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Wednesday, June 11, 2014

Daily update 6/11

I know this is hard to believe, but we actually had a down day.  Here is the daily SPX chart.

We gapped down a little bit this morning and closed very near the open.  Even though SPX ended only down about 7 points there was a big drop in new highs.  We went from 353 on Friday down to 111 today (SPX only 24).  The bulls lost some enthusiasm overnight.  Will they find it again tomorrow or not?  Did we start a pullback or is this just a short pause on the way to higher prices?  Not enough information yet.  The last three bars look like a typical short term top OR a consolidation to go higher, LOL.  You can find lots of examples that look very similar at the start with dramatically different results at the end.  Here is a look at the futures chart.

The futures tested the 18 SMA today, but closed above it.  They brushed that MA twice on this rally so far and bounced nicely.  The jury is still out on whether they do that again or not.  The MACD has crossed below its signal line so we are losing some momentum.  Most of the time when the 18 is broken price continues down to the 50 SMA.  That is about another 25 points down.  Since price is resting just above the 18 tonight we should know fairly early tomorrow whether it bounces or not.  If we are going higher in the short term we should be up and away early in the morning.  If we break below today's low then we might be headed to that 50 SMA.  That would put SPX right around its 18 DMA and potential support.

Here is a chart for the price/sales ratio on SPX. 

As you can see the ratio is now higher then it was at anytime in the last bull market.  It is still below the 2000 bubble level.  Sales are much less manipulated then earnings.  This is yet another valuation metric that shows an over valued market.  The pundits are quick to point out that we are still not as  over valued as the tech bubble in 2000.  Can we reasonably believe people will be that crazy again?


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.