Daily update 4/30

It only took four months to get 4 points.  The Dow made a slight new closing high.  Time to celebrate?  Here is the SPX daily chart.

SPX closed at a slight new high for the current bounce, but did not make a new all time high close.  The rally started after the FED announcement today.  We have seen many of the moves after a FED announcement reversed the next day.  I actually do not understand why that is.  It is just a phenomenon I have witnessed time and again.  I guess we will see if that is the case this time or not.  There were only 103 new highs today.  Those numbers continue to be pitiful.  Surprisingly there were 34 new lows.  That is really odd at the highs.  If we turn down that could be important.  We are back in the price area first reached in early March.  Two months to go nowhere.  Now that it is May is it going to continue up or turn back again?  Lets zoom in to the SPY 60 minute chart.

After the FED meeting we finally got the upside confirmation of the 50 SMA break.  However, we are now in resistance.  Not much more to say about that chart. 

There are obvious divergences with many important indexes.  Does it matter?  It is now May and everybody knows about the sell in May thing.  How will that play out this year?  Every year since 2010 there has been a multi week pullback starting in April or May.  In 2012 and 2013 we bottomed in June.  In 2010 the low was in July while the 2011 low was in Oct.  With the low number of new highs and many important lagging indexes it seems pretty hard to believe there won't be a more significant pullback in SPX then we have seen lately.

The margin debt data came out for March.  It seems the sell off in the momentum stocks lowered the debt by about $15 billion from $465 billion.  This may be significant.  In 2000 and 2007 the drop in margin debt marked the price highs.  Time will tell if it is the same this time.

Sellers have come out of nowhere for the last two months in this area.  I have no idea if they are done or will strike again.  I will be watching for a break of the SPY hourly 50 SMA for sign we are headed lower again. 

Bob

Daily update 4/29

All but two Tuesdays have been positive this year.  I wish somebody would have sent me the memo that everybody else got at the first of the year outlining no selling Tuesdays.  I have seen this publicized a couple of times now so it will likely stop happening before too long.  Here is the daily SPX chart.

SPX tested 1880 all day and found nobody willing to push prices higher.  Despite nearly all indexes being up today the breadth was only 58% positive.  On the 4/22 thrust day we had 71% positive.  This was not a particularly strong day.  It was also clear we still have resistance here.  Enough companies have reported that if we were going to break out I think we would have by now.  Lets zoom in to the SPY 60 minute chart.

We had yet another gap up today.   However, this being Tuesday it did not sell off.  SPY got above the 50 SMA first thing and stayed there all day.  However, it never got a confirming close.  If the market is going to continue on in the direction of the MA break you usually get that confirmation in the next couple of bars.  Since that did not happen I think the odds favor this reversing back down.  An hourly close below that 50 SMA should put the bears back in control.

There is a slight, but perceptible VIX divergence between now and the 4/22 high.  That combined with the weaker internals today might also give the bears an edge.  Tomorrow is FED day and even though they will likely taper another $10 billion as everybody expects there could be some market volatility.

SPX closed very close to where it was on 4/22.  However, some important divergences seem to be developing.  We all know that IWM and QQQ have been showing a lot of relative weakness.  Between 4/22 and now we can add IYT, XLF, and SMH to that category.  These are important ETFs for market health.  I still cannot see a real all clear level here on the long side.  The market looks like it is getting weaker to me.

Bob

Daily update 4/28

The selling into strength continued.  However, the buying of the dip also continued.  Here is the daily SPX chart.

I marked today with a yellow arrow and a question mark because SPX came up fractionally short of another outside day, but SPY made one easily.  I don't know if it has the same bearish intent the other days did or not.  SPX dipped below the 50 SMA before buyers stepped in and pushed the market back up through it.  There was a lot of volume today for some reason.  Are emotions picking up a bit?  SPX closed above the 50 DMA and the 18 SMA, but below Friday's high.  Lets zoom in on the SPY 60 minute chart.

SPY tried twice today to get across the 50 SMA, but failed to do so.  Volume was elevated all day which is quite unusual.  The last two days we have a little bit of a mix with big green and red volume bars.  The pattern is not very clear looking.  However, so far price is making lower lows and highs.  Until that changes we have to assume the bears are slightly in control. 

The bounce came as IWM hit its 200 DMA and SPX got slightly below its 50 DMA.  The dip buyers are clearly still out in force.  However, the people selling into strength are also still around.  Exactly how big of a hammer do they have?  If dip buyers dry up will the rug be pulled out from under the market?

