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Tuesday, March 18, 2014

Daily update 3/18

Over sold condition resolved.  What happens now?  Here is the daily SPX chart.

SPX rallied back to the .786 retrace line.  If it is going to make a lower high this is usually the place where it stops.  Volume was light again.  Early this morning the futures were down until Putin said he did not want to split up Ukraine.  The futures popped and rallied all day.  Now we have been here before.  We made a new all time high on Putin saying he had no plans to invade Ukraine.  That rally failed.  Will this one stick?  There were 138 new highs today (only 33 SPX stocks).  While better then yesterday this is still awfully low this close to all time highs.  Here is a look at the SPY 60 minute chart.

After gapping up again today the market spurted a little further the first hour.  SPY ended the day right at the high of the first hour.  This is a problem chart.  It clearly closed above the 50 SMA, but is it clearly confirmed?  There was one bar that closed a few cents above the high of the break bar.  That is a confirmation, but the closing price for the daily bar was right on the high of that first bar.  Technically we have a confirmed break of the 50, but just barely.  The market struggled after the first hour just like yesterday.  The initial surge was probably short covering from people that didn't cover yesterday or shorted in the afternoon.  I think the market is still struggling for buyers up here.

The two day rally has taken care of the over sold condition.  Will buyers show up to push price higher?  One oddity today was that TLT was up.  Here is a look at it on the daily chart.

TLT pulled back the 6 SMA and rallied the rest of the day.  This chart looks bullish to me like it wants to break out above the recent highs.  It seems unlikely to me that both SPX and TLT are going to rally together.  I think SPX is going to be the one that turns around.  I guess we will see.

Tomorrow is the FED announcement.  It is widely expected they will continue with the taper action. The FED doing what is expected sometimes creates a stronger reaction then one would think.  I am not going to try and predict what happens tomorrow 

We still have a small matter of whether there are buyers up here willing to push price higher.  I don't really like how SPY rallied the first hour both days then traded mostly sideways in the afternoons.  Will it make a new high or reverse course from a lower high?  I am pretty sure it is going to fail from somewhere up here.  The number of new highs is just too low to sustain a rally.  I will be watching for a drop back below that SPY hourly 50 SMA to indicate the bounce is over.  If SPX closes back below 1850 again I am pretty sure it will spark more selling then the last time.  That would be the third failure.


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