Daily Market Update – July 28,  2015  (Close)

Yesterday was another in a series of down days and deteriorating internal metrics. 

That latter part refers to the mix of up and down stocks and the relative number of new lows to new highs, as well as other indicators that are all pointing to a loss of optimism.

But you definitiely wouldn’t have known any of that by today’s action, although it was hard to understand what lit the fire and especially what can keep it going.

If earnings can’t help the market seek newer heights, there really isn’t much that will push the market higher at the moment other than these unforeseen daily oddities.

Even the upcoming FOMC Announcement has little that it can offer to make the markets feel optimistic, especially as the situation in China is weighing so heavily on our own markets. It’s not so much that there’s really contagion that’s the risk, but rather, in the event of a cash crisis in China or a significant need for capital, there’s always the chance the the government will sell their US Treasury holdings.

That wouldn’t be very good.

But for now, even though this morning’s decline in Shanghai was 2%, that’s a moderation from what happened over the weekend and may show that at least in the short term, China is beginning to control some of those forces that would take their markets even lower.

One question to be asked is just how long the government can continue to stop or slow down the natural direction of the market, but anopther important question is always “How low will it go?” and that applies just as well to energy and commodity prices here in the US, as it does to stocks in those sectors.

Of course, to some degree those are both also related to Chinese prosperity and increasing economic activity.

Regardless, today looked as if it was the day that traders began to ask that “How low can you go?” question.

This morning the futures were moving higher, although moderating a little as the opening bell neared. After 5 consecutive days of losses, it would be nice to have some kind of an end to that string occur, but as we had seen with previous turnarounds to the upside, the best turnaround is one that seems insidious. The ones that are done 200 points at a time to the upside seem to have very little lasting power.

But at least we’ll have a chance to see if that’s true tomorrow, as the market finished the day nearly 200 points higher, more than erasing yesterday’s loss.

Just as “death by a thousand cuts,” the more sure way to work back from technical support and overwhelm technical resistance is to do so by small pieces, especially as nearing that resistance level, but I wouldn’t mind some quantum kind of leaps forward.

So for now, I’d still be happy to see some small gains and wouldn’t mind if those triple digit moves, usually coming after triple digit losses, just went on a break for a while.

Daily Market Update – July 28,  2015  (9:15 AM)

Yesterday was another in a series of down days and deteriorating internal metrics.

That latter part refers to the mix of up and down stocks and the relative number of new lows to new highs, as well as other indicators that are all pointing to a loss of optimism.

If earnings can’t help the market seek newer heights, there really isn’t much that will push the market higher at the moment.

Even the upcoming FOMC Announcement has little that it can offer to make the markets feel optimistic, especially as the situation in China is weighing so heavily on our own markets. It’s not so much that there’s really contagion that’s the risk, but rather, in the event of a cash crisis in China or a significant need for capital, there’s always the chance the the government will sell their US Treasury holdings.

That wouldn’t be very good.

But for now, even though this morning’s decline in Shanghai was 2%, that’s a moderation from what happened over the weekend and may show that at least in the short term, China is beginning to control some of those forces that would take their markets even lower.

One question to be asked is just how long the government can continue to stop or slow down the natural direction of the market, but anopther important question is always “How low will it go?” and that applies just as well to energy and commodity prices here in the US, as it does to stocks in those sectors.

Of course, to some degree those are both also related to Chinese prosperity and increasing economic activity.

This morning the futures are moving higher, although moderating a little as the opening bell nears. After 5 consecutive days of losses, it would be nice to have some kind of an end to that string occur, but as we had seen with previous turnarounds to the upside, the best turnaround is one that seems insidious. The ones that are done 200 points at a time to the upside seem to have very little lasting power.

Just as “death by a thousand cuts,” the more sure way to work back from technical support and overwhelm technical resistance is to do so by small pieces, especially as nearing that resistance level.

So for now, I’d be happy to see some small gains and wouldn’t mind if those triple digit moves, usually coming after triple digit losses, just went on a break for a while.

Daily Market Update – July 27,  2015  (Close)

Last week was one of revelation.

There came the realization that despite the markets having hovering near new highs the indexes were portraying a picture of market health that was largely illusory.

All it took to realize that was to see the consistent deviations that the major indexes had from one another and then to dissect out some of the biggest winners whose equally big market capitalizations moved their respective indexes while leaving so many other index members behind.

As last week came to its end, with the entire week having taken a strong turn downward as the second full week of earnings started uncovering some disappointments among the few gems, the expectation was that this week would be guided by more earnings reports and the FOMC Statement release.

While some good earnings could help to bring the market higher, it’s not too likely that the FOMC will have anything to say that would be interpreted in a positive way by the markets in the immediate day or two of its release.

For the most part, there wasn’t too much reason to believe that this week would be very active, but that was the case last week, too, as there was very little in the way of scheduled economic news, other than earnings and the rest of the world seemed to be quiet.

It was a little different than expected this morning, however. There’s not very much scheduled economic news this week, but the week looked as if it would be getting off to a negative start as the unexpected comes into play.

While China’s overnight sharp sell-off took about 8% off the Shanghai market, it probably shouldn’t have been too unexpected.

