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Friday, October 4, 2013

Daily update 10/4

Another bounce by the bulls to try to jump start a rally off the 50 DMA.  Here is the daily SPX chart.

SPX is still below its 18 SMA, but is back above the 50.  Neither the breadth or the number of new highs was as strong as they were on the 10/1 rally day.  The market has not put together two up days in a row since the Sept. high.  Will they be able to do it this time?  I was unable to conclude any odds of that at the close.  Lets take a peak at the SPY 60 minute chart.

SPY closed clearly above the 50 SMA unlike the last rally day.  However, it crossed that line in the middle of the day and then just muddled around.  Apparently rally chasers were taking the afternoon off.  Will they show up on Monday or not?  I don't see anything that tilts the odds one way or the other.  Even though the bulls got SPY back above the 50 SMA it is still below where it was a couple of days ago.  It did not do enough yet to say the bulls are in control. 

Earnings season kicks off this weak with AA on Tuesday.  There have been lots of warnings and the number of stocks above their 200 DMAs has dwindled a lot over the last few months.  This is likely to be a tricky earnings season.  Be very careful swing trading stocks through earnings reports.  There could be lots of surprises out there.

SPX is clearly consolidating in the area of the 50 DMA.  It will decide which way to go before too long I would think.  The direction may be based on earnings reports next week.  We also still have to deal with Washington.  The rally that started yesterday and continued today may have been sparked by Boehner saying he would not let the government default.  I think everybody already thought this, but to hear him say it was a relief I would guess.  My expectation is that the House will pass something to raise the debt ceiling.  However, a continuing resolution to reopen the government is an entirely different manner.  The president says he will not negotiate until the government is back open.  The problem for Boehner is that he has been trying to negotiate with the Democrats starting well before the shutdown.  They were not interested in doing so.  If the House reopens the government Boehner will have no leverage to get the Democrats to negotiate.  I think there will still be a fight over reopening the government that could drag out.  If that turns out to be the case it could eventually be a problem for the market.

Chart practice has been updated with HOT the stock tonight.

The market and sector status pages have also been updated.

Have a great weekend all,

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