Daily update 7/16

Running out of rally chasers?  SPX got briefly to a new rally high (still below the May intraday high), but failed to stay there.  Is it any wonder, LOL.  The market is very extended to chase it here.  Whether this ends up as a pullback or more sideways price action remains to be seen.  The new highs are issuing a caution flag though.  Yesterday there were 182.  They were below the caution threshold of 200 I mentioned the other day, but it was a down day so I was not real sure it was truly cautionary.  However, with today being an up day and a new rally high we had even less at 162.  That is very low especially with the big gap up to start with.  Here is the daily SPX chart.

The futures actually closed a little below the open.  Volume increased today.  Even though it was an up day with the close below the open that looks a bit like distribution.  I mentioned there were lots of divergences in the market internals.  With the number of new highs dropping this low I am beginning to think this is likely going to turn out to be a double top.  If new highs drop under 100 before we get above that May high it would increase the odds of this being a top considerably.  Lets take a peak at the 5 minute SPY chart.

SPY formed a potential head and shoulder pattern today.  The neckline that formed in the morning was tested twice in the afternoon, but did not break.  However, SPY is still below the shoulder level at the close.
Price is likely to be choppy until it breaks the neckline on the downside or the head on the upside.  I don't know what happens on the upside with price so extended.  On the down side a break of the green line should target yesterday's low and could bring on some profit taking.

Chart practice has been updated with PSX the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob