Daily update 11/29

Late day sell off.  Everything was positive until the last 30 minutes.  Then we ended up with a mixed market.  Here is the daily SPX chart.

SPX tried to break out of the recent range, but was turned back late in the day.  That leaves us with a bit of a shooting star candle, but the upper tail is not very long.  Here is the SPY 60 minute chart.

That sell off at the end of the day came on very high SPY volume.  The VIX spiked up over 5% today which is a bit odd given the small down day.  This all could just be month end stuff that has no bearing on future direction.  If SPX is down again on Monday that could be a different story though.  AAPL seems to be driving strength in tech, but SPX is still struggling to go higher.  It is now up 8 weeks in a row, but it was a very narrow price range this week.  Does that mean it is time for a rest?  SPY ended the day below the hourly 18 SMA.  Like 11/26 it is an unconfirmed break.  That time the market rallied the next morning back above the MA.  However, it did not make much upside progress.  The song remains the same this time.  If SPY climbs back above the 18 SMA then it should be in position to continue the rally.  An hourly close below today's low would confirm the MA break and open the door on the down side.  The first support on SPX is 1800 then 1775 below that.

The market and sector status pages have been updated.
Have a great weekend all,
Bob

Daily update 11/27

Equilibrium.  This week has had an extremely tight range on SPX.  Here is the daily chart.

Every time the futures dipped down to 1801 this week the bulls rushed in to buy.  However, at 1807 the buying came to a stop.  At this price level that is an extremely narrow range.  In the last 8 trading days SPX has managed to gain a whopping 9 points.  Not exactly an upside explosion going on.  Like yesterday the strength today was in small caps and tech.  Lately strength has rotated around to different sectors while SPX itself has clearly struggled to go higher.  It appears to be more a lack of buyers then selling pressure.  Dips have been very short.  Whether that is a problem or not depends on whether something comes along that increases the selling pressure.  That is kind of the gist of the problem with a market running on weak internals.  If no sell catalyst comes along the market crawls to the upside.  If something does happen price can fall rather dramatically.  How do you know if something is going to happen or not? 

There appears to be support at 1800 the last few days.  A close below that would be an early sign of potential trouble.  The real key level is still 1775.  Enjoy the ride, but be vigilant just in case. 

Happy Thanksgiving to all that it applies to,

Bob

Daily chart for 11/26

Another mixed day.  There was strength in small caps and tech while SPY was flat.  XLF was weak for a change.  It had been running up for several days.  There was a late day sell off into the close.  Here is the daily SPX chart.

SPX has a gravestone doji on a slight increase in volume.  The bulls showed up early in the day and gave a lift to SPX slightly above yesterday's high.  Will the collapse into the close have any follow through tomorrow?  The daily chart has a little bit of a short term top look to it.  I don't know if it is possible for the market to go down ever again though so we will have to see what develops.  The 18 SMA has risen above the key 1775 level.  That adds extra importance to a break of that level as SPX would  be below that key SMA.  Lets take a peak at the SPY 60 minute chart.

SPY closed below the 18 SMA.  There was quite the volume surge on the sell off into the close.  Climbing back above the 18 SMA tomorrow should be bullish and could continue the up move.  An hourly close below today's low could mean a pullback is starting.  Just keep in mind the 50 SMA might provide support.

The daily chart looks a little iffy and the market is dealing with some round numbers.  It may take a few days to decide what to do.  Do people feel comfortable bidding up prices from here or not?  There were 188 new highs and 58 new lows.  The new lows remain unusually elevated.  It may turn out that is important in hindsight.

Bob

Daily update 11/25

A few profit takers at the round numbers.  Here is the daily SPX chart.

Today seemed like a rather innocuous day didn't it.  Volume increased over Friday.   The trouble with the market is that seemingly innocuous days can be short term tops or bottoms.  The 8/28 up bar was rather inconspicuous yet it turned out to be a short term low.  And so it could easily be that today's seemingly inconspicuous bar could turn out to be another short term top.  The market internals are weak and many indexes are at round numbers.  It won't take much selling pressure to send it lower.  There were 243 new highs and 56 new lows.  The number of lows is unusually high for all time highs.  I believe that is a sign that some stocks are still breaking down from tops.  Check out the chart of EBAY for example.  It might have consummated a top formation today.  It still looks like the market is thinning out overall.  There has been a rush into financials the last several days.  They have been lagging for months though.  I don't know if that is the start of a new move or just a move into the laggards.  It should be a positive for the broad market if it is a new move.  It is worth keeping an eye on.

The McClellan oscillator went negative again today.   Market internals continue to be weak.  Will there be more profit taking tomorrow or will the bulls come stampeding back again?  The market looks very tired, but so far keeps holding up.  SPX has a potential short term double top should it break below the 11/20 1777 low.  The market needs to prove all these round numbers are not going to be resistance.  The COMP hit 4000 today in case you missed it.  The SOX has been struggling with 500.  I think it is very unusual to have so many indexes hitting them at the same time.

Chart practice has been updated with PETM the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Daily update 11/22

SPX closes above 1800.  There should be lots of good headlines this weekend with the Dow also above 16000.  Here is the SPX daily chart.

