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Tuesday, September 24, 2019

Update 9/24

The market took a bit of a dive.

The combination of poor economic data and Trump giving a speech that was tough on China trade at the UN caused a bout of selling.  The breadth was -66%.  SPX closed just below the 20 SMA.

The futures ended the day below the 50 SMA.  A confirmed break should indicate the market is in pullback mode. 

The red count crossed above the green line and is above 50.

The 10 DMA breadth lines are right on top of each other.  The volume lines have a negative cross.  The McClellan oscillator is in the red.

The short term and long term bull pressure lines have a negative cross.  The mid term lines are still positive.

There are plenty of negatives in the market internals.  The bulls probably have one chance to save the market from a pullback.  A close below today's low is likely to bring out the sellers again.  This latest bounce was driven by head lines which did not lead to any accumulation in the tick indicator.  There has been no accumulation since back in July.  The ticks came close to a distribution signal today, but did not quite get there.  The bears can take control here if they desire.

I believe the market is holding up well against weak economic data on hopes of a trade deal with China.  I think such a deal to be extremely unlikely before the election.  The market keeps going back and forth on whether a deal is likely or not.  Any positive news causes a big rally and any negative news causes a sell off.  We have no idea what the next headline will be.  The global economic data continues to weaken.  A global recession is definitely looming large if things don't turn around.  So far there has been no sign of that happening.  This is a very strange situation.  Since WWII global recessions have largely been caused by the U.S. economy showing weakness first.  They used to say when the U.S. catches a cold the rest of the world gets the flu.  This reverse order is what I have been afraid of since the 2009 low.  U.S. investors monitoring the U.S. data think everything is still ok, but we could get dragged down by the rest of the world this time. 

The weak sister indexes IYT, IWM, and XLF are still lagging behind.  There are enough internal divergences that we could be looking at a very important top if the market sells off here.  I thought so last fall and there was a significant sell off.  However, the economic data was still good last fall and investors bought the dip.  The economic data is much weaker this time with the last ISM manufacturing number below 50.  The global data is much weaker than it was last fall.  If the market takes another big tumble like late last year I don't think it will be coming back so fast this time.


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