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Thursday, May 1, 2014

Daily update 5/1

Mixed day today.  Here is the SPX daily chart.

We had a doji day today on declining volume.  SPX got above the highs of the last few weeks, but failed to find enough buyers to keep it there.  A last rush of buying at the close almost got the index positive for the day.  Still tough slogging, but from a lack of buyers rather then selling pressure.  If the lack of buyers problem is not solved soon I would expect selling to pick up.  Lets zoom in to the SPY 60 minute chart.

We got a distribution bar this morning, but overall the volume pattern is still positive.  It is really just a question of whether we can conquer resistance or not.  I think the divergences in the indexes make that unlikely, but we will see.  Check out the IWM chart.

In 2000 the bubble was most pronounced in tech stocks.  There were really the key to the action of the overall market during the bear market that followed.  The Russell2000 now has a P/E of 101 according to the WSJ web site.  That makes it the big bubble this time.  This index will probably be the key to what happens in the overall market for a while.  Here is a look at the IWM daily chart.

It is doing a lot of testing of its 200 SMA.  Whether this ETF bounces strongly or breaks down through the 200 will probably set the direction for the rest of the market.  I will be keeping a close eye on this from now on.

Tomorrow is the unemployment report.  I have no idea what it will be or what the market would like it to be.  I think a lot of people have been buying in hopes that bad economic data would cause the FED to stop tapering QE.  However, I heard some comments today that indicate people are starting to realize the bar is really high for that to happen.  If they continued the taper with a GDP print of .1% they are pretty strongly committed to it.  I don't know if that will taper the dip buying or not.  Time will tell I guess.

With SPX toying with resistance I will still be watching the SPY hourly 50 SMA.  If it is broken on the downside it will likely be a clue we are headed down again.


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