They sure were celebrating today at the close.  Everybody loves those round numbers.  Now that SPX closed above the milestone we will see next week if there are any sellers here.  Volume was pretty light today.  There were 218 new highs and 53 new lows.  New lows that high at all time highs is rather odd.  Yet another sign of weak market internals.   I can't find any sign this market is gaining strength from the internals.  They just keep getting weaker and weaker as we climb.  The bullish sentiment is a completely different story.  Today I heard an interviewer ask Dave Tepper what the risk for the market was next year.  His reply was the market could be up another 20-30% and people didn't have enough long exposure.  He sounded rather cocky actually.   He was just one of many I heard this week with prognostications of great things for next year.   Mostly from rather young people.  I did hear some words of caution from a few of the older (excuse me more seasoned) crowd.

The trouble with a market that is rising on fumes is that it can turn on a dime and drop like a rock.  However, it can continue to rise on fumes for an unknown period of time.  Lets look at the weekly SPX chart.

Both last week and this week we have blue bars indicating price closed above the upper Bollinger band.  This week was a hanging man bar.  We have been up seven weeks in a row to boot.  This is clearly a high risk time for adding new longs.  Can it keep going up?  Yes it can.  Can it turn down and visit the 200 SMA before year end?  Yes it can.  This is a time to be vigilant not complacent.  With indexes at round numbers there could be some profit taking here.  With everybody so sure the market can only go up there may be less hedging going on then normal.

Lets take a look at TLT.

TLT tested a support line and has bounced off of it.  I don't know whether this is a temporary bounce or if it is going to make a bottom and mount another rally.   I think what happens here is going to be important.  This is a long consolidation now.  If TLT breaks down it should lead to another significant surge in rates.  That could have negative consequences for rate sensitive stocks like home builders, utilities and REITs.  It might be positive for other stocks if money coming out of bonds looks for a home in equities.   If this consolidation turns into a bottom then we could see the opposite affect.  Rate sensitive stocks might rally while others drop.  Since I am writing that TLT is at an important decision it would seem the most likely thing for it to do is nothing but scrape along the bottom.  Neither breaking down nor rallying.  In that case it will probably be unimportant to stocks.  Since the bigger picture trend is down the longer it scrapes along the bottom here the higher the odds are of a break down. 

This week's low was just above the key 1775 level.  If we get some profit taking next week and 1775 gives way we would have a failed break out situation.  That could lead to an increase in selling pressure.  Otherwise enjoy the ride.

Chart practice has been updated with SNDK the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

The market and sector status pages have been updated as well.  A lot of sectors have been bullish for more then 10 weeks now.  In the time I have been tracking this for the blog I have never seen so many in double digits.  Is the market a little overheated?

Have a great weekend all,
Bob

Daily update 11/21

The Dow closes above 16000.  That should generate some headlines.  Of course the real question is whether it will stay there or not.  Financial stocks drove the rally today.  XLF made a new bull market high along with the Dow.  The rest of the major indexes were still a little off their highs.  Here is the daily SPX chart.

Yesterday's FED meeting minutes induced sell off was reversed today.  That is not surprising.  It happens fairly often.   The FED seems to generate a lot of head fake moves.  The first and second moves are not all that reliable intraday and over successive days.  Will tomorrow continue today's move or reverse yet again?  Lets take a peak at the 60 minute SPY chart.

The upside volume today was not nearly as high as the down side volume was yesterday.  Not a lot of conviction this morning.  Compare that to the big volume bars on 11/8 as people piled in.  There were 151 new highs today.  That is less then the 200 threshold we have been having trouble getting over the last few weeks.  The breadth chart is mixed with the McClellan oscillator negative while the 10 DMA breadth lines have a positive cross.  Breadth was very strong today at over 71% positive.  Is this a last gasp move or the start of a break out through potential round number resistance?  It may take a few days to find out.  I don't think the round numbers we are hitting are going to just give way.
I think there will be more profit taking going on. 

The bubble talk sure is heating up.  Most of what I have seen is how we could not be in a bubble.  The main reason seems to be that SPX's forward earnings P/E of 16 is too low to be a bubble.  The argument that really cracks me up is there is too much bubble talk for it to actually be a bubble.  Yep, that is a mighty fine reason right there.  I would have to agree on SPX.  It does not have a bubble valuation based on P/E.  There are other valuation methods that suggest it might be rather high though.  Here is the only article I have read stating we could be in a bubble Is The Stock Market Experiencing A Bubble?.  Interestingly it leaves out the most compelling evidence we have for a bubble.  That would be the P/E of the Russell2000 of course.  We have 500 stocks that are not in a bubble and 2000 that are.  Based on trailing 12 month earnings just about all indexes are at the high end of historical norms (outside the late 90s bubble).  They may not be bubble valuations, but they are certainly not cheap.   The trouble with bubbles is that when they pop they tend take everything down with them.  The Rusell2000 bubble will pop some day and it will most likely drag the other indexes down with it.

Bob

Quarterly DJ30 chart

I got a request to show the quarterly chart so here it goes.

Connecting the quarterly closes with trend lines shows an expanding volatility pattern.  We are also at the upper trend line right here.  This could be rather significant resistance.  The last bear market ended at the 100 SMA.  Most people are of the opinion that was a generational low.  I don't think that is the case, but we will see.  Lets look at the last secular bear market in the 70s.

