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Thursday, January 2, 2014

Daily update 1/2

That was a different way to welcome in the new year.  The last time the first trading day of the year was negative was 2008.  Profit takers did not waste any time this morning.  I did not really see any particular bad news to cause the futures to be down at the start.  Here is the daily SPX chart.

That was quite the reversal from Tues.  The trouble with the market is it does big reversals sometimes that end up being totally meaningless as they are soon reversed.  We had several big downside reversals last year, but nothing serious came from any of them.  The really bad part is this causes people to relax and get complacent.  Then one day the market reverses and it really means something.  Reversals that come on the first of the month, quarter, or year have a bit better track record of persistence then other days.  Whether today was an important omen or not remains to be seen.  Follow through or the lack of it will be important.  There were only 97 new highs today which is rather low one day off of all time highs.  Lets zoom in to the SPY 60 minute chart.

SPY broke down through the 50 SMA early today and closed there.  This changes the short term trend to neutral.  The intermediate trend from the daily chart is still up.  Do the dip buyers show up tomorrow or will more profit takers rule the day?

In What will 2014 bring? I wrote "If there is trouble for stocks next year it is likely to come from outside the U.S.  Global economic growth has been slowing since 2011.  There are signs of stress in many emerging markets including China.  Those signs of stress have been mostly contained in their bond and currency markets.  Historically that is often where trouble starts before eventually affecting stocks.  Whether anything truly bad happens there remains to be seen.  The risk is real, but hard to quantify."  Lets look at the EEM daily chart.

EEM was really hammered on high volume today.  It is now down near the lows of the last few months.  Is it going to break down or find support again?  Was something that is going on in the emerging markets the reason for the sell off in U.S. stocks today?  I think this bears watching.

TLT continues to try not to break down.  Here is the daily chart.

TLT closed slightly above the lower trend line again on an increase in volume.  I don't know what is going to happen here, but it sure looks like a big move is coming.  I think what this thing does is going to be important for a lot of other assets.  I do hope I am still awake when it decides what to do.

There was clearly money being taken off the table today.  Will dip buyers rush in tomorrow or will the profit takers rule the day again?  Last year the market rallied on hope.  All bad news was a reason to buy.  All good news was a reason to buy.  Will that same mantra apply this year?  I guess we will see. 

SPY needs to get back above the hourly 50 SMA to get bullish again.  There is potential support from the SPX daily 18 SMA at 1812 and our old key support line at 1808.  Breaking 1808 would indicate a failed break out from a multi week consolidation.  Those tend to have short term bearish implications.


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