If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Wednesday, May 22, 2013

Daily update 5/22

Wow.  What did Ben say that caused that reversal?  Here is the daily SPX chart.

That qualifies as a key reversal day especially with that high volume.  What I find amazing is the breadth reversal that took place.  This morning there were 75% stocks positive on the day.  At the end of the day there were 76% negative.  In all the years I have been doing this I have never seen that big of a downside reversal.  On the key reversal day at the market top in 2007 we went from 69% positive to 62% negative.  That day pales in comparison to today and it was a major market top.  Today the market was talking in a very bearish fashion.  Will it flip back to talking bullish again or not?  The next few days are going to be critical.  Here is a look at the SSO 195 minute chart.

We got the first red price bar we have had all month.  As you can see there are a bunch of potential support lines down below on this chart.  If the market really does pullback this time we will have to see how it reacts to them.  Notice the trend bias filter is still below price so the bias is still up.  It flipped to down on the 60 min. chart on the last bar, but is not confirmed yet.  Here is the current breadth chart.

On the day of a new all time high both the McClellan oscillator and the 10 DMA breadth chart have negative crossovers.  That is extremely odd and is a sign of short term weakness.  That is not the only odd thing though.  Check out the chart of stocks vs their MAs.

This chart has been diverging from price since 5/8.  Since then the advance has been getting narrower and narrower. 

The last two charts are short term in nature, but they do show exhaustion.  With today's reversal a pullback to the 50 SMA seems pretty likely.  A close below today's low could set that in motion.  Dip buyers may show up in the morning.  If they show up I don't know if they will be able to hold the market up all day or not.

A warning sign that we might be starting a correction would be for new highs to drop under 200 in the next four days.  Under 100 would be even more bearish.  Down the road a ways another warning sign would be the 14 SMA of the Nova/Ursa ratio going negative.  It has dropped down around the 0 line twice since the Nov. low, but it has not crossed it.

Since I have never seen a downside breadth reversal that strong I can't really say with any certainty what it means.  They say one day does not make trend.  However, one day can be a game changer.  That is what happened on 3/10/09.  We did not know at the time how much of a game changer it was.  We won't know for quite some time whether today was a game changer or not.  All I can say is that it could be.  I would not just dismiss it out of hand until we close above today's high on several important indexes.  Obviously we would need to close below today's low to have any meaning at all.

Chart practice has been updated with CAM the stock tonight.


No comments:


The information in this blog is provided for educational purposes only and is not to be construed as investment advice.