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Thursday, June 5, 2014

Daily update 6/5

Buy the rumor, buy the news.  Here is the daily SPX chart.


So far neither of the outside days have had the negative affect they had earlier this year.  I am not sure if that is just because of the ECB meeting or if it is different this time.  I have mentioned a number of times the reaction to a FED meeting is often reversed in the next day or two.  Does that apply to the ECB?  The breadth was 76% positive.  That could mean this was a buying climax.  Numbers like that after a big run up sometimes end up being a short term top.  There were 297 new highs today (80 in SPX).  That was the most since March 4th.  A word of caution.  SPX closed only 5 points higher the rest of the month.  So the market is over bought with the possibility of a short term buying climax.  Buyer beware.  Lets take a look at the futures chart.


We ended the day with a blue bar indicating the futures closed above the upper Bollinger band.  Price is obviously very extended from the 100 SMA now.  The -DI line is down to 11 again as another indication the market is over bought (as if we need a technical indicator to tell us that, LOL).  Not much else to talk about on this chart.

We did not get a sell the news event today.  However, that does not mean it won't happen.  The FED QE announcement in Sept. of 2012 had a big up day and a bit more the next before selling off for the next two months.  Hard to say what happens tomorrow.  Lets have a look at IWM.


IWM rallied on big volume today.  It stopped right at resistance from a prior swing high.  There is also a key trend line just a little further up.  If it turns back here that would make a lower double top pattern which can be a pretty bearish formation.  If it kisses that trend line good bye it could be a pretty bearish pattern.  I think this is an important chart to watch because this is where the bubble is.  It may end up dictating what the rest of the market does.


The site I used to look at the II sentiment survey stopped publishing it quite a while back.  I think they got in trouble with II.  I have not been able to find another free site since.  I saw an updated chart today and it is kind of interesting.


This chart goes back to 2007 which covers the last bull market top.  The arrows market the other two times we reached this level.  The most recent case was just before the Jan. to early Feb. pullback.  The only other instance was the final high at the 2007 top.  With the market very over bought risk is pretty high at the moment of at least a short term pullback soon.  Since the margin debt turned down in March it is possible this is the final blow off top of this bull market.  At the very least we can positively say that not everyone is bearish.

Bob

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