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Tuesday, February 5, 2013

Daily update 2/5

Sell em, no buy, no sell em, no buy em, LOL.  I think a look at the daily SPY chart is in order today.

That is one odd looking chart.  We just don't normally see volatility come in like that during a rally.  However, if you turned this chart upside down I think a lot of people would say it looks like a possible bottom forming.  Yesterday's down day had bigger volume then either of the two surrounding up days.  Lets zoom in to the 60 minute chart.

We have an expanding volatility pattern.  There are three peaks each a little higher and two lows with the second one lower then the first.  I don't know exactly what the odds are for an expanding pattern, but it is commonly a reversal pattern.  Lets look at the breadth chart again.

The McClellan oscillator is now down to 4.  While SPX made a slight new bull market high today breadth is continuing to get weaker.  There is obvious resistance here.  Here is the SPX monthly chart again which shows it clearly.

SPX is struggling with that upper trend line.  Breadth indicates the market is running out of oomph in the short term.  The expanding volatility would seem to indicate the odds of a pullback are increasing.  This is the second weakest month of the year behind only Sept.  Will the market power higher like it did last year through Feb. or succumb to seasonality and trend line resistance?  I suspect the latter, I guess we will see.


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