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Thursday, December 12, 2013

Daily update 12/12

Downside follow through confirms the trend flip to down from yesterday.  Here is the daily SPX chart.

Well, well, well.  Look where we ended the day.  Right on the key 1775 level.  It sure looks like a totally random market to me, LOL.  SPX has a blue bar indicating it is below the lower Bollinger band and is extended.  Since it is right on key support that may bring out some bargain hunters.  It penetrated 1775 earlier in the day and then bounced back pretty good.  However, going into the close it sold off again.  It is possible that was all the bounce we get there.  Pretty hard to say.  Trading outside the Bollinger band is a double edged sword.  It can signal time for a reversal or that the market is accelerating in that direction.  Here is the SPY 60 minute chart.

More big red volume bars today.  SPY is still in distribution mode.  There were 260 new lows and only 29 new highs.  That seems like an awful lot of new lows just 3 days off the high close for SPX.
This has been a recurring theme since May.  Big spikes up in new lows.  I know the trend is up and all, but the action in new lows is not bullish.  The market is in the topping process.

One possible reason for a market top was in the USA Today money section today.  The title of the article was "Profit warnings reach peak".  The ratio of negative to positive earnings pre-announcements is 10.4 to 1.  That is way higher then the previous record of 6.8 to 1 back in the first quarter of 2001.  You might recall that 2001 was when the 2000-02 bear market really got going.  The recession started in the second quarter of that year.  Lets recap.  We have weak market internals, ultra bullish sentiment and declining fundamentals.  That is exactly what bull market tops look like.  It does not get any clearer then this.

Tomorrow morning is a tough call.  We have a modestly over sold condition that could cause a bounce.  However, we have seen pretty aggressive selling the last two days.  SPX has been above 1800 twice and failed to find buyers.  What besides a new all time high would be an all clear sign for bulls?  So I don't have a price level on the upside at the moment.  It will have to be something in the charts that signal the bulls are back in control.  In the mean time it seems like everybody else is selling rallies.  It might be a good idea to join the crowd for now.  There is pretty good evidence we are in a pullback.  Just a reminder that all pullbacks since May have touched the 100 DMA before they ended.  Is there any reason this time will be any different?  The recent high had weaker internals then the other highs.  If anything is different it seems like it could be that we don't stop at the 100 this time.   If taper fear is driving this move down I doubt we see a big rally until we get to the FED meeting and find out what they do.  The exception to that would be if they signal no taper before then.



Anonymous said...

All we need is a match!

Anonymous said...

Could someone explain to me how the FED does not do some form of taper at the next meeting and maintain any credibility. I sure don't see it.

Bob, The data is all lies, has been for 5 years, they can't stop QE!


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