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Thursday, August 23, 2012

Daily update 8/23

Follow through on the downside.  Both breadth charts now have negative crossovers.  Here is the daily SPX chart.

We got the first red bar in a while today.  However, price has stopped at the 18 SMA.  This is a possible bounce point.  There is some congestion in this area that could also provide some support.  Lets zoom in a little to the 130 minute SPY chart.

SPY has made it down to its 50 SMA on this time frame.  We can see the late July pullback stopped at this same MA.  Another big gap up on more talk like we had then seems less likely now.  You can see the congestion area from the middle of Aug. pretty clearly on this time frame.  Lets zoom in one more time to the 30 minute chart.

We had a blue bar that stopped the downward move early this afternoon.  This coincided with the 200 SMA as well.  This paused the market for the rest of the day. 

I want to show the breadth chart again.

The circled area is the June low.  Notice the positive cross and recross negative.  That negative recross did not change the trend back to down.  It does that most often when price is at multi month highs and lows like we had then and have now.  Therefore, a positive cross does not necessarily mean the rally is resuming.  The fact that we got the cross so close in time to the high usually means the short term trend really has changed.

All three charts show price at a place it could bounce from.   The weekly and monthly charts are green so it is unlikely the bulls are just going to disappear.  I don't know if the bulls will show up here or wait for lower prices though.  One problem with extremely light volume rallies like the last few weeks is that they can fold very quickly once sellers emerge.  There is likely support in the SPX 1390-95 area which encompasses most of the early Aug. lows.  Below that and that market will likely pick up speed as a lot of late comers to the rally fold. 

Don't forget to visit the chart practice site if interested.  http://traderbob58-chart-practice.blogspot.com/


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.