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Thursday, January 23, 2014

Daily update 1/23

Back down through 1838 again.  What a tussle this market is having.  Here is the daily SPX chart.


SPX closed below the 18 SMA, but above the lower trend line.  There was a minor penetration of the trend line during the day.  We had an outside day then an inside day then a close below the outside day low.  We had that exact combination starting on 1/9.  In that case the market rallied strongly the next day.  Will it be different this time?  Volume was heavy again today.  We have had high volume up days and high volume down days this year.  The market seems to be churning in a trading range. 
This kind of action can be indicative of a turning point.  It is certainly likely to lead to a big move when the final direction is decided.  Lets zoom in to the SPY 60 minute chart.


We have the possibility of a triple top going back to Dec.  However, price held the 200 SMA at the close.  Will this embolden bulls for tomorrow?  This is certainly an ugly chart if you like trends.  How do you predict what happens next on a chart like that?

SPX is at a key lower trend on the daily chart. but we do not have any kind of short term over sold condition.  Will the bulls try to get a bounce going anyway?  They have been trying to get SPX to go up for two weeks now.  Do they still have the desire to push it?  It is all about how people feel about things.  I don't know how to quantify that or predict it.  The down side is a different story.  If we break below that lower trend line on the daily chart I am pretty sure people will feel less bullish and will be inclined to take some profits.  We have lots of potential support levels below, but they may not amount to much if the selling gets going.  We have all heard how resilient this market is.  The funny thing about resilient markets is that the resiliency always ends at some point with a big sell off.  Those pesky humans pile into a market slowly, but always want to cash out at the same time. 

I have talked about how the volume in the SPY 195 minute chart looks like it has been largely in distribution mode since last Nov.  I saw this interesting comment from Bespoke's article Futures vs Cash: The Disconnect Is Night And Day

While it feels as though the weakness during the regular session is a new trend this year, the reality is that ever since mid-November, the regular session has been flat to negatively biased, while the gains have been coming outside of the regular trading session.  Selling during the regular session would be considered by some to be a bearish indicator from a technical perspective as it signals that investors are selling into strength.

As the trading range has progressed this month the volume is picking up.  That means emotions are picking and the release of those emotions is going to cause a big move.  This is no time to fall asleep at the wheel.  I don't think a bounce tomorrow means it safe for the bulls.  They really need to see that SPX can climb above 1850 and stay there.

Bob

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