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Friday, August 30, 2019

Update 8/30

SPX still under the 50 DMA.

Here we are back at the top of the Aug. trading range again.  The sellers started right from the open after a sizable gap up on no news.  The buyers stepped in after a sizable sell off in the morning.  However, the rebound never made it back to the morning highs.  Breadth was +52%.

The futures are struggling with the 200 DMA.  They closed back below that MA to end the week.  The resistance that has been in this area all month appeared to still be there today.

The green count is above the red line, but is still below 50.  It is also well below the green count from the last time we were in this area.  The intermediate indicator remains below 50 so there is still downside risk here.

I have not seen a tick buy signal yet.  The internals are not clearly building up steam for an upside break out either.  I have not heard any word about cancelling the next round of tariffs scheduled to go in effect Sunday night.  I think it will probably take a positive news event to break out on the upside next week.  I don't know what that might be, but a tweet could always change things.  If the market turns back down the odds of breaking the Aug. lows are pretty high.  It is rare to spend this much time below the 50 DMA and not hit the 200 DMA.  I would not blame money managers for not wanting to pile in with all that is going on.  The July monthly price bar was a doji and this month closed below the July low with an increase in volume.  That has negative connotations.

Maybe this cartoon explains why the 50th reunion of Woodstock was cancelled.

Have a great weekend.  Peace.


Friday, August 23, 2019

Daily update 8/23 Bear dead ahead?

This is the third day this month with 90% of the volume in down stocks.  That is not a bull market phenomenon.  I have been talking about the market possibly making a major top since last summer.  There has been lots of ups and downs, but the market is still lower than it was in Jan. 2018.  I think these down days happened because investors have finally figured out that there will be no trade deal.  There will be a nasty trade war instead .  I have been saying all along China does not want to make a deal.  They just want Trump to go away.  That is not happening so expect things to get ugly and I don't think the market will like it.  I know, I know, everybody thinks Trump cares what the stock market does.  I don't think that is true.  Sure, he brags about it when it goes up, but that is just because he has a huge ego and brags about everything.  He also knows the market went up over 40% after he got elected so he thinks he is playing with house money so to speak.  Things will have to get pretty bad before he will worry about the stock market.

The market is still in a trading range, but the down moves have been much stronger internally than the up moves.  Breadth was -83%.  New highs were 139.  New lows spiked up to 185.

I had a fresh tick sell signal today.  That probably indicates the half baked rally we have been having the last few weeks has ended.  The objective of working off the deep oversold condition we had at the 8/5 low has been fulfilled.  We might bounce early next week, but unless I get a tick buy signal I expect lower prices ahead.  I think SPX will break the lows from earlier this month and continue down to the 200 DMA at least. 

The weak sister indexes never pulled themselves together to make a run at new highs.  Now we have some serious selling going on.  It looks likely the top that has been forming since Jan. 2018 is complete.  I would expect major turbulence ahead. 

Have a great weekend.  Peace.


Friday, August 16, 2019

Update 8/16 Negative Is The New Subprime


There was no bad news to keep the bulls from capitalizing on yesterday's test of the 8/5 low.  Breadth was +76%.  The volume was 88% in up stocks which is very good.  Another day like that might end the correction. 

The futures rebounded nicely, but remain below the 200 SMA.  We don't have a green bar on this rally attempt yet.  The DI lines still do not have a positive cross.  In other words, the bulls still have work to do.

The red barely turned down and remains above 50.

Today's rally is a good start on a turnaround, but there is still work to be done.  The bulls need to keep the buying pressure up next week.

I have always thought the NYSE tick indicator held the key to real buying and selling pressure.  I tried for nearly two decades to figure it out on and off.  However, I just could not get it.  I was recently made aware of a way to look at them to get the very information I was after.  After studying much history I have determined it works.  The ticks can give amazing buy and sell signals.   The market can go for months after a buy signal with no sell signals.  The signals usually happen very near the high and low of important turning points.  There was a buy signal on 6/3 which was a down day and the final low of the pullback.  The market rocketed up the next day and kept on going.  For the lack of a better term I will call these signals tick buy and sell signals.  How creative is that!  In our current situation there was a sell signal on 8/1 after the tariff tweet.  None of the big rally days (including today) have given me a tick buy signal.  There was a fresh sell signal at the low yesterday.  That may turn out to be a sign of capitulation after today's bounce, but that remains to be seen.  With this setup a buy signal could produce a decent rally.  Until that happens we need to be alert as the market could still roll over and make new lows.  I will do updates on the days I see a signal.

I really do not understand why the pundits act as if all the negative rates on global bonds is perfectly normal.  Not a problem at all.  Some people even try to say it is a positive.  If negative rates are so good why is the European economy bordering on recession instead of flying high?  Here is a more realistic look (at least the way I think) at it.  Negative Is The New Subprime

Have a great weekend.  Peace.


