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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.


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