Most every Tuesday has been up this year, but that has been somewhat widely publicized by Bespoke now.  I don't know if that will continue to work or not.  The bulls still need that confirmed upside break of the SPY hourly 50 SMA and the bears need SPX to break below the 50 DMA.  In between it is slop.

Bob

GLD and GDX 4/25

These charts look like they are trying to make a higher level double bottom on the daily.  Check out the charts.

If they succeed a test of the high should be in the works.  The risk reward looks pretty good here.

Bob

Daily update 4/25

I ran across an interesting tid bit and forgot to put it in last night.  Check out U.S. Warns Money Managers of More Russia Sanctions .  For those pressed for time here is a snippet.

The Obama administration told asset managers last week that it was planning additional sanctions against Russia over the conflict in Ukraine. Officials from the Treasury Department and the National Security Council met in Washington with mutual-fund and hedge-fund managers, according to a person who attended. Their comments sent a message that more sanctions are on the way and that investors, if they were concerned about the impact, should manage that risk, said the person, who asked not to be identified because the discussions weren’t public.

You are a money manager of your own finances.  You have been warned.  Manage your risk.

The outside day warning worked again.  Here is the daily SPX chart.

SPX closed below the low of the outside day which is supposed to set a new short term trend.  That was not the case back in Jan., but for the other three cases it was.  I suspect that will be the case this time.  SPX closed just above the 18 SMA as the bulls came out to support the market in the afternoon.  As with all turning points follow through is key here.  The bears fired a shot, next week we will see what the bulls response is.  The 18 and the 50 are pretty close together here.  If the bounce is going to continue we should be up and running on Monday.  Lets zoom in to the SPY 60 minute chart.

SPY is attempting to hold the 200 SMA.  We got a confirmed break of the 50 this afternoon.  That increases the pressure on the bulls to make a stand.  Volume was not especially heavy today, but heavier then yesterday.  That adds some validity to the move.  I want to show the NDX tonight.

NDX has a potential head and shoulders top.  The current bounce appears to have failed at the 100 SMA.  The neckline and the 200 SMA are in close proximity.  That should be key support. Today it is showing weakness that looks like there should be follow through on the down side to the 200.  This was about the only stock index I know of that was showing a positive divergence with the Dow and SPX in March of 2009.  This is a very important index watched by many people.  What happens here is extremely important.   The next chart is the weekly SPX.

We have 2 gravestone doji bars in the last four weeks.  Both were on increased volume.  That looks a little bearish to me.  Lets take a look at the TLT daily.

TLT attempted to break out above the key reversal day high, but failed to stay there.  That leaves a gravestone doji on a retest of a key level.  This chart is a bit suspicious on the long side, but it still needs to get below the key reversal day low to be bearish.  I found this interesting cycle chart of 30 year interest rates.  Check it out.

Source

This is a look at a 93 week cycle active since 2000.  I have to say it lines up pretty well.  Are we in for another big move in rates.  Going down into the line should mean a turn up if it is going to work again.  Combined with the suspicious looking TLT daily chart I could see that might happen.  As I warned the other day if rates rise again watch any rate sensitive stocks you own.

For Monday the bulls need to get a confirmed break of the SPY hourly 50 SMA on the upside.  The bears need to get SPX to close below the 50 DMA (1858).  In between we are in limbo on whether the market has really turned down or not.

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

Bob

Daily update 4/24

I guess even an AAPL earnings beat was not enough to conquer resistance.  Here is the daily SPX chart.

SPX earns another yellow arrow.  As a refresher, those arrows mark the outside days we have had this year.  As you can see none of them were short term bullish.  The last three led to multi day pullbacks.  I find these days very curious.  They all happened around relative highs.  They are very rare in the index.  I have been doing this a long time and I have never seen anything like this.  We have had enough upside gaps that we should probably be 100 points higher just on the gaps this year.  I think this market is extremely heavy and is just sucking in the last buyers.  Here is the SPY 60 minute chart.

SPY closed right at the 18 SMA.  The outside day happened in the first hour.  How odd.  This chart looks ready to roll over to me.  We still have not gotten a confirmed break of the 18 though.  The bulls have been holding prices up, but we clearly have significant resistance here.  Apparently earnings so far are not good enough to inspire people to push prices higher. 

