Courtesy of Yahoo.
As we discussed previously, the stair-step advance in the markets continues with each breakout leading to slightly higher-highs and then a stall at the 2-standard deviation mark from the 50-dma. Volume continues to contract on up days and expand on down days as volatility becomes more compressed. A correction to the 50-dma is 3.5% and near 11% to the 200-dma.
Unlike weakening manufacturing surveys from other countries and various regional surveys within the U.S., the ISM manufacturing survey is slightly higher versus last month (59.9 vs 59.5). In a sign shortages are abating, inventories rose to their highest level since 2018. The only concern in the report is employment fell back to contractionary levels at 49. The broad ISM index, while off the peak from earlier this year, is still near the highs of the last 20+ years. The lesser followed PMI Manufacturing survey is slightly higher than ISM, but lower versus last month (61.1 vs 63.4).
However, given the recent weakness in China, there is a high probability, given the historical correlation and dependence on China for imports, we will see further softness in the months ahead.