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Thursday, April 4, 2013

Daily update 4/4

The market is staying true to form so far.  The alternating pattern repeated yet again.  Tomorrow is a problem though.  Nearly all, if not all Friday/'s this year have been up.  However, the alternating pattern suggests tomorrow should be down.  Which pattern will fail?  Here is the daily SPX chart.

SPX managed to close back above its 18 SMA.  Volume was about the same as the last two up days which is was considerably lower then yesterday.  The most disturbing thing for bulls was that there were only 92 new highs today.  Dropping under 100 is often a sign of a pullback starting.  That happened in Feb., but that pullback did not last very long.  It shows less conviction among investors to say the least.  Lets look at the 30 minute SSO chart.

SSO looks like it is forming a symmetrical triangle.  It has two points of contact on each trend line, but ended the day right near the upper line.  These are more often continuation patterns rather then reversal so a break down has slightly higher odds.  It is not a highly reliable pattern though.  I guess if the Friday pattern holds true we will break the upside.  If the alternating day pattern plays out tomorrow a break out the bottom is likely.  The weak internals suggest more downside is coming, but that does not preclude a small gain tomorrow. 

This is a very odd situation.  SPX spent the entire month of Feb. within a few points of 1515.  It then shot up to 1555 in early March and has spent the last few weeks within a few points of that level.  Breaking the March low of 1538 would consummate the double top and will put quite a lot of buyers under water.  But just below that is the prior high in the 1530 area which could be support.  Breaking the Feb. low at 1485 would put another big group of people underwater, but there could be support at the Sept. high in the 1474 area.  How will a pullback play out if we do get one?  I am sure that breaking that 1474 Sept. high will usher in a bunch of selling.  Other then that I think it is hard to predict how a pullback here would unfold.  First things first though.  The bears need to exert themselves again to confirm they are in control.


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