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Friday, January 31, 2014

Daily update 1/31

It is official.  The January barometer was negative.  I am sure most have heard the saying that as January goes so goes the year.  That is not 100% of course.  It works better on the upside then the down side, but definitely has some validity.  Even on up years when Jan. is down most of the time stocks are below the Jan. low sometime during the year.  Here is the daily SPX chart.


We gapped down to test the recent lows.  Despite extremely negative breadth the dip buyers were there to support 1775 again.  The market rallied right from the open until the afternoon.  I think the last hour sell off was end of month related.  That happens a lot, but rarely seems to follow through on the next trading day.  We now have a short term triple bottom at 1775.  I believe the dip buyers will just keep buying there until the market bounces.  The 100 SMA is right here and it caught every pullback last year.  If something works people tend to keep doing it until it stops working.  So my guess is we bounce next week.  Now if that bounce makes a lower high and we come back down to 1775 then that support may not be there.  Lets zoom in to the SPY 60 minute chart.


Quite the sloppy looking chart.  Plenty of big red volume bars.  Most of the price action is near the highs of the pattern not the lows.  It seems to bounce pretty quickly when it gets to the lower end of the range.  If it gets down to that lower area and does not bounce, then look out below.  Otherwise this looks destined to go up to me.  I have seen action like this around my over sold buy signal before.  If the buy signal is not going to make a low most of the time the market keeps going down right away.  The fact that we have a triple bottom combined with that buy signal I think we have really good odds of a bounce.  It seems likely to take really bearish news to break this down at this point.  That could always happen, but can't be predicted.

The market and sector status pages have been updated.  Have a great weekend all.

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.