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Tuesday, December 11, 2012

Daily update 12/11

Interesting day.  Here is the daily SPX chart.

I have added a resistance line at the highs around the election and a trend line from the last two peaks.   SPX ran into a confluence of resistance and backed off during the afternoon.  I should have had those lines on the chart before.  I thought after the post election gap down we would not be getting back up to this area after that sell off without a pullback and higher low pattern.  You don't see very many V patterns like this on SPX.  Expecting that type of move is normally a low odds play.  Lets zoom in to the 195 minute SPY chart.

SPY has blue bars indicating price is above the upper Bollinger band and is extended.  How about a look at the breadth chart.

There are small divergences in both the 10 MA breadth data and the McClellan oscillator.  The yellow line in the McClellan oscillator pane is a level that has been hit on the rally after every big sell off since the 2009 low.   You can see we hit that line twice after the early June low.  There are other measures that have not shown the same strength we usually see also.  I can't say there is enough strength yet to indicate we are starting a new leg up.

What happens now?  I wish I had the answer for you, LOL.  SPX hit resistance and is a bit over bought.  We have breadth divergences and we have not had the usual strength to give us some odds the sell off is over.  We also had no divergences at the low to signal that selling pressure was likely exhausted.  I would think under those conditions that resistance might win out here. 

There is a FED meeting tomorrow.  Operation twist is scheduled to end this month.  I have heard many pundits on TV that seem to think the FED will add to the QE program about the same amount they were buying in operation twist.  I have no idea what the FED is going to do or what the market's reaction will be.
I think we will have to wait and see what happens when the dust settles tomorrow.  The FED meeting may have been what today's gap up was about.


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