Do we get a confirmed break of the hourly 18 SMA tomorrow or do the bulls try to push it higher again?  A confirmed break would be an hourly close below 187.44.  You are on your own on the long side here.  I see no level that is safe.

SPX has an apparent triple top forming on the daily chart.  Price tightened up in March then expanded in April.  That is usually associated with a meaningful reversal..  I have to think that a pullback here will be significant.  Stay tuned.

Bob

Daily update 4/23

A little profit taking in SPX, but not too bad.  IWM, QQQ, and IBB were down considerably more.  Here is the daily SPX chart.

The move down may have been small, but the volume was nearly as heavy as yesterday.  A noticeable drop in volume would have looked more bullish.  This indicates there were quite a few profit takers today, they just did not overrun rally chasers.  Lets take a look at the SPY 60 minute chart.

SPY sold off a bit early in the day, but that low held.  Price settled in to the 18 SMA as support.  This looks similar to the pattern back around 4/3 where the market gapped up the next day and sold off hard.  SPY is near all time highs, and still stretched away from the 50 SMA.  That makes buying above yesterday's high seem pretty risky.  The futures are up on AAPL earnings tonight so a gap up seems likely.  With QQQ and IWM much weaker then they were back at the high in early April people may not be in the mood to chase that higher.  May is right around the corner.  It has to be really difficult for money managers to put money to work now.  This is tricky up here, be careful.  I think a break of the 18 SMA would be a good sign the down side is kicking in again.

This is kind of odd.  Check out the Nova/Ursa ratio chart.

This chart is not updated for today yet.  The drop in the indicator back below zero was from yesterday.  On a strong up day that seems odd.  Notice the 14 DMA.  It did not show the strength into the high earlier in the month or now that it showed into peaks all last year.  It has been declining ever since the early March high.  The last pullback saw a very negative reading which has not been even close to being matched on the upside yet.  Notice how that was not the case before March.  Before that downward spikes were matched with bigger upward spikes.  This looks similar to the pattern from the fall of 2012.  I don't have the chart handy, but there were three peaks between Sept. and Oct. in SPX that led to the bigger pullback in Nov.  The 14 DMA was declining on each of those peaks just like it is now.  I think this means traders are quite hesitant here to pile in.  Another caution sign.

Bob

Daily update 4/22

Up to where the rubber meets the road now.  Here is the daily SPX chart.

SPX got slightly above the March intraday high before stalling through the afternoon.  There was a bit of selling going into the close.  That left SPX right at the .786 resistance level.  There were only 28 SPX stocks making a new high today.  Those numbers continue to be weak.  Breadth on the other hand was very strong at 71% positive.  We now have a slight overbought condition in the area of all time highs.  I wonder how that is going to work out with IWM and QQQ lagging so badly.  Lets take a look at the SPY 60 minute chart.

SPY shot up at the open, but stalled once SPX got above the March high.  It sold off in the afternoon and ended with a confirmed break of the 6 SMA.  First time that has happened since this bounce started.  Will there be some more profit taking or will the bulls step in and buy again?  SPY is now pretty far away from the 50 SMA and the MAs are still in a bearish formation.  It seems kind of risky going long here.  I guess we will see if people hold their nose and buy or not. 

SPX failed to conquer resistance today and is short term overbought.  Do people that have been buying this bounce hold em or fold if we get a little selling pressure in the next day or two.  Since the late day pullback was the first selling that lasted more then a few minutes it is a bit hard to say.  This move seems to be nothing but a technical bounce.  Those can reverse completely if there is no fundamental reason for people to hold on.  Is the selling in the momentum stocks over or not?  I don't know how to answer that question.  My gut feeling is that there is more to come.  I still do not believe the market is really safe for longs until IWM and QQQ make new highs.  If we continue the selling in the morning I will be watching that hourly 18 SMA.  Does it bottom above it or break below it. 


I constantly hear the pundits talk about how corporate balance sheets are in the best shape ever.  I wrote a post quite a while back that showed that was not true as corporate debt had increased significantly.  The pundits are simply talking about cash.  Check this out.

When looking at corporate debt relative to fixed assets we can see they are more levered now then at any time since 1953.  In fact it looks like the leverage is about double what it was in 1982.  I can't say whether this is a serious problem or not, but are corporate balance sheets really in the best shape ever?

Bob

TLT 4/21

Last Thursday TLT had a key reversal day to the down side.  Will there be any follow through?  Lets take a look at the monthly chart.

