

There was a lot of crowing about the better than expected GDP this morning.  I will remind readers that GDP is useless in real time as the average error according to CNBC is 1.3%.  The Conference Board's LEI had the biggest drop since 2016 this month.  Industrial production has been slipping all year.  We are not out of the woods with the economy yet.  It is possible the slowdown is accelerating, but I need a couple more months of data to see if that is the case.  The amount of bonds world wide trading with a negative interest rate jumped to a new high this week.  The financial world has literally gone insane.  That has happened before like 1929, but I think it is even more insane this time.  I cannot imagine there won't be a day of reckoning at some point.  The question is when.  People in the future will look back at this time period and wonder what the heck were those people thinking.  If this break out to new highs fails it would reopen the possibility that the price action since Jan. 2018 is all a huge top formation.  The weak sister indexes IYT, IWM, and XLF are still well below all time highs.  Downside risk remains elevated for now.

Have a great weekend.  Peace.


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