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Tuesday, September 30, 2014

Daily update 9/30

There were certainly plenty of crosscurrents today as the market alternated between buying and selling.  Here is the daily SPX chart.

SPX climbed above its 6 SMA this morning, but failed to stay there.  Breadth was 62% neg. which was quite weak given the indexes not down all that much.  The small caps were again hit the hardest.  This is going to be a recurring theme because of the over valuation.  After closing back above the 50 SMA the last two days the bears pushed it back below it today.   However, SPX was still above the key up trend line at the end of the day.  This seems like a weak response by the bulls for such an important line.  Lets have a look at the futures chart.

The futures took a bit of a tumble after the market closed.  They are now below the 200 SMA, but were still above it at 4 PM.  They rallied enough today to get slightly above the 18 SMA twice before turning back down into the close.  The bears won the day, but have not quite won the battle yet.  Who will show up tomorrow?

The dip buyers have been doing their thing, but so far they have not been able to over power the sellers.  Its pretty hard to find anything bullish in this action.  Unless the bulls show up in force tomorrow morning it looks like the trend line will break and selling pressure could increase considerably.  We have the 100 DMA down at 1957.  With the poor performance of IWM and the divergences we had in place at the highs I suspect that line won't hold this time.  If the bulls show up tomorrow we have the 18 DMA (1992) and the 9/24 big down bar high (1997) as resistance.


Monday, September 29, 2014

Daily update 9/29

Dip buyers still active.  The bulls came out first thing this morning to defend the key trend line on SPX.  Here is the chart.

The bulls were happy today the market did not break down.  I commented on 9/25 the bulls need to make a stand here.  So far they have.  Will they win the battle though?  While the bulls started buying right out of the gate the rally stalled when SPX got close to break even.  We spent all afternoon in a trading range with a late day surge that closed the gap on the futures.   We ended with a lower high and lower low from Friday.  The bulls have clearly not done enough yet to say with any confidence this is going to be a low here.  Lets see how the futures chart looks.

The futures are consolidating on the green line that marks the last swing low earlier this month.  The bulls are certainly trying to hold on to that 200 SMA.  However, they have not been able to get any traction yet.  We have bounced twice and each bounce got sold.  This price action looks like it is coiling up for a good move though. 

SPX is being pinched between its 6 DMA and the uptrend line.  One of them is going to give out and that should point the way to the next swing. I hesitate to even guess what happens tomorrow with it being end of quarter.  With so many stocks off their highs and yet a few standouts on the upside there could be considerable portfolio manipulation.  We might not get a good read on where the market is going until Wed.

This is a thought provoking chart.

I have been pointing out the relative weakness in IWM for months.  This chart shows it pretty clearly.  Time will tell if it is important or not.

This is an interesting read with quite a few charts to look at.
Why Stock Investors Should Care What Happens in the Junk Bond Market


Friday, September 26, 2014

Daily update 9/26

Oh no.  We made a big mistake selling yesterday.  We got to buy em back today.  Here is a look at the daily SPX chart.

SPX closed above the 50 SMA, but below the 18.  Breadth was 68% positive which was much stronger then the last bounce day.  However, volume dropped of noticeably.  We had 20 new highs and 152 new lows.  Apparently people are hesitating to buy stocks at highs, but not hesitating to sell stocks at lows.  Not a very bullish combination.  We got the bounce off the trend line and oversold condition as expected.  Is it a dead cat or something more meaningful?  Lets see what the futures chart might tell us.

The futures pushed up to the important green line and stopped.  While they bounced pretty good off the 200 SMA they are still below the important 100.  Despite the rather sizable move up today all we really did was rally back to potential resistance.   I don't see anything here that indicates we have made an important low.  The bulls need to follow through on the upside next week.  Will they come out to play again?  Lets take a look at the IWM weekly chart.

IWM has fallen below the trend line that marks this bull market.  The latest rally attempt came from the fourth point of contact on the line.  That rally failed to make a new high and IWM has penetrated the line.  I could be wrong, but I think this is very meaningful.  This is the bubble index.  It looks very likely its bull market has ended.  With valuation that high I think it is very unlikely to just trade sideways and consolidate.  I would expect an urge to take profits will manifest itself in some downside action.  I mentioned the other day there seems to be a lack of liquidity in some of these stocks.  There is likely to be some wild swings in this one.

I heard several people talking this week about economic weakness in China, Japan, and Europe.  Some people are starting to get a little worried about that affecting the U.S.  I also heard some talk of valuation being a bit rich.  Geopolitics got some air time as well.  I sense some concern entering the minds of some money managers. Everybody knows the QE reason to buy is going away completely next month.  I believe that has some people actually thinking about fundamentals now.  That is probably why a lot of stocks are now falling by the way side.  If many more stocks falter I don't think the indexes will be able to hold up.

