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Friday, November 22, 2013

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.

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,

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.