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Friday, November 2, 2012

Daily update 11/2

Thud.  So we break out of a four day consolidation to the upside only to fall right back into it the next day.  With the SPX monthly chart green I have been trying to give a little edge to the bulls, but they are making it really hard.  Today acted just like a bear market.  They could not wait to get the market open so they could sell it.  Here is the daily chart.

I mentioned yesterday on the 130 minute SPY chart, the volume pattern was not very good.  I also said we needed to close above yesterday's high to confirm it was not a one day wonder on the upside.  SPX tagged the 18 and 50 SMAs on the open and turned tail and ran.  That indicates the overhead resistance above the top green line is stiff.  We may still bounce into the election next week, but I don't think we will get much above the 50 SMA in that case.  Lets zoom in to the 130 minute SPY chart.

The volume pattern still shows red bars dominant.  The price bar is neutral, but closed slightly below the 18 SMA.  The red line was the top of the consolidation pattern and once broken should have provided support.  Clearly that did not happen.  This is a bit of an ambiguous chart.  The fact that we did not find support after the break out is bearish.  However, this pattern does not preclude another bounce attempt.  This makes Monday a bit hard to predict.  We may just stay inside the consolidation until after the election.  Lets look at the 60 minute chart.

SPY closed back below the 50 SMA.  However, there was enough strength to get the 18 SMA to cross above 50.  Like the other chart, I can't preclude another bounce attempt on Monday.  We are still above the majority of the price action of the consolidation. 

We are in a bit of a grey area here.  A bounce is not out of the question, but neither is a meltdown.  The easiest money lately is to sell into any gap up and that is bear market behavior.  This many gaps means it is not an isolated event.  It seems to have become standard operating procedure.  If you have not finished your catastrophic bear market financial planning yet, the market is trying to prod you into action.  I strongly advise listening to what the market is trying to tell you.

Chart practice has been updated with CMI the stock today.


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