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Wednesday, April 16, 2014

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.


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