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Monday, February 3, 2014

Daily update 2/3

So Feb. continues to go as Jan. went.  Here is the daily SPX chart.

On Friday I said it would probably take bearish news to break down below the key 1775 support level.  We got that news with a bigger then expected drop in the ISM manufacturing number.  Volume increased dramatically today.  The sell off also triggered another over sold buy signal.  The last one on 1/27 did not get much of a bounce.  This one might do better.  It looks like we are in the process of making a volume climax low this time. SPX closed a bit below the green line representing the Nov. low.  That line was the last important support line above the 200 SMA.  I added a blue line that corresponds with the Sept. high that could provide some support.  I view that as minor support though.  Breaking the 100 SMA usually leads to a trip to the 200 SMA.  With the market this over sold in the short term it is hard to say whether that will happen this time or not.  We might find support around the Nov. low here.  We are already about 75 points below the 18 SMA.  That is a majorly stretched market.  Lets have a look at the weekly VIX chart.

The VIX climbed above the weekly 200 SMA today.  This is the fifth time it has done that since the rally off the 2011 low began.  Every other time that happened the VIX ended the week back below that MA and the market began a rally back to new highs.  Will it be different this time?  We obviously don't have the same back drop we had the last two years where the market roared to the upside out of the gate.  With Jan. down this year I am inclined to think it will be different this time.

The VIX spiked up over 21 and the TRIN ended the day over 3.  That combination has been known in the past to entice buyers.  With the market being oversold in just about any short term measure you want to look at a multi day bounce might not be far off in time here.  However,  I don't know if the 200 SMA will act like a magnet or not.  We will just have to see what develops.


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