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Wednesday, October 23, 2013

Daily update 10/23

There was a chill on the semiconductor industry today.  I suspect that had a lot to do with the gap down this morning.  Here is the daily SPX chart.

The 6 DMA and the upper trend line provided support when touched early this morning.  There were numerous rally attempts throughout the day, but each pop was sold into.  The  number of new highs dropped down to 150.  One day off an all time high that was a very low number.  If it drops below 100 in the days ahead that would be fairly bearish.  The reversal pattern I mentioned last night saw some follow through today.  Over the last few months this market has made some rather quick turns in both directions.  We don't know if it is through doing that or not.  This could be another high that sees a sizable pullback.  Closing back below the upper trend line could send us back down to the lower line.  I expect the market to continue to focus on earnings now that all the other distractions are gone for the moment.  Here is a look at the SPY 60 minute chart.

The first bar this morning closed below the 18 SMA.  However, SPY did not close below that bar's low so the break is not confirmed.  This makes things pretty easy.  An hourly close above the 18 SMA should be bullish again.  An hourly close below today's low should be bearish in the short term.

I can't recall in all the years I have been studying the market a time when people were more complacent.  There is a general feeling that the market can't go down because the FED is printing money.  This belief seems to be pervasive even among the longer term bearish crowd.  It reminds me of the old saying that goes something like when nobody is worried is when you should be worried.  It is pretty damn hard to find anybody worried now.  We have a market loaded up on margin and very complacent.  That is a recipe for a much bigger move down then people expect.  Maybe it won't happen, but these are the conditions of past crashes.

Chart practice has been updated with CAT the stock tonight.


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