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Trend table status

Trend

SP-500

R2000

COMPX

Primary

? 3/31/20

?- 3/31/20

? 3/31/20

Intermediate

Dn 4/3/20

Dn 3/20/20

? 5/8/20

Sub-Intermediate

Up 4/20/20

Up 4/22/20

Up 4/17/20

Short term

Up 5/20/20

Up 5/20/20

Up 5/20/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Wednesday, March 18, 2020

Update 3/18

SPX took out the Dec. 2018 low and fell somewhat lower.  However, it bounced going into the close and ended the day above that low.


There is a possibility the Dec. low holds for now and causes a bounce.  It is along ways down to the next support level so that would be a good thing.


The futures show the break below the recent lows and recovery back into what looks like a consolidation.  This is the best looking bounce setup yet.  Will the bulls step through the door?

What I am looking for as a good indicator of a short term bottom is for the VIX to plunge at least 13% in one day.  We have had several big bounces, but the VIX did not meltdown on any of them.  It is up to the bulls now.

Peace and good health to all.

Bob

Monday, March 16, 2020

Update 3/16

I did not expect the FED to act over the weekend.  The action of cutting a full point Sunday night and ramping up QE indicates they expect a recession is unavoidable at this point.  The FED has now fired all the ammo they have.  I have been worried about the next recession for years because I believe there has been a gross misallocation of capital because of the extended period of low rates.  A lot of investors were buying all kinds of risky bonds to get the higher yields.  I think a lot depends on how fast we can get this virus under control and get the economy running again.  Too long a recession will probably start causing considerable financial stress.  I have no idea how long is too long.  There is far more uncertainty in the economy now than anytime since the early 30s.  I don't think there is any hurry for investors to rush in and buy.


The weekly chart shows SPX is approaching the Dec. 2018 low.  Everybody that bought into SPX last year and still holding is underwater.  I suspect that is a considerable amount of people due to the rapid decline.  About the only thing I can predict is that the market will be volatile for quite some time.  We just blew through a number of potential support levels as if they were not there.  Emotions are running the market and there is no way to analyze that technically.  If the emotions were not enough of a problem we are in the dreaded margin debt unwind I have been talking about for years. Back in 2017 in Daily update 4/5 What Could Possibly Go Wrong? I wrote:

"I was listening to one analyst today saying he did not see the ingredients for a big decline.  Here is the problem I have with that statement.  If one studies the history of the market and margin debt it becomes obvious that high levels of margin debt relative to GDP (>2%) have caused more crashes (including 1987) then any other factor.  We have record levels of margin debt today.  The ratio to GDP is lower then it was in 1929, but probably a record high otherwise.  Margin debt is like a loaded gun.  It can sit around and not be a problem for a very long time until the trigger gets pulled.  All of a sudden the market is crashing uncontrollably.  Wall street has many ways to measure risk, but they never include margin debt.  I understand that because the risk can't really be quantified.  Just because it can't be quantified does not mean the risk does not exist.  In my book margin debt is the single biggest risk in the market any time it is above 2% of GDP.  Its north of 2.5% now.  However, it has been high for years.  That is the very trouble with it.  Nobody knows when the trigger will get pulled.  So while things are calm and the volatility is very low the market could still crash much more severely then people think.  The problem is it may not happen anytime soon.  This is a subject that has bothered me for years when doing this blog.  I am 100 percent sure there will be a very ugly margin debt unwind some day.  But when.  It is highly likely to happen during the next recession.  When the market sniffs out a recession is coming people will unload in mass and surely trigger many margin calls.  That is why I spent so much time going through the economic data in 2015.  I want to know as early as possible when a recession is happening. "

I never expected a virus to be the culprit for a crash.  I have no idea how this plays out and I see no point of guessing.  I think we are in a full fledged bear market and rallies will be sold by the pros.

Peace and good health to all.  Stay safe.

Bob

Friday, March 13, 2020

Update 3/13

Much better.


The futures were limit up at the open.  The sellers went to work right away and SPX gave up much of the gains before buyers stepped in.  Breath was strong at +86%.  Volume was very good also.  This is the best bounce set up yet.  Will the bulls show up on Monday?

