I connected the last two peaks with a trend line and I see that line crossed my lower channel line at the same place that SPX stopped yesterday. Volume was pretty heavy for a consolidation type day. Bulls would have liked to have seen the volume drop considerably. Instead it was the heaviest volume day of the last several weeks besides yesterday. That looks like distribution to me. Tomorrow is expiration so the volume will be extra heavy anyway.
Here is a chart of the percent of stocks above their 200 SMA versus SPX.
The blue line is SPX. The green line is the percent of stocks above their 200. As you can see it keeps diverging lower as SPX keeps making higher highs. This is very similar to 2007 check out that chart.
It certainly might be different this time, but this is normal at tops. On any break out follow through is key. We did not see that today. We will have to see what happens tomorrow. If this break out fails I expect it to fail big time. It might not happen right away though. Here is SPX from 1998.
The market broke out to new highs and ran up further for a few weeks before failing the break out. The weak market internals and over bought position create some risk of a break out failure. Just keep an eye on the 1700 level even if it is several weeks from now before it is broken on the down side.
Bob
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