Monday is a tough call.  There is more room to bounce as SPX is still 12 points below the 18 SMA.  However, the bears came back after just one up day yesterday.  I would not be surprised by either a continued bounce or another splat.  It might just depend on the news flow and overseas markets.  For a downside pivot I think I will be watching the SPY hourly 18 SMA.

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


Thursday, September 25, 2014

Daily update 9/25

I guess it was a dead cat bounce yesterday all right.  Sometimes looks are not deceiving.  Here is a look at the SPX chart.

SPX broke down from the multi week trading range and ran right smack into an important trend line.  That line goes back to the Nov. 2012 low.  That low was the acceleration point of the big move up in 2013.  It is a key trend line to say the least.  The TRIN was over 2 today at the close which can bring out dip buyers.  The price bar is blue so it closed below the lower Bollinger band and is extended.  We have a pretty deep oversold condition with the McClellen oscillator.  Breadth was 81% negative and the downside volume was around 90% of total volume.  Some people were running for the exit today.  There were 18 new highs and 194 new lows.  Lets see what the futures chart looks like.

The futures found resistance at the 18 and 50 SMAs as I mentioned they could last night.  They ended up trying to find support at the key 200 SMA today.  The -DI line crossed above the key 35 threshold.  I have been calling this a sell warning.  It is kind of like the famed Hindenburg omen.  Every big sell of from bull market highs since the beginning of my futures data in 1998 had a +35 reading early in the decline.  The trouble is that more often that same +35 reading will mark an important low.  It is a clear sign to pay attention.  This may be a good buying op or a time when you might wish you had hedged or reduced long exposure.  What  happens in the next few days around this low will be important.

This is an interesting juncture for the market.  SPX is at a key trend line in an oversold condition that could bring out the buyers.  Any bounce that occurs needs to be very strong to be sustained.  We had way too many new lows at the highs and all the big divergences I have been talking about for weeks now.  A weak bounce would very likely get sold into at some point.  If the bulls have the will to push this thing higher they need to prove it right here, right now. 

Since we closed on the low today a gap up is likely to test that low again.  If the buyers come in at that point it would be a good sign a bounce might be on.  A gap down that gets bought right away and sends price back above yesterday's low might also work as a bullish sign.  If we open flat then price needs to get above yesterday afternoon's high.  SPX's 100 DMA is just a little lower at 1954.  That is the next important support level below if we fall through the trend line.  We have bounced off that 100 DMA six times already since May 2013.  No pullback from the highs has fully ended until SPX closed below that line.  Since we have not done that yet a rally from here to new highs would be a case of it is different this time.  If we end up breaking the 100 and keep going it would also be different.  I believe that action would cause a mini crash as people panic for real.

I heard a guy on TV saying that people get scared on these little pullbacks, but then relax when the market rallies again.  He was saying that behavior is bullish for the market.  I believe he is wrong and here is why.  I think most people that experienced both bear markets do not trust the market.  I have heard many people say they are not going to go through that again.  These people are long the market though.  The data also shows that to be true.  It is not that people don't trust it and are sitting out.  What we really have is thousands of people long the market with profits that have decided they are not going to ride out another crash.  This is why retail investors seem to panic on these little sell offs.  They are looking for the end of this rally so they can get out with profits in tact.   This is not a situation we had in either of the two prior bear markets.  Most everybody was still thinking buy and hold.  Despite the Wall Street pundits telling all of us to be good little bag holders I don't think that will be the case.  Is my perception of what people are thinking wrong?

This is a pretty interesting read Future Bull.  Here is an interesting chart showing yet another valuation metric.

No matter what you look at stocks are not cheap.  There is a lot more stuff in that article and I think most people will find it thought provoking.


Wednesday, September 24, 2014

Daily update 9/24

The dip buyers showed up yet again.  Here is the daily SPX chart.

While SPX rallied nicely today it stopped just below 2000.  It dipped slightly below the last swing low this morning before buyers stepped in the rest of the day.  Breadth was 56% positive.  There were 24 new highs and 137 new lows.  Those are weak stats for a .78% up move in SPX.  That suggests a lot of the buying was in index positions again.  At this point this looks like a dead cat bounce.  We will have to see if it gets some legs.  Lets see what the futures chart has to say.

The rally came to a halt at the 18 SMA.  The futures closed above the 50 SMA though.  Will they confirm an upside break or be turned back here?  Over the last few weeks they have been selling when the price bar turned green which usually put SPX above 2005.  That could mean we have some more room above.  However, the 18 SMA could end up being resistance.  Its kind of hard to say here.

I don't think we had a deep enough pullback to launch the market.  The week internals today would seem to confirm that.   That does not preclude us from making a test of the high though.  Lets face it we are in a very choppy and hard to predict pattern.  We will eventually break out or break down and things should get easier.  Hopefully the market will decide pretty soon.