TLT broke down from a sloppy head and shoulders top last year.  The current bounce has retraced back up to the area of where the slanted neck line started to form.  TLT also got pretty close to touching its 18 SMA.  This is an area of possible resistance.  TLT is still clearly in a bigger picture bear market.  Is it possible the oversold bounce is coming to an end and the downtrend is about to reassert itself?  Lets take a look at the daily chart.

We can see that TLT has been in a short term uptrend since Jan., but it has really struggled with the 109 area.  The neckline low I mentioned above was 109.69.  That would seem to explain the resistance we have seen in this area.  The daily chart looks corrective to me rather then an impulsive move up.  Since the first close above 109 on 2/3 the chart looks more like a top then anything else.  I don't think it would take much to get TLT moving on the down side again.  Should that happen there will likely be a reaction in stock market land.  The rate spike last summer caused sizable pullbacks in rate sensitive stocks.  Even SPX dropped a bit.  The DJ15 utility index also had a key reversal day on Thurs.  That indicates that even though it has been one of the strongest indexes this year it would probably succumb to a rate spike.  Homebuilders and REITs were significantly affected last year.  The broad market is in a much weaker position now then it was last May when that spike started.  I am not sure what another rate spike would do to SPX.  Would money come out of bonds and go into stocks or would money come out of stocks as well because of higher rates?  Something to watch out for if TLT picks up speed on the downside.

Bob

Daily update 4/21

Very low volume push slightly higher.  Here is the daily SPX chart.

I put in the .618-.786 retrace zone.  It looks like we ended the day about in the middle of it.  I see the top line also corresponds with some prior highs from back in Feb. and March.  This might be very stiff resistance.  There is the potential for a very sloppy head and shoulders top forming here.  It is so sloppy I didn't label it.  I think it is pretty clear that if we turn back down we are likely to do so strongly.  SPX bounced off the 50 DMA, made a lower high, then bounced off the 100 DMA.  If we make another lower high I would expect it to break down through the 100 and head to the 200.  The relative weakness in the COMPX and Russell2000 would seem to back up that idea.  Lets take a look at the 60 minute SPY chart.

Even though the market crept higher this really looks more like a consolidation at the highs forming.  Whether that turns into a springboard for higher prices or a reversal remains to be seen. Most people will be back tomorrow so we should get a better look at how they feel about this price level.  With the 50, 100, and 200 SMAs in downtrend order a confirmed break of the 18 should be a signal we are headed lower again. 

One look at QQQ and IWM makes it pretty hard for me to believe this market is getting ready to break out and head higher.  I guess we will see, but don't be surprised if it turns again.  Sellers have showed up out of nowhere in this area with considerable conviction before.  We have had no selling pressure on this bounce yet.  What happens when we do?

Bob

Daily update 4/17

A little more upside, but some profit taking into the close.  Here is the daily SPX chart.

SPX closed higher today which confirms the intermediate trend flip to up.  However, this really looks pretty shaky.  Sometimes at important turning points it will flip back and forth some before the big move starts.  At this point a close back below 1858 will flip it back down again.  That is not much cushion.  Breadth was 57% positive and there were 129 new highs.  Not a lot of strength in the internals.  Here is a look at the SPY 60 minute chart.

SPY closed below the 6 SMA for the first time since this bounce began late in the day.  After the last bounce that was the end of the rally and was the start of another dump.  Is that going to happen again? 

Now that a little profit taking came in at the end of the day we may finally get a test of this bounce next week.  The COMPX and the Russell2000 are both still below their 100 DMAs.  They were leading indexes all last year.  They could easily drag down SPX if they resume their slides.  Like last night the early warning sign for SPX is the 18 DMA (1858).  The more important level is the 50 DMA (1851).

I don't know what is going to happen next week.  The SPX daily chart looks really unstable to me and we could see another sharp reversal to the downside.  I don't know what to tell you on the upside.  I want to see some selling pressure come into the market and make sure it does not collapse.

The market and sector status pages have been updated.  Have a great weekend all.  Happy Easter to those that it applies to.

Bob

Daily update 4/16

The bounce continued today thanks to another big gap up.  Here is the daily SPX chart.

