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Tuesday, October 22, 2013

Daily update 10/22

It had to go and mess up my nice little pattern I mentioned last night didn't it, LOL.  Here is the daily SPX chart.

We did run into some sellers after the first hour today.  The dip was bought for a retest of the high in the afternoon, but sold off a bit going into the close.  That pattern could be a short term top.  We certainly are stretched enough for a pause of some kind.  Check out the stocks vs. their MAs chart.

The number of stocks above their 10 MAs (yellow line 2nd panel) hit levels seen only twice this year.  In Sept. and back in Jan.  In looking at this indicator over the last few years of data it almost always marks a short term top.  Even in Jan. the market paused long enough for SPX to touch its 6 DMA before moving up again.  This can be a sign of strength and a new leg up or mark a short term top and pullback like it did in Sept.  It has very high odds of a pause at least to let the 6 DMA catch up.  The profit taking that came into the market today backs that up.  The number of stocks above their 50 DMAs is the highest level since back in May.  That is another case of it is over bought, but could be a sign of strength. 

The overall pattern of slightly higher highs just does not look like a pattern to launch from to me.  Normally a correction is sideways or has a downward slope to it.  I will say there is no shortage of bulls in the media.  I
have heard plenty of nice Wall Street folks on TV lately spouting off a lot of upside targets.   Lets look at the number of stocks vs their 200 SMAs.

At 56% it is still very low for a market with the indexes at all time highs.  This needs to get up into the 60s at least to sustain the uptrend I think.  We will see what happens.

The new margin debt (Sept.) data came out and there was an $18 billion increase to a record high $401 billion.  I don't know if the shutdown mess in Oct. will make the next data come out lower or not.  As I have said time and time again margin debt does not unwind until the market goes down.  Some day it will and the higher the margin debt is when that happens the bigger the fall will be. 


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.