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Monday, August 11, 2014

Daily update 8/11

Sort of a strong day.  Here is the daily SPX chart.

The futures ended the day slightly below the open.  Breadth was above 70% positive for the second day in a row.  For most of the morning breadth was around 79% positive.  It was a very strong open to say the least.  However, the market really struggled to push higher and sold off a bit in the afternoon.  Volume dropped quite a bit today.  What does that tell us?  My guess is people were not really sure whether they should buy or sell the gap up.  While breadth was very strong I am not really sure today was as strong as it looked.  If the big boys were piling in I think we should have closed above the open at least.  Lets take a look at the futures chart.

The price bars seem to show a slight expanding volatility pattern.  That kind of adds to the unpredictability here.  The futures closed the 10 AM bar above the 200 SMA, but failed to confirm an upside break in the afternoon.  We have worked off the over sold condition completely now in both price and breadth.   This is a place where it could roll over again, but will it?

SPX's 50 DMA is up at 1955 which could easily act as a magnet.  The lack of vigor today would seem to suggest the selling might not be over.  However, the sellers could hold off for higher prices before striking in force.  This looks pretty tricky here.  A moderate pullback tomorrow might end up being a good buying op for continued upside.  People who chased the gap up this morning ended the day under water in SPY.  Some of the other ETF's ended up above the open though.  Would a gap up tomorrow have any more success?  Beats me.  I don't know if chasing the rally is going to work out as well as it did the last 18 months.  I think it is time for a bit of caution.


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