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Thursday, June 6, 2013

Daily update 6/6

Interesting day.  Today's low at 1598 was just one point above the key 1597 support level mentioned last  night.  Oddly though, SPX closed at 1622 which was the resistance level also mentioned last night.  Here is the daily chart.

I have two sets of channel lines (red and blue) because price has reacted to both of those lines at different times over the last few months.  It slightly poked through the lower blue line today before bouncing.  The 1622 resistance level is from the 6/3 and 6/4 lows that we broke down from yesterday.  How strong that resistance is or if it is there at all remains to be seen.  Price is below the red set of channel lines.  There was a similar break down back in April.  In that case price climbed back into the channel and kept going.  It could move up to kiss it good bye this time because we have technical problems we did not have then.  We have a confirmed key reversal day and a lot of new lows.  There is another new sign that we are likely in a corrective move.  Here was last nights Nova/Ursa ratio chart.

The 14 DMA has clearly crossed below the zero line.  This is the first time that has happened since the cross above zero after the Nov. low.  There are a lot of high readings that are going to drop off so this MA should  move some lower yet.

Tomorrow is the employment report which can render analysis useless for the morning.  Since the move was straight up from the low this afternoon I kind of think they might sell a gap up.  However, we were plenty oversold enough to support a rally back to the 18 DMA (now at 1645).  That could mean buyers would show up on a dip tomorrow that retraces some of today's move up.  Lets zoom in to the 60 minute SPY chart.

The down trend line for this move has 3 points of contact already.  Price would intersect this line before SPX gets to the 18 SMA. Would that line stop the rally again?  If we rally straight up to it without much of a pullback it likely would.

I think this bounce is of the dead cat variety.  I have a very good over sold buy signal that has not fired yet.  With this much selling pressure in the breadth I think it will have to fire before we get a longer lasting low.  The question is how high does it go before it rolls over.  As I have pointed out above that is a bit of a complicated question, LOL.  There is even a possibility that we rally all the way up to the .618 or .786 retrace levels of the entire move down.  Hopefully we will know more after we see how the market reacts to the employment data.


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