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Wednesday, March 19, 2014

Daily update 3/19

Another negative reaction to more tapering by the FED.  The biggest reaction may have come from something Yellen said in her press conference.  However, the market bounced at the end of the day making back a lot of that move.  Here is the daily SPX chart.

SPX tested the .786 retrace line again early this morning, but failed to find buyers up there.  It drifted around until the FED announcement.  SPX closed right on the 18 SMA.  There were 121 new highs today.  The numbers remain very low.  FED day reactions are sometimes reversed the next day and sometimes follow through for days.  We will have to see what tomorrow brings.  At the moment this chart looks poised to continue down.  Lets zoom in to the SPY 60 minute chart.

SPY never went above the price it was at just before the FED announcement.  Often it trades up and down.  Not this time.  That leads me to believe we will follow through on the down side.  SPY ended the day below the 50 SMA, but we do not have a confirmed break yet.  Here is a look at the current breadth chart.

After briefly crossing positive on the over sold bounce both the 10 DMA lines and the McClellan oscillator had negative crossovers again.  Both of these indicators were weak on this retest of the high.  Downside follow through here should see more selling pressure then the last pullback.

Tomorrow is key for the bulls.  If we follow through on the downside I think we go much lower.  The internals have been weak for a while.  I think some people hesitated to sell in front of the FED meeting in case the bad weather and poor econ data caused the FED to pause the taper.  Since that did not happen there may be more willing sellers now.  A close below 1848 would be a third SPX break out failure this year.  I think that would be the charm for bears.

Here is an interesting article on China China's "Minsky Moment" Is Here, Morgan Stanley Finds.  I believe China has all the earmarks of a major financial crisis about to happen.  If that is the case it will slow the global economy considerably.  I suggest everybody keep abreast of this situation.  It could easily be the biggest driver of stock prices this year.


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