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Thursday, November 14, 2013

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.


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