We now have a red price bar and closed under the 18 SMA on an increase in volume. The last time the price bars went red there was no follow through on the down side. The sell off this afternoon seemed to be sparked by news from CMI. If you missed it, they lowered revenue guidance from +10% this year to flat from last year. Since they are at the bottom of the food chain with engines, this news was not taken well by the market. People have been overlooking the clear weakness in the economic data, but when it starts affecting real earnings it becomes much harder to sweep under the rug. The odds of follow through on the downside are higher this time unless some blow out earnings come out in the next couple of days.
Here is the 60 minute SPY chart.
I changed the green line to red because it should be resistance now that it is broken. Look how many times it was tested from above. That is likely to be very stiff resistance now. I have added a new green line at a prior price peak. There were several bar highs on 6/27. This is slightly above a gap fill from the big gap up day. It is also coming together with the up trend line. Since that level is below today's low, getting down there probably means the bears are in full control of the market. Therefore, it may not provide all that much support. This morning SPY came within .06 of the 7/5 low before turning down. This is a halfhearted gap fill, but close enough I guess.
Both breadth charts are still positive, but the McClellan oscillator is getting close to going negative. Another down day will do the trick. A close below today's low will confirm the break of the daily 18 SMA. The rally from the early June low is now on life support, if it is not already dead. We will have to see if there is any follow through on the down side.
Bob
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