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Wednesday, May 15, 2013

Daily udpate 5/15

This looks a lot like a buying climax.  Here is the daily SPX chart.

SPX hit the upper red channel line today and stopped.  We had 483 new highs yesterday and 519 today.  We also had somewhat elevated volume both days.  Here is another way to look at the over bought state of the market.

The yellow line in the bottom pane is the percentage price is from the 18 SMA. The red arrows mark prior instances of price getting this extended over the last 1.5 years.  There was only one instance that did not see a pullback to the 18 SMA.  That was in Jan. of last year.  Given that it is now May and we just had over 900 new highs in the last two days I think odds are pretty high we will see a pullback to the 18 SMA.  Based on the research in A lot of new highs could be a buying climax  I would say that if we drop under 200 new highs in the next four days a trip to the 50 SMA becomes likely.  There should be support in the 1595-1600 zone should we pullback that far.  If we drop under 200 new highs though I would expect a bounce from there to be short lived.


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