SPX closed slightly above the 18 SMA.  This turned the trend indicator back to up.  That needs confirmation with a higher close.  This is a very marginal flip.  A close back below 1857 tomorrow would turn it back down.  Breadth was extremely strong at 77% positive.  However, new highs were only 102.  My guess is today was mostly about end of day traders covering shorts after yesterday's bounce and the big gap up this morning.  This is really just a 1.5 day bounce since it started yesterday afternoon.  Since the key reversal day on 4/4 this market has become unstable.  It is changing directions both ways very suddenly.  Big players are moving money around.  Something is afoot.  Lets take a look at the SPY 60 minute chart.

SPY stopped at the 200 SMA.  It is now well away from the 18 SMA so it pretty extended.  The 50, 100, and 200 MAs are all in downtrend order.  Buyer beware.

Here we are with SPX back in the area it has struggled to find buyers all year.  The technical position is the weakest it has been at this level.  Are people going to pile in here?  I don't see how any money manager can put money to work on the long side here.  The intraday volatility is crazy.  It is only two weeks to sell in May.  I know I would not be buying here.  It may even be tempting for some of them
to take some money off the table.  At any rate this bounce is untested.  We will have to see what happens when some selling comes into the market.  Don't be surprised if it turns down violently yet again.

I still think SPX, IWM and QQQ all need to make new highs before we can say the market is safe for longs.  There is just too much technical damage.  For tomorrow I will be watching the 18 DMA (1857) as an early downside pivot.  For the less nimble the 50 DMA (1848)  might be better to watch.  This could turn out to be a great short op.  On the long side I have no idea.  Until we get some kind of intraday sell off and don't fall apart it is hard to say we are going higher.


Bob

Daily update 4/15

Strange day.  Up, down, up.  Here is the daily SPX chart.

SPX closed above 1840, but not very strongly.  Breadth was 58% positive which was weaker then yesterday.   Since the all time high day we have had 2 down days, 2 up days, 2 down days, 2 up days.
What happens tomorrow?  Does the pattern repeat with 2 down days or does it break.  There were 62 new highs and 54 new lows.  That was the most new lows in this pullback.  Lets zoom in to the SPY 60 minute chart.

There was a straight up launch from the low of the day in the afternoon.  Nobody on TV seemed to have any idea what that was about.  That put SPY back on top of the 50 SMA.  Notice how the previous 2 day bounce did exactly the same thing.  That time the sellers came out the next morning.  The volume pattern is still showing more big red bars then green ones.   Contrast the current pattern with the low in late March that preceded the move up to a new all time high.  There were some big green bars sticking out that are not there this time.  This is a real sloppy price pattern. The bounce from the low was never tested.  We have no way of knowing whether the sellers have been cleaned out or not. This has been really strange the last two days.  The sell offs intraday have been pretty dramatic only to see an equally dramatic bounce.  You can't say the market is boring these days. 

Just like last time the two day bounce alleviated any short term over sold condition we had.  However, the daily chart is weaker then before.  The intermediate trend indicator is down this time.  SPX managed to get up into the bottom of the trading range it broke down from, but that could be a kiss good bye type of move.   For tomorrow we have the same situation.  Either we get a confirmed upside break of the hourly 50 SMA, or we drop back below it.  An hourly close below probably signals the down trend is taking hold again.  The upside is a little tougher.  We need to see some real strength and close back above the 18 DMA.

Bob

Daily update 4/14

Bounce day.  Here is the daily SPX chart.

SPX closed back above the 100 SMA, but just barely.  Will it be able to stay there?  Last year all pullbacks ended around the 100.  Volume was really light today, even lighter then the last two rally days.  Breadth was 63% positive which is nothing to write home about.  It makes sense for the bulls to put up a fight here.  All last year it worked.  However, with so many momentum stocks breaking down that may not be the case this time.  Most of the other trips to the 100 had the VIX over 20.  At 17 on this pullback it is not showing much fear.  I am not convinced the sellers are done yet.  Lets zoom in to the SPY 60 minute chart.

We have had enough bars for the MAs to adjust to the dividend gap down so I am switching back to SPY.  They started selling right after the open and SPY retraced about half the gap up.  When it got close to the 18 SMA mid day it sold off even harder.  The late day bounce made the day look better then it probably was for the bulls.  Those moves in the last 30 minutes are not real reliable on future direction.

Will the bulls show up to play again tomorrow?  There is probably significant overhead resistance up at 1837-40.  We traded above there the entire month of March before breaking down from that trading range.  I suspect there are more sellers lurking up there.  So far this looks like a dead cat bounce.  A close below Friday's low (1814) would confirm the break of the 100 DMA and should target the 200 DMA (1762).  On the upside SPX needs to close back above 1840 with some strength.