The 73-74 time period shows a bit of an expanding pattern.  However, the bulk of the price action fits into a nice horizontal channel.  The 74 bear market broke below the 100 SMA.  We have not had that yet.  The DJ30 did not make a new high in the bull market off that low.  It also went into a quiet period in the late 70s.  It was in 79 when the famous magazine cover proclaiming the death of equities as an investment.  At the time people actually believed that.  The buy and hold crowd was washed out.  Does that sound like today to you?  Bill Gross was highly ridiculed for his piece on the death of the cult of equities.  Everybody, and I mean everybody was out proclaiming that as a contrarian sign.  How is something a contrarian sign if nobody believes it?  That told me we still have a long ways to go in this secular bear market.

This secular bear market price pattern is very different then the last one.  We are also at a logical place for a bull market top at the upper trend line.  It would not surprise me a bit to see that lower trend line hit in the next bear market.  The buy and hold crowd will be swearing off stocks forever.  Stocks will eventually get cheap.  I mean really cheap.

There has been a flood of money into the market since the indexes broke out to new highs.  That is a lot of people that chased the market and bought in at high levels.  Somehow Wall Street suckered people in again.  I guess we will see how it works out for them.  During the next bear market I expect a lot of people that rode out the last two bears will sell out not wanting to go through that again.  Time will tell.

Bob

Daily update 11/20

Another down day.  Here is the daily SPX chart.

The market was up slightly before the 2 PM release of the FED meeting minutes.  I guess it was something they said.  This was a news induced down day.  The question is was the news lasting and important or just a temporary move that will be reversed.  We will have to wait and see for that answer.  SPX is still above the key 1775 level.  There were 73 new highs and 66 new lows.  That is the most new lows since the 10/9 low.  Interest rates spiked up after the meeting minutes came out so the increase in new lows could rate related.  GLD also sold off.  That combination would make me believe that people are once again worrying about the FED tapering.  Lets take a look at the SPY 60 minute chart.

There was a really big volume bar after the minutes came out.  SPY is now below its 50 SMA, but has not confirmed the break with a lower close bar.  An hourly close back above the 50 could put the bulls back in charge.  An hourly close below that break bar's low would confirm the break of the MA and put the bears in charge for the moment.

Last night I showed a couple of market internal indicators that show the market is the weakest it has been at the highs all year.  Actually it is the weakest it has been at any high in this bull market.  If taper fear gives people a real reason to sell the weakened condition could exaggerate the move down.

Tomorrow is likely to be important.  If the bears show up again the key 1775 level seems likely to give way to me.  That should confirm another short term top is in place.

Chart practice has been updated with JOY the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

GLD and GDX 11/19

I have not looked at GLD and GDX in a while.  Here is the GLD daily chart first.

It looks like GLD has formed another down trending channel over the last few months.  It is currently near the middle, but looks like it could be on the way to the lower rail.  Here is the GDX daily chart.

Interestingly GDX also looks to be in a down trending channel.  Are both of these headed back to the lows?  Clearly they need to break the upper channel lines before becoming longer term bullish.  I don't know if they are going to continue down from here, but it is a distinct possibility.

Bob

Daily update 11/19

Down side follow through.  That is more then we can say for the last two reversal days.  The more significant development might be that new highs were only 76.  Every time new highs dropped below 90 since May it has meant the top was in and SPX was headed for the 100 SMA.  Will history repeat or will it be different this time?  Here is the daily SPX chart.

The market tried to rally three times today and each bounce was met with selling that knocked it back down.  That certainly is different then the last few weeks.  Lets take a look at the McClellan summation index.

First of all this is extremely weak for all time highs.  I consider anything under 700 at highs to be weak.  This is the first time the indicator is below the 20 SMA at the highs.  This would seem to back up the idea the last few weeks may be a distribution pattern.  But wait there is more.  Here is the number of stocks above their 200 MAs.

This indicator is also below its 20 SMA.  It has clearly diverged over the last few weeks from price as well.  These two indicators are already on sell signals with price at new highs.  Clearly the market is in the weakest technical condition it has been at the highs this year.  I think there is a pretty good chance that if we continue down here SPX will not stop at the 100 SMA this time.  It has not touched the 200 in over a year.  Maybe it is time.

Bull market tops are defined by two points.  The first point is where smart money starts distributing stock to dumb money.  The second point is the final high before the bear market starts.  This second point can be higher or lower then the starting point.  In 2000 it was lower while in 2007 it was higher.
The current formation is kind of odd for a top.  However, market internals really look like the distribution phase started in May.  They are also weak enough currently that this could be the final high.  The current market environment is very much like a bull market top.  Speculation is running rampant and a large majority of market participants believe the market can only go up.  In 2000 and 2007 SPX dropped below its 200 SMA between the initial high and the final high.  We don't have that in the current chart as SPX has constantly been caught at the 100 SMA.  I don't know if that is a reason to say this is not the final high or not though.  This feels like it could be it.  First things first though.  Lets see if the market actually goes down from here.  The first key level on SPX is 1775.  A close below that would indicate a failed break out and increase the odds of further down side.

