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Wednesday, May 21, 2014

Daily update 5//21

Late day bounce from yesterday continued with yet another gap up to start the day.  Here is the daily SPX chart.

Volume was light once again.  The breadth started out very strong this morning (69% positive), but the mid day pullback really weakened it.  It went all the way down to 51% before recovering at the end of the day to 61% positive.  Even though the pullback from the high was not very big the selling was broad based.  Lets have a look at the SPY 60 minute chart.

I marked the .618 to .786 retrace zone on the chart.  This is the most common area to make a lower high from.  I also marked the rally from the recent low as it resembles an ABC pullback from lows.  If that is what is going on this move is corrective in nature and we should resume the down move that started from the all time high.  I don't know if this is the right interpretation here or not.  Lets look at the SPX new highs chart.

The sell of from the all time high really knocked down the number of stocks making new highs.  We went from the 30s and 40s (already pitiful numbers) down to the teens.  Pretty soon there will be no stocks making new highs.  Looking at this chart is what made me ponder that SPY could be making a corrective move back up into the retrace zone.  That move down from all time highs might be more important then it looks just from the chart.  Lets take a look at the number of SPX stocks above their 50 SMAs.

That sell off knocked down this indicator also and the bounce has not done much to repair the damage. 

What happens tomorrow?  I was hoping you could tell me, LOL.  SPX is back into the resistance zone where it has not been able to sustain trade.  Market internals continue to get weaker with each push up.  I still think it is going to take a high volume strong breadth day with a lot of new highs to break out and continue higher.  Support at the 50 DMA and resistance in the 1885-1900 area.  Somebody wake me up when it decides what it wants to do.


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