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Wednesday, August 14, 2013

Daily update 8/14

We have a development finally.  Here is the daily SPX chart.

SPX closed below the May high (1687) and there was a trend flip to down.  However, it ended the day right at the lower blue trend channel line.  The trend flip will sometimes come right on a low.  To truly change the trend it needs confirmation of a lower close before the trend flips back up.  There were 231 new lows versus 99 new highs today.  We are within spitting distance of all time highs it is very abnormal to have this many new lows.  Somebody is selling a lot more then just normal profit taking.  The question you should be asking yourself is who is doing it.  Is it smart money or dumb money?  I can tell you there are a lot of similarities to 2000 and 2007.  Both those tops saw a turn down in margin debt and a double top formation.  There were also big divergences in market internals like the number of stocks above their 200 MAs and the McClellan summation index.  We have very similar divergences today as well.  The time between the highs was shorter in 2007 then 2000 and the time between the current peaks is shorter yet.  The main difference is that in the current situation SPX did not visit the 200 DMA in between the peaks.  That may mean that if we do sell off here we visit the 200 and retest the high in some fashion.  I don't know that we can count on that though.

Should the market follow through on the down side the July low of 1676 is extremely important.  I am sure there are a lot of stops lurking around a little under there.  Should we break that the market is likely to accelerate down.  On the upside SPY needs to demonstrate that it can stay above its hourly 50 SMA.  Every time it sticks its head up there it comes to a screeching halt.  That may be starting to put a damper on dip buyers as they seemed to be running out of gas.

Chart practice has been updated with EBAY the stock tonight.


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