Daily update 9/30

SPX tested its 50 DMA today.  Here is the daily chart.

The day started with a big gap down, but the dip buyers rushed right in again.  However, the market found its high mid day and started drifting down a bit in the afternoon.  At the end of the day SPX closed above the 50.  Will the bulls come out and support the market here?  Here is a look at the Russell2000 index.

Unlike SPX this index is still right near its highs.  Whatever is causing the pullback in SPX it is not a general fear thing.  If that were the case this index would be much lower.  I am suspicious it has to do with the upcoming earnings season. 

Here is the current breadth chart.

Both breadth indicators had negative crossovers today.  The third panel in the chart above is the 10 DMA of the advancing and declining volume.  I usually don't talk about this because most of the time they cross with or slightly after the breadth lines.  However, in this instance they actually crossed four days ago.  That is an indication that there has been significantly more volume in declining stocks then advancing stocks lately.  There is definitely some distribution going on in the market. 

The daily chart is pretty steeply down on SPX.  The market has some work to do to get fully bullish again.  At this point I think the bulls need to get back above the hourly 50 SMA on SSO to get control back.  Any bounce that fails to do that will likely end up at new lows.

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

Bob

Daily update 9/27

The bulls forgot to show up for quarter end markup day.  Here is the daily SPX chart.

SPX closed below the low of the last several days but found support at the 18 SMA.  That is now down 6 out of 7 days.  Despite that statistic there seems to be no worry in the air.  I suspect this is due to the NASDAQ and Russell2000 not selling off.  Why are so many big cap stocks selling off?  Why aren't the other indexes being affected?  I am sure it is not related to the games being played in Washington.  First of all, everybody thinks it is all just grandstanding and some deals will be made.  Second of all, if that was the worry then I would expect the other indexes to be impacted also.  So what is the deal.  Lets zoom in to the SSO 60 minute chart.

SSO is below the neckline of the head and shoulder topping pattern.  It has not sparked any rapid increase in selling yet.  I guess that is because nobody is worried, LOL.

What happens now?  Will SPX find support here at the 18 DMA or just a little further down at the 50 DMA?  Until the bulls do something that we can identify as a positive for the market the path of least resistance appears to be down.  We are not building up the usual oversold tensions because many indexes are not breaking down yet.  If they join the party then selling will likely pick up.

The big question now is does SPX stop going down before people get worried or after.  It is possible the move down is because of earnings season jitters.  What is clear is that some people are selling rallies while others are buying dips.  Which is smart money remains to be seen.  This looks like a real serious top to me.  Is that just a bearish bias or is it real?  In Daily update 9/19 I showed the big divergence that has formed in the number of stocks above their 200s.  That is always a red flag.  In addition I am seeing lots of junk stocks making huge runs lately.  I think there are so few stocks still going up that traders are flocking to the junk.  This was very prevalent in 2000.  I did not notice it so much in 2007.  I think that was because the commodity related stocks were still surging after the broad market topped.  That is not the case this time.  So the traders are running junk.  These are signs of a dying bull market.

Have a great weekend all,
Bob

Daily update 9/26

String of down days ends.  Here is the daily SPX chart.



The market rallied out of the gate then sold off mid day back down near the recent lows.  However, the bears were not able to break the market down and it bounced going into the close.  This has the look of a low.  SPX got above yesterday's high on the initial rally and the afternoon sell off made a higher low.  Here is a look at the SSO 60 minute chart.



The last bar on SPY has a lot more volume then SSO does so there was some significant buying at the end of the day.  Both SPY and SSO closed above their 18 SMAs.  All that is needed now is upside follow through by the bulls.  We are coming into the quarter end window dressing period.  It should not be too hard to generate a bounce from here.  Both breadth indicators remain in positive territory.  An hourly close above the last bar's high should be confirmation of the upside break of the 18 SMA.  That should initiate a test of the highs.  If we end up breaking yesterday's low instead I think it will drop pretty quickly.  The last few days the bulls were defending the lows vigorously.  If they fail there will be selling pressure.  I would have thought that would have happened by now if it was going to though.  I guess we will see.

Bob

Daly update 9/25

Another down day.  According to Bloomberg TV this was the first time we had five days down in a row this year.  The last time that happened coming off a bull market high was in April of 2012.  Those five days were much more violent and took SPX well below the 18 DMA.  This has been much more gentle so far.  Here is the daily SPX chart.



There have been some dip buyers every morning.  SPX seemed to find resistance around 1700 today.  Yesterday morning there was a market rally that ripped right through 1700 to the upside.  What is missing is rally chasers.  Every bounce ends up getting sold into. No panic selling, but persistent selling into strength.  I thought closing below 1700 would bring out more selling then it has.  Lets look at the 60 min. SSO chart.



SSO actually closed below the neckline of the possible head and shoulders top pattern.  However, nobody seemed to care as there was no acceleration down.  The volume bars are still big red dominant so there is distribution going on.  At what point do people get a little jittery?

The bulls were really busy defending that neckline today.  At the end of the day they lost the battle, but I can't be sure whether they lost the war or not.  Will the bulls try to get it back above the neckline tomorrow? We still have another 13 SPX points down to the 50 SMA.

There seems to be a distinct lack of fear on this sell off.  I find that kind of odd with all the rhetoric coming out of Washington these days.  I guess market participants have been through the drama enough times before to believe that in the end they will agree on something.  That may in fact be true.  However, I would point out that in the past those agreements only came when there was at least some fear in the market.  At this point there does not appear to be any negotiations going on and both sides seem to be happy to have a government shutdown.  I don't know if the market will continue to stay calm as deadlines approach or not.

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

Bob