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Wednesday, January 2, 2013

Daily update 1/2

Another buying climax?  Check out this chart of SPX with new highs/lows.

Notice the spike in the green new highs line in the bottom panel nearly matching the peak at the Sept. high.  I guess we all better put every penny in the stock market, it can only go up from here.  We can see how well it worked out in Sept.  I think it will work out even worse this time.  Lets go in a little closer on the SPX chart.

The blue box shows the move into the last closing high.  That move took six days.  The current move is just about the same size, but in only two days.  SPX has a blue bar indicating price is outside the upper Bollinger band and is extended.  SPX closed about 3 points below the prior closing high.  Will this area still be resistance?  Lets look at the stocks vs moving averages chart again.

The  number of stocks above their 10 and 20 SMAs is about as high as these indicators get.  This is another indication of a short term over bought condition.  The number of stocks above their 50 SMA got above the green line today.  The last pullback hit the red line indicating it was a serious correction.  In the other occurrences since the data started in early 2010, price was still well below the prior high when the green line was hit.  Price is already back to within 3 points of the prior closing high here. SPX has had the tendency to have at least a short term pullback the first time the green line is hit after hitting the red line.  Will that happen again?

I have a hard time believing people are gong to chase the market from this over bought setup.  This looks like an exhaustion gap, volume climax, panic buying attack, retest of the Sept. high.  It was on the retest of the July 2007 high in Oct. of that year that people thought I was crazy for saying the market was going to tank  This looks even more like a top to me then it did in Sept.  The sentiment is way more bullish now while the fundamentals are actually worse.  I think we will be making the high for the year in the next few days. One thing lost in the focus on the "fiscal cliff" was all the earnings warnings for the fourth quarter.  I think this earnings season will bring that back into focus. 

I love watching how the market works.  It can be truly amazing, LOL.  The long trade here is very crowded, make no mistake about that.  We might make it slightly above that Sept. high, but I think it will fail to stay there.  I guess we will see.


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