 Bob

Daily update 11/19

IWM and QQQ had key reversal days.  SPY had a dark cloud cover day that was close to a bearish engulfing bar.  Here is the SPX daily chart.

SPX turned down from a trend line formed from the last two highs.  I have marked a horizontal area of SPX that formed after 10/23 (red arrow day).  That is the day the market internals really started diverging from price.  We have had two key reversal days on SPY since then also.  Lets look at the SPY 195 minute chart.

On this time frame we can see since 10/23 the biggest volume bars came while price was in the consolidation and are red.  The biggest volume bars since 11/8 have all been green, but still smaller then the red ones.  This afternoon we had the biggest red volume bar since the last swing low.

Many years ago I read a document on accumulation and distribution patterns.  I tried to find it today, but failed in that quest.  The distribution pattern was a rectangle with an upside break out that failed.
The last few weeks look very similar to the textbook pattern and internals are definitely diverging.  There is a possibility this is a small distribution pattern forming here.  If that is the case then price should fall back under the upper green line soon.  Here is a look at the current breadth chart.

Both breadth indicators turned negative again today.  I mentioned yesterday that could happen easily.  This is the same situation.  This is currently a weak cross so they could easily turn positive again. 

With round numbers (DJ30 16000, SPX 1800) a down side reaction would be perfectly normal.  People like to take profits at round numbers.  In this particular situation we have weak market internals combined with a serious lack of bearish sentiment.  The latest II sentiment survey showed 15.6% bears which was the lowest number since March 1987.  One thing is true.  It can no longer be said that everybody is bearish.  If there is downside follow through this week we could be in for a sizable pullback.  With such a low number of bears there is likely less hedging activity then usual.   I have mentioned a few times that the NYSE ticks were weak on this rally leading me to believe it was largely futures driven.  Today the ticks were very negative on the afternoon sell off so many individual stocks were being sold. 

The bears were unable to do anything with the last two reversals.  Now that we hit round numbers will it be different this time?  If we close lower tomorrow then it is possible the bears are going to be successful this time.  A close below 1775 on SPX would signal a failed break out.  That should indicate the last few weeks really were a distribution pattern that could lead to significantly lower prices.  It has been over a year since SPX has touched its 200 SMA.  Maybe it is time.

Chart practice has been updated with WFM the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Bubbles

I have seen quite a bit of talk lately about whether we are in a bubble or not.  Most of what I see is like this quote:

Are we currently witnessing a market bubble?  It is entirely possible, but if it is it will be the first market bubble in history to be seen in advance.  From a contrarian investment view point, there is simply "too much bubble talk" currently which means that there is likely more irrational excess to come.

Source

I actually like reading the guy that wrote that.  He makes a lot of good points and is usually pretty fair in his analysis.  However, this time he is dead wrong.  Every bubble in history has been recognized by some people, but ignored by the majority.  Think about it.  People talked of a stock bubble in 2000.  There was plenty of talk about a housing market bubble in 2006-7.  There are things that show there is a bubble mentality in the markets.  Bitcoin for example.  Bitcoins exist in the imagination of people and can go away at the drop of a hat.  And yet people actually pay money for them.  There is some company selling shares in athletes future endorsement revenues.  Really.  Athletes that can get hurt at any time and totally disappear from the endorsement scene. Or maybe they just do something stupid and nobody wants them for their products anymore.  That never happens, LOL.  I have seen junk stocks do nothing this entire bull market all of a sudden running up 100% or more in days.  This is bubble mentality people.  Now all the talk about being in a bubble just confirms it.  Think about this very hard.  In your life time has there ever been bubble talk about a market that did not actually turn out to be true?  I can't think of one myself.  The question is not whether we are in a bubble or not.  We clearly are.  The question is how close to the end of it are we.  That is the only question that matters.  This is not a party you want to be the last person to leave from.

There is a belief among almost all market participants that another big decline cannot happen.  The usual reason is valuation.  The trailing 12 month P/E for SPX is now nearing 19 which is actually higher then it was at the top in 2007.  Other indexes are much worse.  Check out this latest update.

There is no index in this list cheap.  They are all high.  Notice the Russell2000.   There is no way that a 75 P/E is not a bubble mentality.   Low interest rates just won't cut it as a rationalization.  This is a bubble.  We just need to figure out when it is ending and get out of the way.  I know I got a little crazy early this  year looking for a top.  That is because I was thinking with my heart and not my head.  I apologize for that.  I was hoping the next bear would hit before the indexes made new highs and sucked everybody in at the top.  I was really afraid the bubble mentality would return with new highs.  It has.  The result will definitely be another crash.  New highs within a secular bear market happened in 1973 and 2007.  The following bear markets ended up below the prior bear market low.  We now made new highs within a secular bear market.  Is a trip below the 2009 lows in the cards?  I know a lot of Wall Street people are telling us we are in a new secular bull market.  I believe they are wrong.  We cannot know the answer for sure until we get through the next bear market.  The monthly ADX is only 27.  That is still slightly lower then in 2007.  In order to signal a new secular bull market we need to see a bear market where the ADX declines.  From this low level I don't think that will be the case.  The truth is there is no valuation method or any technical indicator that indicates a major decline in stocks will not happen.  There is always a risk and anybody that says otherwise is either lying or stupid.  I believe the risk is much higher now then it was a year ago.  A lot of people have recently piled into the stock market at high levels.  Lambs being led to slaughter by all the Wall Street talk of sunshine and roses.  This will end ugly as before, the only question is when.

