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Wednesday, December 5, 2012

Daily update 12/5

Last night I wrote:

I don't really know how this will play out.  We could have a quick pullback and rally again or we could head on down to test the Nov. low.

That was a quick pullback all right, LOL.  If you stepped away from your computer this morning you probably missed most of it.  Here is the daily SPX chart.

We had a big volume day, but a large part of the volume was in AAPL (down) and C (up).  I don't think that volume tells us much about future direction in this case.  SPX is now situated on the underside of the trend line.  It also tested the closing high of this rally before turning back down into the close.  Lets zoom in to the 60 minute SPY chart.

Price sky rocketed back up to resistance, but failed to break out on the upside.  SPY ended the day right on the 18 and 50 SMAs.  Notice the volume bars on this chart.  The biggest one today was red.  Lets zoom in to the 30 minute chart it is even more interesting.

We had a similar big rally from a sell of on 11/28.  Notice the difference in the volume bars in the circled areas.  The red bars were dominant today, unlike that reversal move.  The sell off into the close was on the highest volume of the day.  In the late afternoon, SPY retested the high of the day and fell back.  I loaded some SPY puts when it appeared the retest had failed because I did not think the volume pattern was particularly bullish.  Even though we closed right at the hourly 18 SMA I held on to them because I liked the big volume bar that was forming in the last 30 minutes. 

Lets have a peak at the breadth chart again.

Both breadth indicators have weakened over the last few days.  The reversal day on 11/3 is still in play until SPX can close above that high (1424).  It is possible today was the pullback and retest of the high I was thinking might happen.  If we turn down again the odds of a rally back to these highs are much lower now with these breadth readings.  I think it would be more likely that we retest the Nov. low now.  Today really looked like panic buying to me.  That usually does not work out real well.  I would say today's low and the 11/3 are important support and resistance.  Whichever breaks first should lead to a decent move.

Chart practice has been updated with MCHP the stock today.


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