Bob

Secular bull market poll result

Do you believe we are in a new secular bull market?

Yes	5 (27%)
No	13 (72%)

This is better then I expected.  I should have included an I don't know answer.  For those that think we are in a new secular bull market I can tell you unequivocally you cannot possibly know that.  You are guessing.  Have a look at the charts in Secular bull vs bear market.  We need to get through a bear market without crashing to new lows before we can even begin to say the ultimate low is in.  In both the 30s and the 70s the bull markets off the ultimate lows did not make new highs.  There were in fact multiple bull and bear markets that did not make new highs or lows before the final resolution.  In 1973 and 2007 the Dow made new all time highs in the middle of the secular bear market and plunged to new lows.  Since we blew another bubble in the market there is a real possibility we go below the March 2009 low.  This is why I was really looking and hoping for a top in 2012.  Had that happened there was a reasonable chance the next bear market would have made a higher low and the worst would have been over.   Based on past history the odds might be higher that we see the March 2009 low again rather then us being in a new secular bull market.  If we can get through another bear market and make a higher low that would change the picture. The bubble may be too big for that to happen though.  I guess we will see.

The age demographics and valuation argue for a continued secular bear market.  If we really are in a new secular bull market it is "different this time".  That seems really unlikely to me.

Bob

Daily update 4/11

Down side follow through.  Today confirmed the break down from the trading range, the intermediate trend flip from yesterday, and the break of the 50 SMA.  Here is the daily chart.

SPX closed with a blue bar so it is below the lower Bollinger band and is extended.  There is a slight short term oversold condition, but nothing dramatic.  SPX closed below the 100 SMA today, but that needs confirmation.  We gapped down this morning, but the market rallied back to slightly green on most indexes.  However, sellers stepped in and knocked it back to the lows.  That happened multiple times today.  People were wasting no time selling rallies.  Lets take a look at the SSO 60 minute chart.

Pretty straight down there.  No sign of life from the bulls yet.  Obviously we are stretched away from the 18 SMA far enough to bounce.  It could certainly still continue down though.  I don't see any sign the selling is exhausted yet.  Lets have a look at the weekly SPX chart.

SPX closed below the 18 SMA this week.  It did that last Aug. and rebounded right away.  However, every other time in this bull market SPX traded lower the next week.  It usually closed lower also.  I think odds are pretty high we will trade below this week's low next week.  If we start with a gap up on Monday I will be looking to short it at some point next week.

SPX is over sold enough short term to bounce.  However, I don't see anything that looks like we are close to making an important low.  If we bounce weakly and alleviate what oversold condition we have it would open the door for another big move down.  The traders are talking more and more about selling rallies.  I don't think there is any big rush to put on long index positions.  Be careful.

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

Bob

Daily update 4/10

Wow.  I guess they rethought all that buying after the FED meeting minutes yesterday.  Here is the daily SPX chart.

SPX closed below a key support line and the 50 SMA.  Volume picked up again today, but does not look climactic.  Since the two day rally relieved the slight oversold condition we had there is no real oversold condition now.  The TRIN was not particularly high and neither is the VIX.  Not much of a technical reason to bottom here.  The intermediate trend indicator turned down again.  It needs confirmation with a lower close.  We clearly broke down from a multi week trading range, but follow through is key.  Just like upside break outs can fail, so can break downs.  I do not see any particular technical reason for that to happen like I did on the recent upside break out.  Just something to watch for in case it happens.  Lets take a look at the SSO 60 minute chart.

SSO closed back below the 50 SMA early in the day.  Last night I wrote " I will be watching the 60 minute 50 SMA.  Will we get a confirmed break above or fall back below?  An hourly close back below is likely a sign we are headed down again."  That worked like a champ and got me back on the short side early on.  In the afternoon SSO broke below the last swing low.  It then rallied back slightly above that low, but sold off again going into the close.  That looks like it tested the break down and decided it liked it down there.  That would seem to lower the odds that this is a false break down.