Bob

Daily update 11/15

Almost to 1800.  Here is the daily SPX chart.

The panic buying continued today.  There were 233 new highs which was down from yesterday.  The XLF ETF made it above its Sept. high.  However, IWM still has not made a new high.   Here is a look at the current breadth chart.

Both indicators had slight positive crossovers today.  This is still a weak condition as they can easily uncross on a single down day.  Lets take a peak at the weekly chart.

Like daily chart the weekly chart has a blue bar indicating it closed above the upper Bollinger band again.  More often then not the market corrects after that.  It did not the last time three weeks ago.  Will it this time?  I believe we will head down next week.  The Dow is just under 16000 and SPX is just under 1800.  Round numbers tend to provide resistance, sometimes formidable resistance.  With the market spiking up to them it is extremely extended.  I suspect there will be significant profit taking.  The number of stocks above their 200 MAs is only 53% which is considerably lower then it was in Oct.  Market internals continue to be weak.  NYSE ticks were weak again today.  This still looked like a futures driven move again today.  I think this could reverse pretty sharply from round number resistance.  This looks a lot like a blow off top.  Those flush out the shorts and suck in new longs only to pull the rug out.  With the weak internals that could be the case here.  Stay tuned.


Chart practice has been updated with KLAC the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

The market and sector status pages have been updated.
Have a great weekend all,
Bob

Daily update 11/14

SPX followed through, but not IWM.  XLF made a new high close, but was .01 below its Oct. high.  Here is the SPX daily chart.

SPX now has a blue bar indicating it closed above the upper Bollinger band and is extended.  New highs were 247 today.  This is good if the market keeps going and we keep getting over 200 highs.  If this turns out to be another short term top then it is just another negative divergence.  Earlier in this leg up we had days well over 300 new highs.  Both breadth indicators remain negative.  However, one more positive breadth day could turn them both green.  Lets take a look at the SPY 195 minute chart.

SPY has had three blue bars in a row so it is really extended short term.  Notice the big volume bar this morning.  It was considerably bigger then either of yesterday's two volume bars.  That was break out players buying in this morning on the new high made yesterday.  That makes today's low important.  A break of that low will put those break out players under water.  Do people have the confidence to hold on if that happens?  Today was actually the first day the market opened on positive breadth since the 11/7 key reversal day.  Considering how much we rallied off that low I find that rather odd.  The NYSE ticks continued to be very weak today.  I believe this move was largely driven by people buying futures more then individual stocks.  If that is the case then it is very important for the market to keep going up.  The leverage on futures tends to make people have a low tolerance for pain.  A pullback that puts them underwater is more likely to cause selling pressure. 

The breadth indicators are negative while IWM and XLF have not clearly broken out yet.   That means I can't really say the odds of this break out sticking are high yet.  It looks a lot like late comers piling in at probably the wrong time.  We need to see a pullback that lasts more then 60 minutes to really see how much profit taking there is. 

Many years ago the old timers used to have a saying that the bears get Thanksgiving and the bulls get Christmas.  I don't really hear anybody say this anymore.  However, there is a lot of truth to the saying.  It is caused by the wash sale rule.  People often sell in Nov. and buy back in Dec.  Will that affect be present this year?  Time will tell.

Given the weak internals and extended market I might be looking to short a break of today's low.  A close below 1775 is better for the less nimble.  If this really was a futures driven late to the party move it could peel off pretty fast.  If it keeps going up just sit back and relax.

 Bob

Daily update 11/13

Break out to new highs.  Here is the daily SPX chart.

SPX closed above recent resistance.  It still has a white bar which is really odd on a thrust to new highs.  I looked back for a decade and could not find a pattern like that.  In the market status system  there were only 3 green daily charts of the 10 items.  I don't know if this makes the odds of a break out failure any higher or not.  All I can say is that it could. 

There were 161 new highs today.  Still below the desired 200 level.  I have no idea what moved people to buy like crazy.  Was it important and will it last?  Follow through is going to be key here.  Some indexes made it to slight new highs and some did not.  One notable one that didn't is XLF.  It was the darling of the day on 11/8 when everything reversed the key reversal day.  It ended today just below the 11/8 close.  It is also below the May intraday high.  IWM also did not make a new high today.  Both breadth indicators remain negative as well.  Just about any market internal you can think of has a negative divergence.  These are the conditions that break outs often fail so don't fall asleep here just yet.  This could be a last gasp type move just as easily as a break out to go higher. 

Every time frame from the 195 minute on down has a blue bar indicating it closed above the upper Bollinger band and is extended.  So we are extremely over bought in the very short term.  That may mean tomorrow is a narrow range digestion day.  Any close back below 1775 could be an indication the break out is going to fail. 

Chart practice has been updated with TER the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Daily update 11/12

Another day another mixed market.  Here is the daily SPX chart.