The FED is expected to cut rates on Wed.  I heard some saying 1 point.  I doubt that.  A cut of .25 seems to be what the FED fund futures are saying.  With a lot of bad news already out as far as travel restrictions and event shut downs and closings a rally is possible.  People also expect more testing and an increase in the numbers.  I think it is possible the market has discounted all that we know at the moment.  The ticks showed good buying today which started on central bank moves to support economies around the world.  The market rallied strongly during the president's press conference the last hour of the trading day.  Unless there is a negative shock over the weekend the bulls might be able to get a bounce going on Monday.  A rally into the FED announcement is possible.  I was thinking that yesterday's big crash down could have caused the need for a lot more margin calls again.  However, today's big rally leaves SPX just 30 points below yesterday's close.  A good bounce on Monday should take that threat away.  Maybe next week will be a little better for bulls.

For all March madness fans sad to hear it is cancelled this year.


Peace and good health to all.  Have a great weekend.

Bob

Wednesday, March 11, 2020

Update 3/11

SPX trying to hold support.


The green support line SPX is testing was from the June low last year.  SPX tested below the low of the last two days but bounced back.  Breadth was -94%, a level not often seen.  The down volume was 96% of total volume, another level not often seen.  New lows were 1121, down from 1606 on 3/9.  There were a lot of really negative tick readings and another tick distribution signal. 


The futures show some consolidation at the lows.  They are up from the 4 pm close as I write this.  This pattern could spring forth a bounce.  Time will tell.


The red count is over 90% again.  The intermediate indicator is below 25% so we should expect this low to be retested if we do get a bounce here. 

SPX closed at a slight new pullback low, but despite intense selling pressure it did not massively break down.  This kind of action has led to short term bottoms in the past.  If this low does not hold it is going to get really bad.  In that case you might want to put on your crash helmets.  I hope that does not happen, but until we get some lift it is a possibility.

I think the crash in oil prices has greatly increased the odds of a recession in the U.S.  The oil price crash that started in late 2014 slowed down the manufacturing data in the U.S. significantly.  However, the rest of the economy outside of production for the oil industry held up well.  In the current case the ISM manufacturing data has been down to 50 and below for several months.  Further slowing because of the oil industry would not be good.  In addition it is clear the services data will get hit hard with the virus.  I don't think there is any doubt about that.  Large gatherings are being cancelled all over the country.  The NCAA just announced today the games will be closed to the public.  It will still take 4 months or so before we would know if we are in recession and by that time the market would probably be much lower than it is now.  With this one-two punch it will probably be very difficult for the U.S. economy to keep growing no matter what kind of fiscal measures might be enacted.  You know the old saying prepare for the worst and hope for the best.  I believe that is fitting here.

Peace and good health to all.

Bob


Tuesday, March 10, 2020

Update 3/10

There was strong late day buying based on fiscal stimulus talk.


Both sellers and buyers were at work today.  The futures gapped up hugely only to find sellers that took SPX negative.  There was a tick distribution signal during that move down.  However, buyers showed up around yesterday's low and caused a tick accumulation signal in the afternoon.  The last time we had both signals in the same day the last one was distribution.  Maybe this combination will form a short term bottom.


The bull pressure lines have a story to tell tonight.  The short term lines are positively divergent into this low.  However, the long term lines have issued a caution flag.  The red line has reached the threshold that could be the start of a bear market.  That does not mean we are in a bear market, but how the market behaves over the next several weeks will be important.  To clear this signal the mid term green line needs to reach its blue line at +67%. 

As long as there is talk of fiscal stimulus and the virus news does not get really bad the market should have a chance to bounce from this setup.  At least some money managers are buying a little stock.  If the virus starts taking hold in other countries like it did Italy the market could head south again.  But then again, fiscal stimulus talk could keep a floor under the market.  Needless to say volatility is still high and one should be very nimble to participate in this market.  This situation could take several weeks to work itself out whether to return to bull market conditions or break down again.

Peace and good health to all.

Bob

Friday, March 6, 2020

Update 3/6

Retest of the recent low.


There was another tick distribution signal mid afternoon.  However, the market rallied strongly into the close.  SPX is still oversold short term.  Take a look at the TLT chart.


Bonds have had one crazy run.  This has the look of a volume climax top.  What happens if people decide to take some profits here?  Where might that money go?  With stocks still oversold some of it might find its way there.  How much money that might be I have no idea.


The red count is showing a sizable divergence.  The intermediate indicator is near rock bottom.

The market is set up just about like last Friday.  SPX is oversold, it gapped down today and sold off even more.  Then it rallied into the close and ended back above the open.  With the bonds so extreme it is not out of the question we get a another bounce next week.  The market sure could use one.  I hate to think what happens if we keep going down.

Bob

Important

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