I don't see any sign the selling is over.  We don't have a technical reason for traders to jump in on the long side that I can see.  I would guess that means lower prices are ahead.  I would expect this sell off will echo around the world overnight.  All markets will probably be down significantly by the time we open.  That makes it hard to say what we will face.  A big gap up seems unlikely though.  There is bound to be significant overhead resistance above 1838-40 area.  Should we bounce up there it could make a good place to short.  The 100 DMA is just down below at 1828.  That provided support all last year, but that seems unlikely this time.  The long awaited trip to the 200 SMA may finally be in the cards.  I heard a number of traders on TV talk about selling rallies now.  That is a change in mentality from last year.  On the upside the bulls need to get SPX to close back above 1840 which would indicate a failed break down.  That would change the picture considerably.

If we continue down like I expect you might want to strap on a crash helmet.  I think the action at the highs indicates this market is heavy and the exit could get pretty crowded.

Bob

Daily update 4/9

Bounce target reached and a little extra.  Here is the daily SPX chart.

Early in the day the market was up some, but internals were weaker then yesterday.  It seemed to be struggling to go higher.  Then the FOMC meeting minutes came out at 2:00 and sparked some buying.  SPX closed slightly above both its 6 and 18 SMAs.  Here we are back at 1872 again.  SPX really struggled to stay above that level all last month.  Now the QQQ and IWM ETFs are in much worse shape then they were then.  Is it going to be any different this time?  Lets zoom in to the SSO 60 minute chart.

SSO closed above the 50 SMA, but is not confirmed yet.  We have blue bars so price is a bit extended on this time frame.  We retraced just about half of the sell off.  What happens now?  Here are the IWM and QQQ daily charts.

Both these ETFs are still below their 50 SMAs.  Both are market leading risk on/off indicators.  Before the key reversal day last Friday I said that the market is not safe for bulls until both these indexes make new highs.  I stand by that statement.  Only they are further away now then before.

What happens tomorrow?  A lot of FED meeting moves are retraced the next day, both up and down.  I never really tracked it on meeting minutes.  I have to wonder if the minutes are really more important then actual FED policy moves.  It is a strange situation and a bit unpredictable. 

Here is what we know.  SPX has had trouble staying above 1870.  Some key indexes are already below their 50 DMAs.  There were only 80 new highs today despite the magnitude of the up move.  Volume dropped from yesterday.  The short term over sold condition we had has been worked off.  We are in a neutral state now.  The power is up for grabs.  Who will show up tomorrow?  I will be watching the 60 minute 50 SMA.  Will we get a confirmed break above or fall back below?  An hourly close back below is likely a sign we are headed down again.  An hourly close above that last bar's high would be upside confirmation and could set up a test of the all time high.  If we roll back over that 1837-40 area is key support.  I expect there are a bunch of stops just below that somewhere.  That would be an important break down if it happens.

Here is an interesting look at some charts.  Would You Buy These Charts?

Bob

Daily update 4/8

We got the expected bounce.  Here is the daily SPX chart. 

SPX touched the 50 SMA this morning and the bulls stepped in to support the market.  It was not a particularly energetic bounce.  We had 65% of stocks positive and only 32 new highs.  It is starting out like a dead cat bounce.  We will have to see what develops tomorrow.  There is still room to bounce up to the 18 SMA.  Lets zoom in to the SSO 60 minute chart.

We had a pretty strong bounce off of that SPX 50 DMA.  The rest of the day was spent going sideways, but the bulls kept supporting price.  Price is right at the bottom of the 18 SMA here.  Does the bounce continue or get rejected?  I guess that may depend on the news flow.  This chart looks to me like it wants to go up some more.  That was a pretty steep move down so more of a retrace is certainly possible.  Maybe we can get another up day.  If we start down instead, an hourly close below this afternoon's low would likely be a sign the down move is restarting. 

I ran across this chart and found it interesting.  I think there is a lot of financial engineering in the earnings today.  I think this chart shows that to be true.

Source

If earnings are so great why is EBITDA below the prior peak?

Bob

Daily update 4/7

Now that was some follow through.  I want to back up just a bit here.  On 3/20 SPX closed at 1872.  Then an unbelievable streak of upside gaps began.  The market gapped up 10 of the next 11 days.  Then another unbelievable thing happened.  On the 11th day after tagging a new all time high SPX closed at 1865.  That is seven points below where the upside gaps began.  Was that some kind of coordinated pump and dump operation?  Who was bidding the futures up overnight and who was selling into the strength after the open?  I have never seen anything like that before in 15 years of studying the market.  We won't know if that has any meaning for the market until some future date.  However, I can't see any scenario where that kind of action is positive.  I think it is much more likely that it was a very negative thing to happen.  Here is the daily SPX chart.