I guess the lack of buying excitement yesterday held over today.  Maybe it has more to do with the price level then the holiday.  SPX closed fractionally below yesterday's low, but above the 18 SMA.  It is still within the trend lines that mark the expanding price pattern.  Lets zoom in to the 60 minute SPY chart.

SPY is clearly stopping when it gets above 177.   Its not exactly acting like resistance because of people wanting to take profits there.  The first time that was the case back in late Oct.  After that first time though SPY has gotten above 177 and just hung around.  If there are a lot of sellers at a level price tends to get rejected rather then lolly gag around.  The dip buyers have been doing their job, but rally chasers are totally absent.  I think it is going to take a news event that inspires people to buy to push price higher from here.  Every day that price stalls it increases the chance that short term traders will begin to take profits more aggressively.  We can already see a potential triple top forming, 

Both breadth indicators are still negative.  There were 100 new highs today.  We are losing momentum in that department.  If SPX closes below the 18 DMA then we are likely starting a pullback for real.  That seems likely to happen unless rally chasers show up soon.

Bob

A few interesting charts

There has been a serious lack of anything interesting to show on the blog for quite some time.  Here are a few things I ran across lately.

First up is the housing affordability index.

The rise in rates is seriously crimping housing affordability.  It is now at the worst levels for decades.  It is lower then it was at the height of the bubble.  This is likely to slow the housing market in the months ahead.  Will home builder stocks be affected?  Will the economy itself be affected?

Here is a look at the II bull/bear spread.

Source

The only time in this bull market the spread was higher then now was in 2011.  That preceded a near 20% drop.  The high spreads in 2010 also preceded sizable pullbacks including the flash crash.  That was quite a jump in the spread over the last few weeks.  People are definitely heavily long now.

This next chart suggests that hedging is at a minimum now.

Source

This chart is from Shaeffer's research.  They think that many money managers today use VIX call options to hedge their new long positions.  Notice the first part of the year when the green line would spike up with moves up in SPX.  That was also common last year.  In that mode it would seem to indicate it could be an indicator of hedging new long positions as Shaeffer's research suggest.  The relationship started breaking down starting with the May rally.   No longer is the green line going up on rallies.  The June pullback did not see a jump in the green line, but the last two pullbacks did.  I guess nobody was worried in June enough to hedge.  They were a little worried this fall though.  The current move up would seem to have very little hedging activity with it.  This goes along with the big move up in bullish sentiment in the prior chart.  Nothing can go wrong between now and year end so why hedge.

We have the second highest bullish sentiment spread in this bull market combined with what appears to be a very low level of hedging activity.  This does not guarantee that something will go wrong of course.  However, it does suggest that if something does go wrong and the market does sell off it could do so in a bigger way then many expect.

Bob

Daily update 11/11

I don't usually get into things not market related, but I will make an exception today.  I would like to thank all those who have served in the military.  I have a number of veterans in my family and I have a pretty good idea of the sacrifices made.  Thank you very much.

Today was a snooze fest.  I forgot on Friday that today was a quasi holiday as the bond market was closed.  Here is the daily SPX chart.

I connected the recent highs and lows and there is a bit of an odd pattern forming.  It kind of has an expanding triangle look.  The top line is nearly horizontal representing the stiff resistance at 1775 we have seen so far.  The bottom is opening up somewhat though.  Today did not tell us much as SPY closed every hourly bar within a few cents of Friday's close.  I think we will get some more information tomorrow.  Either rally chasers show up soon to send price higher or we will end up rolling over.   The internals are very weak so a prolonged trading range seems unlikely to me.  Those usually start with strong internals.  Breadth was marginally positive again and new highs were 126.
Not really enough strength to say we are about to break out. 

After the last FED meeting TLT, GLD and SPY all went down while UUP went up.  Since that time every ETF besides SPY continued their post FED moves.  SPY started to follow on Thursday, but came bouncing back on Friday.  Is SPY going to play catch up or just plain buck the trend?  I think we will find out pretty soon.

Chart practice has been updated with DFS the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Daily update 11/8

I expected a bounce today, but not that big, LOL.  Here is the daily SPX chart.

This is the third close above 1770.  The highest close was back in Oct.  Did today undo the damage from yesterday?  Personally I don't think so.  Breadth at the end of the day was 56% positive.  That is amazingly low for such a big move up.  It indicates very few stocks were leading the charge today.  The number of stocks above their 200 MAs actually dropped.  There were 115 new  highs and 55 new lows.  That is the weakest number of new highs and the most new lows while closing above 1770.  The internal strength is not there to give the market an all clear.  Lets look at the SPY 60 minute chart.

As you can see SPY completely crossed the channel and closed at the highs.  This chart shows some big green volume bars today.  This is a pretty mixed pattern though.  Lets look at the 195 minute chart.

On this time frame the volume pattern looks more like distribution since 10/30.  It looks like the bears might have a slight edge.

