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Wednesday, August 21, 2013

Daily update 8/21

Somebody must have put the bulls back in the barn.  The bulls tried to defend Monday's low multiple times today.  However, at the end of the day the market sold back down through it.  That action seems likely to continue tomorrow morning.  I mentioned the other day that when my over sold buy signal fails to trigger a bounce within two days it usually means the market is bothered by something.  I would say the market is very bothered by the thought of taper.  Here is the daily SPX chart.

SPX closed back below the lower Bollinger band again.  Are we starting an accelerated move down?  I have not sensed any fear entering in yet.  If we keep going down that will happen at some point, but where.  My support lines are all below the 200 SMA.  We have the 100 SMA and the June low above there and that is about it.  The volume has not been particularly heavy on the way down which suggests a lack of buyers more then heavy selling.  That is not good if you are looking for a climax low.

What could motivate buyers now?  Earnings growth is slowing.  The only real reason people were buying was QE.  With the threat of that being pulled back what is the incentive?  I think it is clear people are more interested in taking profits.

Until SPX gets back inside the lower Bollinger band it can accelerate down.  Do not buy falling knives here.  Everybody else is selling rallies.  Do not fight them until we have a clear sign it is time to do so.  Big down moves have happened in the past when my over sold buy signal fails to spark at least a 2-3 day bounce.  The exit may be about to get crowded.  These things can be hard to predict.  However, I can predict that buying too early can be very painful.

Chart practice has been updated with BIDU the stock tonight.


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