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Thursday, July 5, 2012

Daily update 7/5

Pretty lackluster day on light volume.  We got a mixed picture on how the indexes closed.  The much anticipated employment report tomorrow may cause a little move action.  We will see.  Here is the daily SPX chart.

I have removed some of the old lines to lower the clutter.  I have added a new down trend line connecting the last two swing highs.  We stopped there this morning.  I have moved the red line up to the 6/19 high of 1363.46.  This is because we are still within the confines of a possible short term double top (slightly higher high).  Dropping back below that prior high could end up being a very bearish event.  We probably are not going to know that right away though.  Market internals are a bit of a problem here.  They are strong enough the market could continue to rally, but they are not strong enough to say with any confidence a major low is in.  Check out the 130 min. SPY chart.

We ended the day with the first neutral price bar since the latest bounce started.  This opens the door to a little bigger down move then we have seen the last few days.  The 134.85 area should be good support from the big gap up day and the 18 SMA.  Should we get that far down, I would expect a bounce.  If we ultimately break that line, then the gap fill and the lower blue trend line should come into play.

This is a complicated situation.  We have positive price action the last month against seriously deteriorating economic data.  That is not going to last forever.  Either the market will tank again or the economic data will improve.  The longer term over sold condition we had at the early June low is now gone.  The market has done enough to correct that move down.  The bull case now really depends on people feeling good enough to push prices higher.  We will have to see if they are willing to do that or not.


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