There was a lot of discussion about the death cross (50 SMA crossing below 200 SMA) on the Russell2000 yesterday.  I did not mention it in the blog because that is one of the most useless technical indications there are.  What cracked me up was today they were all excited and said don't bother worrying about the cross.  The reason that cracked me up is that even though the index rallied .86% today it did not even close above yesterday's high.  Not to mention it is still well below the 50 and 200 SMAs.  Whether the death cross is important remains to be seen.  However, today certainly did not invalidate it.  I heard Jim Cramer talking about small caps this morning.  Now we all know he has a terrible track record of market timing.  However, he talks to a lot of money managers.  He said people were telling him they are having trouble selling small cap stocks because there are no bids underneath the market.  I don't suppose the bubble valuation of the index would have anything to do with that do you.  Have we run out of greater fools on the small caps?  Who would have thought there would ever be liquidity problems with small cap stocks.  This is a completely different situation then in 2000.  That time the bubble was in big cap tech and internet stocks.  There were lots of retail investors buying those on the way down. The indexes crashed anyway.  I don't think they will be piling into the small caps the same way.  I would expect the exits to be very crowded on those.  I wonder how many people will actually get to lock in the big gains.


Tuesday, September 23, 2014

Daily update 9/23

A close on the low of the day.  That has been very rare the last 18 months or so.  Here is a look at the SPX daily chart.

SPX confirmed yesterday's break of the 18 SMA with the loser close.  It ended the day about 3 points above the last swing low.  No panic selling going on yet.  Just people hitting the bids.  There were 15 new highs and 136 new lows.  With those numbers it is hard to believe SPX is still above the 50 SMA.  Lets take a peek at the futures chart.

The futures closed below the first green support line.  They also tested the last swing low denoted by the second green line.  Unlike the last pullback they dropped below 100 SMA.  Will support hold again?

We now have a slight short term over sold condition with price hanging around prior support.  Will the dip buyers show up here again?  Even if they do I think we end up going lower still.  We had the lowest number of new highs since last Aug.  SPX has been dropping down to its 100 DMA with less selling pressure then this.  It seems likely to go at least that far now.  One of these days that 100 is going to fail.  With the weak technical condition we had at the highs this could be the time.

Bespoke put out an interesting chart on the performance this year of some key cap based indexes.

I pointed out the weakness in micro and small caps on the blog.  However, the latest new highs in SPX were not confirmed with a move by mid cap stocks to new highs.  Market weakness seems to be moving up the market cap food chain.  Only big caps are left.  Will the infection spread or will the lower cap stocks start getting a bid?


Monday, September 22, 2014

Daily update 9/22

Did the world change over the weekend?  The reason I ask is because there were 32 new highs and 154 new lows today.  That is one trading day after new all time highs.  That is a major drop in buying interest from an already low 127 new highs on Friday.  That was the most new lows we have had all year.  Seems odd to me one day off a new high.  Here is the daily SPX chart.

SPX closed back below the 18 SMA again.  This chart looks a lot like a short term top there don't you think.  This month we have had four separate days where SPX probed new highs but the day ended with breadth negative.  That is clearly distribution.  Lets see what the futures chart looks like.

The futures are back to red price bars again already.  That was a rather brief trip to new high ground.  They closed below the important 50 SMA.  While they are still above the green support line they look headed that way.  Breadth was 81% neg. so the selling was broad based.  That could easily be a kickoff to a decline.

I commented last week how the rally to new highs looked index driven to me.  The market was close to breaking down key support when it started.  It turns out there were six banks involved in the handling of the Alibaba IPO (btw it was the biggest IPO in history).  I am certain they wanted the market going up as they were doing the final pricing and share allotments.  Now the IPO is out and they don't care what happens so the selling started up again.  I think we are now returning to the previously scheduled pullback.  I have been saying all month I need to see a strong day and buying at the highs before saying the market was likely to go significantly higher.  What I keep getting is selling into strength at the highs.  So far the dip buyers keep showing up to prop the market up.  However, if they don't get some satisfaction pretty soon that buying will likely dry up.  Today really seemed like a 180 from all the bullish excitement on Friday.  Was it a one day wonder or a shift in market attitude?  We still have the weakest technical condition at the highs we have seen this entire bull market.  It is pretty easy to see how we could get a bigger pullback than we have had since 2012.  We have all the conditions now that have been present at the start of many bear markets.  Do not be lulled to sleep.

This an interesting look at household income.  Median Household Incomes by Age Bracket: 1967-2013


Friday, September 19, 2014

Daily update 9/19

Resistance persists at least for today.  Here is the daily SPX chart.