SPX is negative on the year again.  We ran a few stops below 1850, but not too many.  The majority of the stops are a bit below 1840.  We ended the day extended in the short term and in the area of the last two swing lows.  This is key support.  Will that cause a bounce?  I would think the bulls will show up in the morning.  However, I don't think the bears are done yet.  I think we will end up breaking below 1840 at some point and that will bring in major selling.  Lets zoom in to the SSO 60 minute chart.

That was some straight down run.  There was a little sign of life by the bulls late in the day at key support.  The volume pattern has clearly shifted to distribution for now.  This looks extended enough to easily support a bounce.  Ideally I would like to see this contact the 18 SMA before starting the next leg down. 

We had 27 new highs today.  That is the first time we have been under 50 since coming off the early Feb. low.  That is pretty remarkably low one day off an intraday all time high.  We had 89 the day after the top in Oct. 2007.  That year we did not get under 50 until seven days later.  In the Jan. pullback we did not get under 50 new highs until 1/24 when SPX closed at 1790.  This looks like lower prices are coming.  Lets take a look at the VIX weekly chart.

The 6 SMA has been above the 18 since the Feb. low.  We made new all time high closes in SPX multiple times since then.  This is the first time in this entire bull market we were at all time highs in SPX with the 6 still above the 18.  This chart is in position for the VIX to spike.  It has been rejected at the 200 SMA for two years.  I have the feeling that will not be the case this time.  A weekly close above that 200 is surely going to spark much more selling.  We will have to watch and see how it closes for the next couple of weeks.

Is it just me or does this market look bearish?  It looks like we had a massive pump and dump operation.  Now we have a big drop in new highs and the VIX is in position to spike.  I have to think we are headed for a bigger pullback then we have seen the last two years.

SPX's 18 DMA is up at 1863.  A bounce up there might provide a good place to short.  If we break down below 1840 tomorrow instead of bounce look out below.

Bob

Daily update 4/4

Now that was some break out failure.  We opened the day with breadth 79% positive and ended with 63% neg.  That was quite a reversal.  Since we opened at all time highs that was clearly the work of institutional sellers.  Here is the daily SPX chart.

I guess it mattered that we closed back below that trend line yesterday.  That was a clear key reversal day.  We sure got some volume today.  That is a pretty obvious triple top formation.  Do you think anybody will notice it?   Every other key reversal day of late has rallied the next day.  Even the one that marked the 2007 high saw that bounce.  So a bounce on Monday is probably likely and would not mean the reversal day is nothing to worry about.  Given the relative weakness in IWM and QQQ of late I think it is very important.  Lets zoom in to the SSO 60 minute chart.

SSO held the 200 SMA at the close.  It did confirm the break of the 50 SMA this afternoon.  Not often you go from all time high to a break of the 50 in one day.  Look at all that volume.  It was very similar in SPY as well.  Quite the run of blue bars so in the very short term price is stretched supporting the idea of a bounce on Monday morning.  However, I am sure this sell off will echo around the world by our open Monday so who knows.  It will be up to dip buyers. 

Today should not have come to a surprise to any of the blog readers.  Just last night I wrote "This market is not safe for bulls until both IWM and QQQ make new highs.  The relative weakness of former market leaders (also includes biotech IBB which is actually in worse shape) is a big huge caution flag.  Be careful."  The low number of new highs and lost market leadership were obvious.  This is very likely just the beginning.


I have no idea where to look at the P/E ratio of IBB.  However, I saw a guy on CNBC discussing it and he said it had a P/E of 195.  Wow.  No bubble there, LOL.  That is way worse then the small caps.  Our experience the last 15 years has showed us that a bubble anywhere is a problem everywhere.  These bubbles will drag down the entire market and I think it started in earnest today.  Buckle up the chin strap.


We saw two 90% down days back in Jan.  I don't know for sure how a pullback here will play out, but it is not hard to imagine a big rush for the exits.  Everybody piles in slowly, but they all want to take profits at once.  If SPX drops back below the 1848-50 area I would expect a lot of stops to be run.  A little panic could enter the scene.  Remember the Jan. barometer was down and well publicized.  The first quarter was basically flat.  The Dow has not made a new closing high since last Dec.  There could be quite a few people that decide it is time to book some profits.  They will be looking for any strength to sell into.  You might want to join them.


Bob