The market reacted as everybody expected to a deal by rallying. I think most people were afraid to sell or be short because of what happened in the past. So unlike past squabbles in Washington the market never seriously sold off. Now we will find out if there is a sell the news reaction. There is a real possibility that the latest move up was simply a relief rally that we were not going to shoot ourselves in the foot. Since the deal was a short term deal is the market really going to continue to celebrate. We still have the problem of weak internals. Here is a look at the new highs/lows data.
The trend line makes it obvious that fewer stocks are making new highs. We finally surpassed 200 today, but still well below the prior peaks. The most telling chart though is the number of stocks above their 200 MAs. Check this out.
This is common at bull market tops. Is it going to be different this time? Time will tell.
The SPX chart still has some room up to the upper trend line from here. We could easily go up there to it. I have my doubts about it breaking out above it though. However, it is also quite plausible there is a sell the news reaction and the market sells off from here. This deal has nothing good in it fundamentally for the market. It also only moves the possible foot shooting out a few months. I guess we will see what people do. A close back below 1700 would be moderately bearish. A close below the 18 DMA (1690) is likely to be very bearish. Lets see if the bulls are interested in pushing price higher or not.
Bob
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