What may have been more unexpected is that their attempt to manipulate the market and keep natural forces from doing what they need to do, had worked for the 2 weeks that it did. That’s a very long time to be able to hold markets back from what they find as their natural course.

As the futures were trading this morning in the aftermath of the sharp sell-off in China, they were relatively muted in response, although we had seen that last week as well, with the market taking mild to moderate negative trading in the futures market and then exploding it in a bad way once trading started.

That’s what ended up happening today, but not in anything resembling an explosive way.

WIth a small number of positions set to expire this week and with cash reserves still at much lower levels than I would like to see, despite the possibility of another lower opening this morning, my expectation was to keep my personal activity low, but it was still hard to resist, although I didn’t go after one of last week’s really big losers – and there plenty of those.

Last week there was a prevailing belief that bargains were being formed, but with each day they became better and better bargains. While there may seem to be compelling reason to step in and buy something, at this point it really takes a fair amount of faith to do so.

The bounce higher from the lows of a few weeks ago that erased the 5% decline so quickly was a good sign, but the rapidity in which that gain has eroded is definitely not a good sign. As the week sets to begin in continuation of last week’s decline that erased all of the previous week’s really nice advance, there’s not too much reason to want to “buy on the dip,” at least not yet.

With the market having tested its support at about the 2045 level on the S&P 500, but failing to surpass its resistance level at about 2037, it looks as if the market wants to re-test its support and I will likely be testing the support of my La-Z-Boy as the week progresses, while watching to see how the market reacts to an overnight return of natural forces and wondering how those forces may take control and then what actions the Chinese government takes next, particularly with its own portfolio of bond holdings.

Daily Market Update – July 27,  2015  (8:30 AM)

Last week was one of revelation.

There came the realization that despite the markets having hovering near new highs the indexes were portraying a picture of market health that was largely illusory.

All it took to realize that was to see the consistent deviations that the major indexes had from one another and then to dissect out some of the biggest winners whose equally big market capitalizations moved their respective indexes while leaving so many other index members behind.

As last week came to its end, with the entire week having taken a strong turn downward as the second full week of earnings started uncovering some disappointments among the few gems, the expectation was that this week would be guided by more earnings reports and the FOMC Statement release.

While some good earnings could help to bring the market higher, it’s not too likely that the FOMC will have anything to say that would be interpreted in a positive way by the markets in the immediate day or two of its release.

For the most part, there wasn’t too much reason to believe that this week would be very active, but that was the case last week, too, as there was very little in the way of scheduled economic news, other than earnings and the rest of the world seemed to be quiet.

It’s a little different than expected this morning, however. There’s not very much scheduled economic news this week, but the week looks as if it will be getting off to a negative start as the unexpected comes into play.

While China’s overnight sharp sell-off took about 8% off the Shanghai market, it probably shouldn’t have been too unexpected.

What may have been more unexpected is that their attempt to manipulate the market and keep natural forces from doing what they need to do, had worked for the 2 weeks that it did. That’s a very long time to be able to hold markets back from what they find as their natural course.

As the futures are trading this morning in the aftermath of the sharp sell-off in China, they are relatively muted in response, although we had seen that last week as well, with the market taking mild to moderate negative trading in the futures market and then exploding it in a bad way once trading started.

WIth a small number of positions set to expire this week and with cash reserves still at much lower levels than I would like to see, despite the possibility of another lower opening this morning, my expectation is to keep my personal activity low.

Last week there was a prevailing belief that bargains were being formed, but with each day they became better and better bargains. While there may seem to be compelling reason to step in and buy something, at this point it really takes a fair amount of faith to do so.

The bounce higher from the lows of a few weeks ago that erased the 5% decline so quickly was a good sign, but the rapidity in which that gain has eroded is definitely not a good sign. As the week sets to begin in continuation of last week’s decline that erased all of the previous week’s really nice advance, there’s not too much reason to want to “buy on the dip,” at least not yet.

With the market having tested its support at about the 2045 level on the S&P 500, but failing to surpass its resistance level at about 2037, it looks as if the market wants to re-test its support and I will likely be testing the support of my La-Z-Boy, while watching to see how the market reacts to an overnight return of natural forces and wondering how those forces may take control and then what actions the Chinese government takes next, particularly with its own portfolio of bond holdings.

MONDAY:   More negativity seems on the way as the week is ready to begin. Lots of earnings ahead and an FOMC Statement release to maybe help out, but hard to imagine any news from the latter moving markets higher in its immediate aftermath

TUESDAY:   More earnings, more China. More disappointment? At least this morning the futures are pointing higher as the FOMC meeting begins and perhaps CHina begins to stabilize a little.

WEDNESDAY:  Could today be a rarity that sees 2 consecutive days of gains? That would be especially nice given that yesterday was a nearly 200 point advance. Today has more earnings reports, but more importantly, there’s an FOMC Statement release this afternoon. Probably a non-event, but you never know.

THURSDAY:  Another day of big gains is being followed by flat futures, so it’s anyone’s guess where today may go, but suddenly the market is just 1.5% away from its all time highs as it has reversed course from re-testing its support level to maybe trying to take on resistance levels again.

FRIDAY:. It looks like a flat start to follow up on the flat close to yesterday’s trading and maybe a quiet end to a week that halted the re-testing of support levels