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Friday, February 7, 2014

Daily update 2/7

Now that is an oversold bounce!  Here is the daily SPX chart.

SPX has a green bar and it closed just below the 18 SMA.  Both breadth indicators have positive crossovers today.  The oversold condition has been alleviated and the market is now neutral.  Volume was higher then yesterday and the breadth was slightly stronger also.  I think this should have pretty much flushed out the weak hand shorts now.  Lets take a look at the SPY 60 minute chart.

We ended the day in the area of the late Jan. high.  There was clearly resistance there back then.  Is it still there now?  Beats me.  SPY volume was higher then yesterday so some people were piling in.  The 18 SMA has crossed above the 50.  I think the 50 SMA is a good bull/bear line for now.  After the explosion the last two days any dip that stays above the 50 should be a buying op.    Check out the weekly chart.

That upper trend line is a line connecting the earlier tops since 2009.  It was resistance for months last year before SPX broke out to the upside.  This pullback has come back to test that line.  SPX responded with a bullish looking high volume hammer candle.  If we close above this weeks high next week that would be technically bullish.

We got the oversold bounce that put the market back into a neutral state.  What happens now?   This is quite the dilemma to me.  We got two 90 percent down days that indicate investors are very much on edge.  The Jan. barometer was down and everybody knows that.  We had a Dow theory non confirmation in Jan. as the transports made a new high while the Dow did not.  The Dow has formed what looks like a three peaks and a domed house topping pattern.  All that should be bearish.  On the flip side we have the VIX spike that has led to new highs every time it has happened over the last two years.  That spike resulted in a potentially bullish weekly chart.  I think there are enough signs of trouble that I don't think SPX will go significantly above the Jan. high.  However, I can't rule out that VIX spike being enough to do a retest of the high.  I guess we buy dips as long as we stay above the SPY hourly 50 SMA.  Just watch for a bearish change of character again as sellers could come back.

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


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