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Monday, October 21, 2013

Daily update 10/21

Today may have been more interesting then it appeared.  Here is the daily SPX chart.

At the low SPX closed below the lower trend line and was followed by a doji bar.  Friday we close above the upper trend line and today was a doji bar.  Nice symmetry there.  Time will tell if we made a high or not.
I noticed something that is kind of odd though.  Sometimes the market does things that just make you go hmm.  Since the May intraday high of 1687 SPX has retraced to the 100 SMA and bounced to new highs three times.  Lets look at those new highs just a bit closer.  The Aug. high was 1709 (+22 points above the May high).  The Sept. high was 1729 (+20 points above the Aug. high).  Today's high was 1747 (+18 points above the Sept. high).  Do you see the pattern?  We don't know if today's high was the end of this rally or not, but it does fit the pattern.  How does the market even do that?  What caused the range between the prior high and the new high to drop by 2 points each time?  Will this time break the pattern or have we made another high?

The last couple of months have seen rapid shifts from buying to selling and back again.  The things that people talked about as things to worry about like the FED tapering or the debt ceiling debate are out of the way.  Does that mean the market has clear sailing now?  I see a lot of people think so.  Until we have some kind of pattern change I don't see how we can know.  In the short term the market is still very overbought so some consolidation or pullback would be normal.  If the market is going to accelerate up that action should happen above 1700.  If SPX drops below 1700 for a third time I think the selling might pick up considerably.  The likely catalyst would be earnings.  With everything else out of the way the fundamentals might come back into focus. 

Chart practice has been updated with DIS the stock tonight.


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