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Friday, August 8, 2014

Daily update 8/8

I guess I was right for one day anyway.  Yesterday I thought the market looked sold out at the lows and we did indeed bounce today.  Here is the daily SPX chart.

SPX reclaimed the trend line and the 100 SMA.  It also closed above yesterday's high.  The breadth was 73% positive.  Much better then the other bounce attempts.  The last several days have seen the market change direction every day like a consolidation.  This one happens to be sloping down a bit.  While today's price action is a positive, SPX is still inside the consolidation price range.  Here is a look at the futures chart.

We had a bullish engulfing bar early today.  That set the tone for positive action the rest of the day.  We ended the day with the first green bar since back in late July.  Early in Aug. the 200 SMA was stiff resistance.  I don't know if that will still be a problem or not.  The bulls still need to prove they have the will to keep buying.  Here is a look at the current breadth chart.

The McClellan oscillator is now up into neutral territory.  This means the market has worked off the over sold breadth condition we had.  Should the market turn back down through the 100 SMA again it is more likely to keep going this time. 

Monday is a bit of a hard call.  While SPX closed above yesterday's high the VIX did not close below yesterday's low.  To top it off, mid day there was a spike up on news that Russia had finished its military exercises along the Ukrainian border.  That was good for about 12 points.  On Monday Russia announced they would be performing the exercises until Friday.  So the news that sparked the big rally was not really new news.  A lot of times news events like that get retraced quickly.  I have no way of knowing if that will be the case this time or not.  People were reluctant to sell below 1910.  Will people be more willing to sell now that we are at 1930 and worked off the over sold condition?  I guess we will have to wait and see because I don't have a clue.  There has been enough technical damage the market might not just take off and go to new highs as it has so many times in the past. 

I thought this chart from Bespoke was interesting.

They had these comments.

Remember a few years back when everyone used to look at the 1% yields on long-term Japanese sovereign debt and write it off as a phenomenon specific to Japan?  Well that so-called Japan specific issue is now firmly entrenched in Germany and Japan, and with a yield of 2.08% Canada is not far behind. Meanwhile, Japan has graduated down to the sub 1% club! 

I think the entrenched in Germany and Japan comment should be Germany and France.  These are obviously abnormally low rates.  Are other countries becoming Japan?

The market and sector status pages have been updated.  Have a great weekend.


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