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Thursday, May 17, 2012

Daily update SPX and DJ-20

Lets start out with a peak at the daily chart.

Volume increased again and so did the range of the day.  If we don't bounce soon we are going to have a very big crash day pretty soon.  The worse then expected economic data this morning put an end to any potential Facebook IPO rally.  This was clearly shown by the action in DJ-20 today.  Take a look at the daily chart first.

Up until today DJ-20 had really been in a trading range while SPX was tanking.  I guess people were holding on thinking the economy was really going to get better.  It looks like today was a point of recognition that maybe that is not the case.  Check out the weekly chart.

This was one of the few indexes that had not completed a top formation.  This chart is clearly busted now.

SPX ended the day very near its 18 month SMA and the round 1300 number.   It closed below the daily 200 EMA.  The 200 SMA is down at 1278.  This market is extremely over sold, but every rally attempt is short lived.  Do not step in front of this freight train until we get some clear sign it is going to reverse.  Big market crashes happen from over sold conditions.   I was amazed last year at how the market just could not bounce on the way down.  That decline ended with some pretty big down days.  So far it is doing the same thing here.  Keep in mind there were many more signs of a major top this year then last.  I have showed the divergences in all the economically sensitive indexes and the big negative breadth divergence in the McClellan oscillator.  None of that was present at the highs last year.  I have also shown the Bloomberg Financial Conditions index and how it is much weaker this year then last.  Everything points to the start of another prolonged bear market.  I don't think we will be seeing the highs again anytime soon.


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