Daily update

That was a pretty muted reaction to the FED announcement.  After everybody has time to parse the statements and think about the ramifications there may be more of a reaction tomorrow.  Lets look at the daily SPX chart.

We are left with a hanging man candlestick today.  This can be a sign of a short term top after a run up.  I circled three prior hanging man days that occurred right after a new swing high.  As you can see there was at least a little pullback after each occurrence.  We are short term over bought right at major resistance so a pullback does make sense.  Where it goes is a little more complicated.  If we truly have an inverse head and shoulder bottom then the neck like around 1335 should be support.  However, if that fails we still have the 18 SMA way down at 1319 that could also provide support.  Breadth data is strong and most of the time a dip from this position is bought at some point by the bulls. 

Here is a look at the weekly chart.

I circled the big volume bar that showed up last fall when the market made its final low.  I don't see anything here that looks even remotely like that.  Also notice the price bar turned green on the second week off the low.  We are in the third week and still have neutral price bars.  The 6 SMA is below the 18 SMA and the 18 SMA has started to turn down a little bit.  We had a blue bar at the low so price was extended and ripe for a bounce.  The bounce just does not have enough strength to be able to say it is anything more then just a bounce from over sold.  It may turn out that we have made a major low, but I cannot say that from what I have seen so far.  The bulls still need to prove themselves.

Lately they have been buying bad economic news.  I suspect that was in hope the FED was going to announce a new balance sheet expansion program.  Since that did not happen, we will have to see how the market reacts to the data now.  Incoming data is likely to continue to show softness and has been worse then expected most of the time.  If this is an ABC type correction pattern the mood can change pretty quickly.
We will have to watch that closely.

Bob