Update 10/25

SPX testing the all time high.

SPX opened lower, but buyers showed up quickly.  It got fractionally below the all time high before stopping.  Breadth was only +54% which is a bit weak for the size of the move up. 

The futures have been finding support at the 20 SMA.  There is quite a bit of congestion up here in this area.

The green count is above 50 and below overbought.  I don't think this chart tells us much about whether we are going to break out and go higher or not.

SPX is testing the highs, but we still have the same problems we have had for months.  The global economy including the U.S. is still weakening.  The weak sister indexes IWM, IYT, and XLF are still lagging.  There has been no tick accumulation signal signal 7/18.  That is the longest stretch in this entire bull market.  On the positive side we are now moving into the seasonally strongest time of the year.  Will that take the market higher? 

Next week the FED is expected to cut rates again.  The market has sold off after both of the previous cuts.  With it be different this time? 

If the market is going to continue higher I believe the lack of tick signals means it will have to be retail investors doing the bulk of the buying.  I can understand the lack of confidence by money managers.  The economic data points to a synchronized global slowdown.  Until the economy turns around there is risk of a global recession.  The China trade situation is still up in the air.  I have heard the Chinese are asking for relief from the tariffs.  I have not heard any willingness on the U.S. side for that.  Will the so called phase one deal actually happen.  I am a little skeptical, but we will see.  The fate of the market seems to be in the hands of individual investors.  Will they show up and keep pushing the market higher?  Beats me.  We will have to see how the market reacts on this test of the highs.

Have a great weekend.  Peace.

Bob

Update 10/18

Sorry for not updating more.  I have been working feverishly on the book, but that is not the only reason.  The truth is I do not know what to say.  The market has been getting whipped around on headlines.  I have been mostly day trading over the last few weeks due to unpredictability of news headlines.  Some of those headlines have even caused big intraday moves.  One must be nimble to trade in these conditions.

On news of a phase one deal with China SPX jumped above 3000.  However, it has not been able to stay there so far.  Is this a consolidation to go higher or another short term top forming?  Breadth on this bounce has been ok, but nothing to write home about.  If this market is going to break out and go higher we need to see stronger breadth readings.

The futures have been sideways the last few days.  They tested the 20 SMA today, but held.  The 50 and 20-0 SMAs are close together.   A break of those MAs would probably be a sign the market is rolling over again. 

This week the IMF said the global economy is in a synchronized slowdown. That makes it harder to turn things around.  The last JOLTS report showed the lowest number of job openings in the last 17 months.  The U.S. is being dragged down a bit.  China seems to be backing off from the deal that was announced but was not in writing.  A deal is not a deal until it is signed.  I don't think it is safe to assume that will happen this year.  I can understand the hesitation to bid up stocks here.  We will have to wait and see if some news can push SPX to new highs.  If that happens then we will have to make sure it stays there.  While we are waiting we have to watch for a roll over.  I don't see anyway to predict what happens in the near term.

Have a great weekend.  Peace.

Bob

Update 10/1 Risk of Recession Rising.

The manufacturing ISM number came in at 47.8 which was way lower than forecast and the lowest since June of 2009.  That 2009 reading was just as the U.S. was exiting the great recession.  Many of the manufacturing numbers from around the world were worse than last month.  The global economy continues to weaken and it appears it is dragging the U.S. down with it.

There was a tick distribution signal today.  Volume was also elevated.  SPX closed below the 50 SMA.  Breadth was -72%, but was +62% when the ISM number came out.  Quite a strong reversal. 

The futures show a confirmed break of the 50 SMA and closed below the 200.

Money managers were busy de-risking today and with good reason.  Unlike most of the headlines in recent weeks this one was fundamental.  My perception is that investors have been buying dips and holding on in hopes of a trade deal.  They have been comfortable doing that because the economic data was okay.  Now the risk is clearly rising with this low ISM number.  The global economy may already be in recession.  The question is how much more de-risking needs to get done in the short term.  It is too soon to tell if this will cause a sea change in investors minds or not, but it could.  Trade deal progress might be scrutinized much more now with the risk of holding stocks rising.   The upcoming trade talks are now really, really important.

This kind of news headline is hard to game out.  Many headline driven moves are retraced in the near future, but most headlines are not really and truly fundamental in the short term.  This headline is clearly a negative and there could be more selling.  We will see if the dip buyers continue to show the same enthusiasm as they have been or not.

Bob