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Thursday, August 14, 2014

Daily update 8/14

A little more up on a very narrow intraday price range.  Here is the daily SPX chart.

SPX closed just below its 50 SMA.  It was yet another light volume day.  SPY volume was down right miniscule.  It looked like a lack of sellers more then an eagerness by bulls to buy.  Lets take a look at the futures chart.

The futures made it up to the 100 SMA today.  This is a potential resistance area.  The top of the Keltner channel (dashed purple line) is also here and can be resistance.  There is more.  Here is a look at the 60 min. futures chart of intraday data.

The red lines mark the 7/31 big gap down.  We just about made it up to the lower line today.  This is another point of possible resistance.  Should we get through the upper line we should be on the way to new highs.  To top off the resistance points the 200 SMA is also in this area.  It kind of looks like this could be a tough area to get through.

Starting in June of last year SPX has had a series of bounces from the 100 DMA.  The current bounce is the 6th occurrence.  The first time was the only time the 50 DMA provided any resistance.  That lasted a few days before blasting through it.  Once closing above the 50 DMA every occurrence has seen SPX make new highs before closing below the 50 DMA again. All those lows are V bottoms.  That might turn out to be important because V bottoms do not provide much support when tested way out in the future.  IWM has spent the last four days just below its 200 DMA.  Obviously it has some resistance there.  So do we blast through the 50 again on the way to new highs or does the bounce end around here?  Stay tuned.

Here is my mark up of the long term Dow chart I showed yesterday.

The prior red areas all had a prolonged period of falling/sideways prices that established a higher low.  The declines we have had since this bull market started are nothing but blips.  Despite what Wall Street might want everybody to believe I have a sneaky suspicion that bear markets have not been permanently eliminated.  Until we get through one and the market does not crash we can't proclaim the red period is over.  If you have read the article on secular bull and bear markets you know we need to see the monthly ADX fall during the bear market.  That will be an important sign of a change in character.  If you overlaid a valuation chart onto this one you would also see that none of the other green periods started with valuations anywhere near what we have today.  In fact current valuations have only been seen in 1929 and 2000.  Both of those instances started periods of red bars.  In an era where the global economy is barely growing I find it hard to believe that today's super high valuations will stand the test of time. Unless of course it is different this time.


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