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Friday, August 9, 2013

Daily update 8/9

SPX is back below the daily 18 SMA.  Here is the chart.

Three days in a row SPX tested down into the area of the May high (1687) and bounced.  However, none of the bounces got any traction.  Price has a red bar and a second close below the 18 SMA in three days.  I think the odds are tilting toward the bears now.  If we close below today's low it would confirm the break of the 18 SMA.  Often that means a trip to the 50 SMA.  A close below the May high would open the door for the bigger picture potential double top to play out.  A close below the last swing low (1676) would confirm the short term double top pattern and greatly increase the odds of the bigger picture double top.

I think it is generally agreed that the majority of market participants believe that QE has pumped the market up.  Without it we would likely not be up at these levels.  If that is truly the case then won't it be likely that if the majority of market participants believe that QE will be tapered they are likely to take some money off the table.  I believe a taper is coming to a FED near you and probably in Sept.  The recent FED speeches have all talked about taper.  I also don't believe it has anything to do with the economy.  I have seen articles about problems with treasuries for collateral and issues in the Repo market.  With the reduced funding requirements caused by the tax hikes and spending cuts the FED has become an even bigger percentage buyer of what is out there.  Apparently it is starting to cause problems in the markets.  Obviously the FED is not going to admit this.  Imagine the chaos that would cause.  However, I heard this discussed on Bloomberg TV today so it appears to be a real problem.  I believe this is the real reason why rallies are being sold. 

Next week is option expiration.  That week has a strong upside bias, but when it is down it can be down big.  I think last Nov. was the last time we had a big down option week.  It may be time for another one if we head down early next week.  We have been in this same area for nearly a month.  In that time a lot of people have been buying at elevated prices.  I am sure there are some weak hands in there that will bail if they get under water. 

Chart practice has been updated with ACN the stock today.

Have a great weekend all.


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