The internals definitely did not show the same strength that price did today.  I believe the push up started with traders buying index positions because of the short term over sold price.  There was no panic selling indicated yesterday so money managers probably were not interested in selling into weakness.  The weak internals all day kept the money managers on the sideline due to lack of strength to sell into.  That allowed traders to just keep on pushing price higher.  Now that price is back to the highs I suspect sellers will emerge again on Monday.  I am not sure exactly what price on the upside means we are going higher.  A close over 1775 is a must, but I am not sure that really means all clear.  It might need to be 1780 or so.  If we close down again on Monday then I think the pullback will be started for real.  I still want to see new highs under 90 though.

Chart practice has been updated with CCI the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

The market and sector status pages have also been updated.
Have a great weekend all,
Bob

Daily update 11/7

I think I might have gotten this one correct.  From last night's update "SPY retested its key reversal day high.  Market internals are weak.  There was a move from risk assets to more defensive stocks.  Gee, that kind of looks like a top to me.  Buyer beware."

They started selling the gap up from the start and continued all day.  Every single index in my daily watch list  ended significantly in the red.  Here is the daily SPX chart.

SPX closed below last week's low and the 18 SMA.  The volume increased quite a bit.  This is the second key reversal day from the 1775 area.  I think we will see some follow through given the weak internals I have been talking about for quite some time now.  Lets zoom in to the SPY 60 minute chart.

SPY broke down from the lateral channel it has been in for several days.  The next chart support I see is marked by the new green lines.  That comes from the circled price action and the Sept. high.
It may bounce back up to test the under side of the horizontal channel, but I think we will get into that support zone soon.  I think that will only provide temporary support.   When a pullback starts with the breadth indicators negative it is pretty rare to stop above the 50 DMA which is below the Sept. high at the moment. 

Sentiment surveys indicate market participants are heavily long.  The prevailing talk I saw in the media before today was that the market could only go up through year end.  I have seen a number of pieces by people making a bearish case that specifically said not until next year.  I believe that there is a very low level of hedging gong on.  Why hedge if the market can only go up?  That leads me to believe a pullback here could gather some steam as longs lock in profits rather then loading up hedges.   Will we see the 200 DMA before this is over?

There were two significant news events today.  The U.S. GDP came in much better then expected at 2.8%.  Some people speculate that the selling was because of tapering fears from the stronger data.
The other piece of news was the ECB lowering rates.  The first look at GDP is very unreliable and to me is meaningless.  I don't know if that was really the catalyst or not.  However, I find the ECB news to be very significant.  After 6 quarters of negative growth in the eurozone they had a slight positive reading in quarter two.  People were out proclaiming the recession was over.  Obviously that is not the case with the ECB lowering rates.  One of the keys to the expected profit growth for next year was a recovery in Europe.  That rug just got pulled out from under everybody.  Money managers all over were probably asking themselves what is the ECB worried about.  After all is said and done it is profits that count. 

There are a lot of things about this current situation that look like a bull market top.  There is rampant speculation to say the least.  Single digit junk stocks doubling and tripling in days.  People are speculating in Bitcoin like there is no tomorrow.  But wait there is more.  There is a company selling shares in athletes ability to make money from endorsements.  I mean really.  I find that totally amazing.  To top it off the Russell2000 index has a P/E of 87.  Yep, a true bubble valuation.  There is a very real possibility this is the final high of this bull market.  The price pattern is considerably different then 2000 and 2007.  However, I have always had this nagging feeling that this top would be hard to see from the price action.  The atmosphere sure feels like the top.  I guess we will see.

Bob

Daily update 11/6

Retest of key reversal day high with a mixed market.  Here is the daily SPX chart.

Leading the charge on the upside were utilities and consumer staples.  The weaker sectors were the QQQ, IWM and IYT.  This was clearly a move from more risky assets to defensive issues.  The futures ended the day right near where they started yet again on a gap up.  That indicates that rally chasers are missing in action.  Check out the SPY 15 minute chart.

SPY broke above the red line (.786 retrace line) and immediately popped up to test the key reversal day high.  You had to be really fast to catch that one, LOL.  At that retest the sellers stepped in and knocked it back down.  The rest of the day was a stalemate.

The breadth started out the day strong but ended barely positive.  There were 166 new highs which is  better then the last few days, but still well below 200.   Both breadth indicators are still negative.  Here is a look at the number of stocks above their 200 DMAs.

The pullback in May really whacked this chart.  Despite the higher highs over the last few months it has never recovered.  It is now diverging from price over the last few days.  Yesterday was quite a whack that was only partially recovered today.

What happens now?  Here is what we know.  SPY retested its key reversal day high.  Market internals are weak.  There was a move from risk assets to more defensive stocks.  Gee, that kind of looks like a top to me.  Buyer beware.  A close below today's low could set a pullback in motion.


Chart practice has been updated with AN the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Daily update 11/5

No upside follow through from the last two rally days.  Here is the daily SPX chart.

Price continues to stay within the range of the key reversal day.  Both breadth indicators crossed back negative today.  The flipping back and forth indicates we have entered into a consolidation.  The short term up trend is now over.  Here is a look at the SPY 60 minute chart.

The light blue lines mark the area where SPY has spent most of the time the last few days.  This is a narrow horizontal channel from 175.75-176.75.  Straying above or below that range has been met with selling or buying.  The last leg up was a very narrow upward sloping channel.  Now price has migrated to a very narrow horizontal channel.  What is next?  I did not mark the chart up, but there is a potential head and shoulders top pattern forming.  Do you see it?  It is kind of irrelevant at this point.  We already know from the weekly chart that breaking last week's low would likely be a fairly bearish short term event.  This morning we had another big red volume bar indicating a little more distribution.  I don't know how long it will be before we break out.  The longer we stay in this narrow range the bigger the break out should be. 