Thursday, August 15, 2019

Update 8/15 Recession Watch (or Distant Early Warning?)

SPX retested the 8/5 low today and bounced.

SPX came within 3 points of the 8/5 low, but rebounded fairly sharply.  Breadth was slightly positive.  Volume was pretty strong. 

There is a slight positive divergence in the red/green count chart on this retest.

There is a  noticeable divergence in the short term bull pressure lines.

Yesterday and 8/5 saw 90% of the volume in down stocks.  That is a rare thing to happen.  In bull markets those type of days rarely happen this close in proximity.  This could be a sign of trouble for the market longer term.  However, in the short term 90% downside days tend to be exhaustive and lead to bounces.  Since there are some positive divergences on this retest of the low a bounce here would not be surprising.  If that occurs we will have to see how strong the buying is.  Another failure at the 50 DMA could bring on considerably more selling pressure and probably break these lows.  If we continue down, the next support level would be the 200 DMA about 40 points lower.

Interesting article. Recession Watch (or Distant Early Warning?)



Friday, August 9, 2019

Update 8/9

Nice oversold bounce yesterday.  It might have a little more room to go, but I don't think the sell off is over yet.

Yesterdays rebound saw a breadth reading of +80% which is good, but Monday's breadth was -90%.  That kind of negative breadth reading can be the kick off of a bear market.  The tip off that the bull  isn't over is when the bulls pull off a day with breadth above 85%.  The closer to 90% on the upside the better.

The futures ripped up through the 200 SMA yesterday.  They have not confirmed a break above that MA yet.  However, they dipped significantly below the 200 today, but were able to bounce back strongly.  That suggests there might be more upside in the short term.

The red count dropped back to near 50 and has worked off the extreme oversold condition from Monday.  The problem here is the intermediate indicator is below 50 again.  That usually means the first low will be retested and possibly exceeded.

If SPX gets through the 50 DMA then the 20 DMA becomes the next target.  If we get there I will reevaluate, but at the moment I don't think it will get much further than that.  There is no law that SPX must get through the 50 DMA either so we need to be cognizant that the market could roll back over without much more upside. 

I heard Bob Pisani today saying he thinks the next round of tariffs will get delayed.  He did not indicate why he thought that though.  I have not heard anything yet that makes me believe that will be the case.  I could be wrong, but I think Trump's patience is starting to get a little thin with Xi.  I think China will have to do something real to delay the tariffs and I have not seen anything that would indicate that will happen.

The big picture here is very troubling.  Last fall we had an internally weak march to new highs that looked like a terminal leg in a bull market.  That was followed by a really sharp sell off.  However, during all that the U.S. economy was still doing pretty well.  I think that allowed the bulls to get SPX back to a new high again.  The rally started strongly off the Dec. low, but the last leg up in June and July was internally weak again.  The weak sister indexes IYT, IWM, XLF still have not reached new highs. The U.S. economy is significantly weaker now than it was last fall.  The 90% down day on Monday might have been the kick off to a bear market.  It is important for the bulls to show some real strength sometime in the next few weeks to cancel out the current bearish looking setup.

Have a great weekend.


Friday, August 2, 2019

Update 8/2

Test of the 50 DMA.

SPX dipped its foot below the 50 SMA this morning, but bounced back.  Breadth was -59%.  New highs slipped to 156, but were still strong.  New lows continued higher to 163.  That is very elevated this close to the highs.

The futures found support at the 200 SMA, a good place to bounce from.

I think the dip buyers were busy this afternoon snapping up the bargains.  The VIX touched 20 which could bring out more buyers on Monday.  The 50 DMA is a logical place to bounce from as well.  This move down from yesterday afternoon was news induced.  As we know many times those moves are retraced.  A bounce next week seems likely.  The bulls need to show strong buying though if the market is going to continue to new highs and beyond.  The bears showed real interest in selling for a change.  A failed rally attempt would be likely to induce more selling.  Next week will be important.

Have a great weekend.  Peace.


Thursday, August 1, 2019

Update 8/1

Potential trouble.

The bulls came out to buy yesterday's sell off.   They were doing just fine until news of more tariffs hit the market.  Breadth was -64%.  New highs were 258.  New lows spiked up to 129.

This morning's rebound took the futures back up to the 20 SMA retracing yesterday's FED induced sell off.  However, the tariff news sent the market below yesterday's low.

The red count crossed 50 giving the bears a chance to take control.

On the monthly chart SPX made a somewhat bearish looking doji bar at the highs in July.   There is clearly a possible expanding volatility top formation going on.  Is the market still forming a massive bull market top?

There was significant intraday selling for the first time since this rally started in early June.  The bulls definitely need to show up in force now.  Another downside thrust is likely to put the market into pullback mode like we saw in May.  Given the weak internals the last few weeks that could happen.



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