SPX pulled back enough to test its 6 SMA on an increase in volume. It has bounced off the lows the last two days, but still closed lower then the prior day. Price is still extended from the 18 SMA. Lets zoom in to the 195 minute SPY chart.
There was a notable pick up in volume in the morning down move. There are now two big red volume bars. Is this a shift into distribution mode? Notice the volume back in Sept. right after the high. It started out the same way with a couple of big red volume bars. Its too soon to tell if that is the case, but it is certainly a possibility. It will be interesting to see what happens to the volume when we have a good rally.
Over the next few days we will get a look at how the market reacts to the initial earnings reports. Expectations were lowered considerably over the last few months, but stock prices have not reflected that. I suspect earnings misses will be punished more then beats will be rewarded.
Price is extended in the short term and the market is overbought in the long term. However, we have had two down days in a row. Will the bulls show up tomorrow to take it higher? Too bad my crystal ball does not seem to be working tonight.
Bob
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