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Thursday, July 24, 2014

Daily update 7/24

It was certainly a good day to be on vacation.  Talk about a ho hum market.  Here is the daily SPX chart.

We ended the day with a doji bar on yet another increase in volume.  More selling into strength again.  This market is really doing a damn good impression of an important top.  While there was an increase in new highs at 205 the breadth was slightly negative.  Narrowing price range on increasing volume is not what good break outs are normally made of.  The SOX was down another .84%.  That confirms its break of the 18 DMA yesterday.  We have not had so many big divergences since 2011.  This really looks like a heavy market to me, but that could be my bearish bias coming through.  After all I have absolutely no doubt we have the 2nd or 3rd most overvalued market in the last 100 years.  Lets take a look at the futures chart.

As you can see we have a stall over the last few bars.  The futures are down a bit as I write this.  Apparently AMZN had a big miss.  It was down 10% at last check.  At any rate the uptrend line keeps rising and price is not getting any more altitude.  The possible W top is still hanging out there in plain view.  The dip buyers have been rushing in to buy every little tiny break in price, but back to the highs there seems to be very little buying interest.  Here is another look at the IWM chart.

It bounced from oversold as I mentioned it could a few days back and that allowed SPX to get to new highs.  However, the bounce appears to be running into trouble at the 50 DMA.  It could easily roll back over from here.  I still think this is a key index to watch.  Do the bears show up again?

Here is an interesting article Bulls Take Notice - Caution Suggested as Credit Markets and Equity Markets Diverge.  Here is a snippet.

There was plenty of cash on the sidelines from everyone positioned for the mid-term election year cycle to play out and when it didn’t and the economy accelerated they moved back into the market. However, given their risk adverse bias towards the market these same investors and strategists likely went reluctantly back into the market for fear of being left behind but likely did so by buying safer assets like large blue chip stocks and investment grade bonds. This likely explains the underperformance of risky assets in 2014.

I mentioned a few times how low the 10 DMA volume lines were on the latest break out to new highs.  That was lowest advancing volume rally in this bull market.  People were reluctant to put money to work, but afraid of being left behind.  So buy they did, but with only a couple of fingers instead of both fists.  That is a very good article I recommend reading the full thing.  There are some interesting charts in there.

For bulls that want some confirmation bias here is an article for you. 5 reasons why the market won't crash  Too bad it did  not have any nice charts,


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