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Thursday, October 24, 2013

Daily update 10/24

Dip buyers to the rescue.  Here is the daily SPX chart.

SPX is still holding above the 6 SMA.  The bulls supported the market today, but did not show much vigor.
Since the key reversal day in May there have been nothing but big swings.  None of the moves have been stopped by either the 18 or 50 SMAs.  Every sell off was caught by the 100 SMA.  Even though price is making higher highs this is hardly a strong uptrend the last few months.  If we pullback again I don't think there is any particular odds we will stop somewhere above the 100.  After three bounces off the 100 the odds of a fourth bounce might not be as good.  If you look at the chart closely you will notice that the number of days in both the up and down moves are getting smaller.  If that pattern persists and we roll over again we could be back at the 100 SMA pretty quickly.  Lets take a peak at the 60 minute SPY chart.

This morning SPY climbed back above the 18 SMA.  It spent the afternoon trudging its way up to the red line which marked the gap fill area.  The bears stepped in and stopped the rally there.  Yesterday's gap down has been completely filled.  We also know there was some resistance there that stopped the up move.  What we don't know is how significant that resistance is yet.  Will we break out to new highs or roll over?

In the short term the market is still very extended.  Will people chase price higher from here?  That looks like a tall order to me, but I guess we will see.  A break of the SPY 60 minute 18 SMA could be a sign we are rolling over again.


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