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Thursday, January 30, 2014

Daily update 1/30

Congratulations to all the AAPL poll responders that voted for it to hit 500 before 600.  Great call and it did not take long.

Over sold bounce started.  Here is the daily SPX chart.

SPX closed above the high of the last two days.  Volume was pretty good.  It was considerably higher then the first bounce attempt the other day.  Breadth was 74% positive which is not particularly strong coming from this over sold condition.  Lets zoom in to the SPY 60 minute chart.

SPY had a confirmed break of the 18 SMA this morning.  However, the volume was not particularly strong.  So far I would have to say this looks like a dead cat bounce.  We will have to see what happens if the market continues higher from here.  I will be watching for a break of that 18 SMA for a sign the market is rolling over.  That would be unusual to happen this fast as we have not alleviated the over sold condition yet.

This pullback created a very over sold short term condition.  This condition will commonly cause SPX to bounce back to its 18 DMA.  I set the 50 DMA as the target for this bounce because the 18 DMA is still above the 50.  It may get to the 18 or fall short of the 50.  We will have to see if some upside momentum kicks in.  Sometimes the second day of the bounce is bigger then the first as shorts really start to scramble.

So far this month we have had 5 down days with volume that was higher then the highest volume on an up day.  That is clearly distribution going on.  Unless volume kicks in on the upside we are likely going lower when this bounce completes.


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