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Tuesday, July 8, 2014

Daily update 7/8

Downside follow through.  Here is the daily SPX chart.

SPX got pretty close to the 18 SMA before bouncing.  There were only 60 new highs (14 for SPX).  Two days off of all time highs that is pretty weak.  In the summer months last year new highs that low kicked off pullbacks to the 100 SMA.  That certainly seems like a possibility.  Lets take a look at the futures chart.

We got the downside follow through the futures suggested might happen.  They touched the 50 SMA today and the last two times they were in that area we bounced.   Overnight news permitting the bulls might come out to play in the morning.  There is work to do to reestablish the uptrend though.

The COMPX, IWM, and IBB were all hit pretty hard again today.  Those were the three weakest indexes in the spring sell off that left the Dow and SPX pretty much unscathed.  The COMPX is the only one of those indexes to make new highs.  If they continue to show weakness I think it will become more widespread this time.  Europe is also showing some weakness and was hit hard today.  The economic data over there has not been very good the last few weeks.  I had to downgrade the short term trend in both SPX and COMPX after today's action so things are getting a bit shaky.  I think caution is warranted on the long side for the moment with the divergences in the indexes and the drop off of new highs.  The trouble in Europe needs to be watched.  There are still many questions about their economy.  A slowdown there has always caused a slowdown here as well.

The bears have fired a couple of shots the last two days.  Lets see if the bulls have a response.  Should we continue down from here the next important support level is 1950, then 1925.


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