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Thursday, September 5, 2013

Daily update 9/5

Now we are getting somewhere.  Here is the daily SPX chart.

SPX closed above the 18 SMA today.  The intermediate trend indicator also flipped to up.  The next couple of days should tell us a lot.  Will the bulls push the market higher and confirm a break of the 18 SMA and the uptrend indicator?  We have totally worked off the short term oversold condition now.  Will the bears show up again?  With the 18 SMA below the 50 and sloping downward a close back below it should confirm the market is rolling over and headed down.  A break of the 100 SMA should lead to a quick move down to the 200.  That would also be in the vicinity of the June low.  I think that is the most likely outcome.  Check out the put/call ratio chart.

Over the last three years every time SPX dropped below the 50 DMA the 10 DMA of the put/call ratio got over 1.0 before the market bottomed.  On this sell off it has not even crossed .95 yet.  Unless it is different this time we probably have more down side to go.  Remember we had the weakest technical position at the top we have had in this entire bull market.  I think that adds to the odds we will go lower.  Lets take a peak at the 60 minute SPY chart.

SPY has started to roll over just a bit on this time frame.  The odd thing about today is the way SPY reacted to the red resistance line.  That line marks the low of the first candle of the 8/15 big gap down day.  In late Aug. SPY blew right up through the line and then went back below it like it was no longer meaningful.  Today price respected the line all day.  Why I don't know. 

We now have a nice narrow range to work with.  A close above today's high should greatly increase the chances for the bulls.  A close back below the 18 SMA should be very bearish.


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