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Tuesday, March 11, 2014

Daily update 3/11

SPX followed the script again.  From last night " SPX closed fractionally lower, but pretty much as expected.  If SPX follows the script tomorrow should be down a little more significantly."

Here is the daily SPX chart.

Here is where the script changes.  The last two outside days marked by the yellow arrows had the second day close below the 18 SMA.  We did the closedown, but SPX is still well above the 18.  In the prior two cases the third day was different.  One was a big up day and the other was a big down day.  The only common denominator was a big day.  Will we see that this time?  SPX broke below 1868 during the day, but bounced some at the end of the day to close just marginally below it.  Despite SPX being only one point below the all time intraday high we only had 110 new highs.  That is abysmal.  This market lacks buying enthusiasm.  That is the kind of new high numbers often seen at bull market tops.  Lets zoom in to the SPY 60 minute chart.

SPY ended the day below the 50 SMA, but does not have a confirmed break.  It was just a few cents above the 3/4 big gap up opening price (186.75) before bouncing.  I would expect a bunch of stops somewhere below that 186.75 from the people that bought the break out over the last few days.  If we get much below that we should accelerate down.

The bears fired a shot and we closed slightly below the key 1868 level.  However, the bulls could still save the day tomorrow if they show up.  If not I think we head down to the more important 1848-50 area.  Since we spent so many days at the highs it has less odds of holding then if we would have tested it right after the break out.  The market soaked up a good bit of buying fuel that will be under water if we pullback now.  That is a recipe for a break out failure.  Especially since the Dow still has not made a new high. 

Copper prices have crashed over the last few days.  This is related to problems in China.  Here is an article on that situation China's credit markets under pressure .  I started reading about problems there last summer.  It has only gotten worse.  Here is another article on their debt problem Fitch says China credit bubble unprecedented in modern world history . It seems their debt problem dwarfs our little subprime debacle from 2008.  I think you will hear a lot more about this as the year goes on.  It could be real trouble for the global economy.


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