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Thursday, May 16, 2013

Daily updarte 5/16

Pullback initiated?  I guess we will find out.  Here is the daily SPX chart.

That was quite a surge in volume today.  Last night I wrote "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."   My math was pretty poor we actually had over 1000 new highs.  I would say the odds are much higher after today.  Lets zoom in to the SPY 30 minute chart.

Notice the very big volume at the end of the day on the sell off.  Profit takers overran rally chasers today.  Given the very short term extended nature of the market I think that will continue.  A trip to the SPX daily lower red channel line seems likely to me.  That currently is around 1600, but rising pretty fast.  It would probably be more like 1615 by the time we would get there.

There sure seems to be almost complete agreement that the market can only go up from here.  However, it has had a big run and this looks like a buying climax that could lead to some kind of correction as opposed to a few days of a pullback.  Those pesky human traders just have to take profits from time to time.  New highs were over 360 today so no warning there yet.  If they drop under 200 in the next three days I think it would be good confirmation of a true correction starting.  I think tomorrow will be a key day.  If the bulls come back strong the upside should continue.

If SPX breaks the lower channel line then the next key support looks like 1595-1600.  The next level down should be the 1570-75 area which was in the area of the 2007 intraday high.  Price paused around there on the way up.

The ball is in the bulls court now.  The bears fired a warning shot.  Who will show up the strongest tomorrow?


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