The new high data may be useful here.  Since May when new highs dropped under 90 the rallies were over and price dipped to the 100 DMA.  Despite the gap down this morning we still had 132 new highs.  The numbers are low for an uptrending market near the highs, but not low enough to signal high odds we won't make a new price high yet. New lows crept up a bit to 30 today.  That is a slight weakening of the internals. 

I mentioned the rapid rotation among the sectors yesterday.  Today's strength was in the NASDAQ index.  Despite most indexes being down the QQQ was up a bit. Unlike most days where the strong sector was up .5% or more the QQQ was barely up.  That may be another sign of slight weakening, but hard to say. 

Bonds have been selling off lately and today TLT was down considerably.  Is that a taper worry coming from strong ISM numbers?  I don't really know, but so far it has not really helped stocks much.

I had to laugh today.  I heard a guy on TV talking about the alarmingly low inflation data coming out of both Europe and the U.S.  The reason I was laughing was because I wrote in GLD and GDX 4/15

"I don't know what is going to happen here, but I think it is very important.  If gold has topped and broken down the most logical reason for that would be a deflation event is coming."

So to anybody watching gold the inflation data should be of no surprise whatsoever.  However, this leaves us with an important question to answer.  If inflation is falling as it appears, why are global interest rates rising?

Bob

Daily update 11/4

Very light volume bounce day.  Here is the SPX daily chart.

The heavier selling that was present the last two days was very muted today.  SPX tested the high from 10/31, but was unable to close above it.  Did sellers just take a break or are they done?  I have no idea at this point.  SPX is still closing within the price bar of the key reversal day.  Lets zoom in to the SPY 60 minute chart.

SPY closed above the .618 retrace level of this little pullback over the last few days.  The red line marks the .786 retrace level.  A break out above that line should retest the key reversal day high.  The blue line is an uptrend line from the low on Friday.  Since the two lines are coming together one will break before too long.  The volume pattern over the last few days shows 3 big red bars and two big green ones.  This is still inconclusive at this time.  Lets look at the breadth chart.

Both breadth indicators had marginal positive crossovers today.  There is not enough strength here to say the market is taking off again.  We had 147 new highs today.  That was better then yesterday, but rather low given today was the second highest close for SPX ever.  This is not enough strength to proclaim the market is going higher either.

The last two days started with sizable gap ups and the futures ended the day not far from where they opened.  So yes the market rallied both days, but it did not do it in a very convincing fashion.  Dip buyers were present, but it is not so clear there are people willing to push prices significantly higher from here.  There certainly has been a lot of rapid rotation among sectors from day to day lately.  Various sectors can be up or down big one day and reverse it the next.  That suggests the news flow is confusing investors.  There seems to be some strong sector or index every day that helps to keep the market up while some other sector or index is holding it back.  I suspect that before this market goes anywhere we need to get a day where everything is in gear together either on the upside or the downside. 

Chart practice has been updated with HON the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

Daily update 11/1

Odd day.  Here is the daily SPX chart.

SPX closed up 5 points, but breadth was negative.  QQQ and IWM even closed down on the day.  That seems like risk off.  There might have been some money moving to more defensive stocks.  The consumer staple ETF XLP was up and so were utilities.  Lets zoom in to the SPY 60 minute chart.

SPY now has a down trend line with three points of contact.  I put in a parallel line at the lows for a possible trend channel.  I also added a line connecting the lows we have.  If the market turns down again we will have to see if it reacts to either of those lines.  The volume pattern shows a couple of big green bars.  This was the first of the month and statistically that is one of the most bullish days of the month.  Not surprising we closed higher.  SPY closed above the 18 SMA, but has not confirmed an upside break yet.

The last two days have done some down side testing and found enough buyers to bounce from the lows.  However, the bounces have not been able to stay above the hourly 18 SMA yet.  The breadth has deteriorated at the same time.  Here is a look at the current breadth chart.

Both the McClellan oscillator and the 10 DMA breadth lines are now negative.  The number of new highs dropped down to 103 today.  That was less then yesterday's 133 and today was an up day.   The internals would seem to indicate the market may be weaker then it appears.  Lets take a peak at the weekly chart.

Last weeks blue bar was followed by a doji bar this week.  That shows indecision in an extended market.  Breaking this week's low should usher in more selling.  The bulls need to get the market back to new highs.  A confirmed break of the hourly 18 SMA would be a good sign the bulls may be taking charge again.  Lets see what the monthly chart looks like.

SPX ended Oct. above the upper channel trend line.  Breaking above a long term sloped trend line like that often is a sign of a blow off move and can be the end of the trend.  I seriously doubt this is a sign of acceleration.  If the market continues higher I would expect a creep up the upper side of the line.  Closing back below that line most likely indicates a move back to the lower line.

Chart practice has been updated with JOY the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

The market and sector status pages have been updated.

Have a great weekend all,
Bob