Great post today at zerohedge.com regarding the October 15th spike low and how it relates to James Bullard’s comments. Key bit: “According to a DJ report, markets were rattled by comments Mr. Bullard made in a Bloomberg interview just ahead of the late October Fed policy meeting. He said the central bank might want to consider extending a bond-buying stimulus that was almost universally expected to end that month.”
News from China of a fresh stimulus package has sparked a big rally in US Indexes. This big move, which is losing its steam at mid day, has pushed the SPY above its weekly Bollinger Band. This is an extreme reading and another red flag for an overbought, overloved, overowned stock market. From Urban Carmel:
“Coming after 5 weeks of gains, this gap will push SPY above its weekly Bollinger Band (20,2). Above a Bollinger Band means that price is more than 2 standard deviations away from the mean. At least in theory, 95% of trading should occur within a Bollinger Band. Trading outside of the weekly band is usually significant. Since mid-2013, markets have been down the next week 5 of 6 times. In the one exception, markets gave back all subsequent gains and more in the next month.”
More here, with additional charts: http://thefatpitch.tumblr.com/post/103204335566/spy-is-above-its-weekly-bollinger-band-watch-out-for
Mark Hulbert has an excellent post out today on the extreme bullishness being displayed by investors this month.
Key bit: “Consider the average recommended equity exposure level among a subset of short-term stock market timers tracked by the Hulbert Financial Digest (as represented by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). On average since 1990, the HSNSI in December has been the highest of any month.”
The Philadelphia Fed reported Thursday its manufacturing index rose to a much-stronger-than-expected reading of 40.8 from 20.7 in October, marking the best level since December 1993. It was much stronger than the 18.5 reading seen in a MarketWatch-compiled economic forecast.
Peter Boockvar takes a closer look, and its not all that bullish: “Tempering the enthusiasm of the robust Philly manufacturing index was the markit.com national US manufacturing index which they claim has high correlation to the ISM. It’s preliminary November index fell to 54.7 from 55.9. That is the lowest level since January. Specifically as it relates to overseas weakness, the new export sales component fell at the fastest pace since June ’13. Job growth was a bright spot and was up slightly m/o/m. The chief economist of Markit.com said “the manufacturing sector is undergoing a marked slowdown in the fall after enjoying a buoyant summer. Output growth has now fallen for 3 straight months…Export market weakness holds the key to the recent slowdown…there is some reassurance from manufacturers continuing to boost their payroll numbers at a robust pace, but with backlogs of work showing almost no growth, the rate of job creation looks likely to moderate in coming months unless new order inflows pick up again. The manufacturing and service sector PMI data available so far point to GDP growth slowing to around 2.5% in Q4.”
Hat tip Doug Kass at realmoneypro.com.