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Monday, May 12, 2014

Daily update 5/12

The bulls woke up in a good mood today.  Test of April high in progress.  Here is the daily SPX chart.


SPX made a slight new closing high.  It fell fractionally short of a new intraday high.  The breadth was strong at 75% positive.  New highs on the other hand were only 155.  We had 261 at the March high, and 186 at the April high.  SPX highs in the same period were 84, 65, and only 47 today.  Contrast that with Dec. where we had 128 new highs in SPX stocks.  It still does not look like we are preparing to break out and go higher to me.  I guess we will see.  Lets take a look at the SPY 60 minute chart.


SPY added another accumulation bar on this time frame this morning.  The pattern is still rather mixed though.  Most of the gain today came in the first hour and was likely mostly short covering.  We will have to wait and see if buyers are ready to push prices higher from here.  Lets zoom out a bit to the 195 minute chart.


SPY has traded sideways long enough that the 50 and 100 SMAs have come together.  The volume pattern was showing a lot of big red bars in March and April, but those have calmed down since the April low.  That would seem to indicate less selling pressure the last few weeks.  However, the market is still struggling to go up.  Is the selling pressure completely done or will it come back?  What happens if it does come back? 

SPX is testing a key level.  Since it consolidated the last couple of weeks it is not in an overbought state.  There is no excuse for the bulls if it turns back again.  The new high data is showing divergences.  The bullish percent indicators and the number of stocks above their 200 MAs are doing the same thing.  That is on top of the obvious QQQ and IWM divergences noted before.  This leads me to believe that if SPX turns back here it will sell off harder then it has so far this year.  Will people be willing to push prices higher into all time high ground with those divergences and this being May?  I guess we will find out.  I would not be surprised to see a hanging man bar tomorrow.

Bob

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