The sellers showed up right at the opening bell and kept hitting the bids all day.  Despite the gap up and strong start we ended the day with most indexes in the red and breadth 59% negative.  New highs were 127 and new lows were 102.  On a day with all happy talk and the launch of the biggest IPO in history (Alibaba) we saw over 100 new lows.  In a normal market that does not happen with indexes at all time highs.  The last two days we had famed Hindenburg omens.  That link will tell you the definition if you are not familiar with them.  There have been several since I started this blog, but I have never mentioned them before.  They have a lot of false signals.  After every one of those signals in this bull market I was able to find a number of articles pointing out the signal and how it portends doom.  I searched the internet to try to find a mention of yesterday's signal and came up empty.  The ZeroHedge web site has a notoriously bearish slant and they have jumped on the other signals but had no mention that I could find.  With the weak technical condition of this market and this signal happening at all time highs I have to think there is a possibility it could be a warning flag this time.  The lack of press most likely means even the bears (what few there are out there) have stopped looking for warning signs.  This looks like a textbook bull market top to me.  I guess we will see what happens.  Here is a look at the futures chart.

The futures ended the day slightly below their prior high.  This is potentially a failed break out, but since it is only marginally below we need to see follow through.  Below the 50 SMA would be a good sign the break out has failed.  Falling below the green support line again will likely bring on more selling.  Do the bulls come back next and try again?  Will the bears strike while the iron is hot?

IWM was down 1.5% and is back below its 200 DMA.  The daily SPX chart looks pretty suspicious as a short term double top combined with a slightly larger double top higher high with the July high.  Just about every index has possible topping patterns sitting out there in plain sight.  If sellers show up next week they could do more damage this time.  The last time we had new lows this elevated at all time highs in SPX was around the 2000 top.  It is a sign something is wrong.  I can't say it any clearer then that.  I don't know what is bothering the market.  It could be one of many things.  The bottom line is that something is wrong and we will likely only know what it is later in time.  Don't be lulled to sleep here.

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


Thursday, September 18, 2014

Daily update 9/18

A new high close on SPX, the Dow and the transports.  Here is a look at SPX.

SPX closed just fractionally above the prior intraday high.  Will SPX keep going or will this turn out to be a failed test of the high?  It was a very strange day despite the high close.  Breadth was only 59% positive.  Not exactly a sign of bulls rushing in.  That is not the strange part though.   There were
112 new highs and a whopping 78 new lows.  Since we had a sizable gap up this morning and never traded even close to negative on the day that is rather striking.  I have not seen new lows that high with SPX at all time highs since back in the 1999-2000 time period.  I thought new lows were elevated in Oct. of 2007 in the 30s and 40s as the market was making its final high.  This is definitely abnormal behavior.  The big technical divergences I have been talking about for weeks are still in place.  Lets take a look at the futures chart.

The futures popped up several points after hours (maybe early results on Scottish independence vote).  The market traded mostly sideways all day after the opening gap up.  Breadth has been weak on this leg up.  It looks like it is mostly driven by long index positions.  Was that Wall Streets way of making sure the much talked about Alibaba IPO comes out tomorrow without a hitch?  I am sure Wall Street firms are making a lot of money on the deal.  They had a vested interest in making the market look good so there would be a lot of investor appetite for the stock.  It will be interesting to see what happens next week.

I will be watching SPX's 18 DMA (1998) as a bull/bear line.  Since we are retesting a high a close back below that line is likely to bring on some selling.  In the mean time we will see how far the bulls are willing to take it.

It seems like almost every night I have to change something in the trend table.  Despite the extremely bullish sentiment out there the market is clearly churning around.  At highs that is usually the sign of a top.  I guess we will see what happens.


Wednesday, September 17, 2014

Daily update 9/17

That was a bit of a ho hum FED day.  However, SPX did test up above 2005 and found resistance again.  Here is the chart.

SPX closed below yesterday's high so there was no confirmation of the close above the 18 SMA yet.  That is not a very pretty looking candle on this retest of the highs.  Closing back below the 18 SMA (1997) would likely bring on some selling pressure.  There were 83 new highs and 61 new lows.  That is pretty shabby on a day when both the Dow and the transports closed at new all time highs.  The number of new lows is very elevated and is probably a bigger warning then the low number of new highs.  More and more stocks are breaking down.  Lets have a look at the futures chart.

The futures rallied past the high of yesterday's green bar.  However, they only managed 1 point on a closing basis.  Not exactly a lot of enthusiasm by the bulls here.  What are they waiting for?

When we were last here in early Sept. I said the market was in the weakest technical condition in this entire bull market.  On this retest we are even weaker.  The elevated  number of new lows is new this time.  Every other time we were around the highs that number dropped down to around 20 or less.  In Signs of a bull market top I wrote about several things that appear at tops.  However, the part that was missing at that time was a topping pattern.  The technical picture for a top is now coming into focus.  IWM clearly looks like a potential top.  Even SPX is looking like a double top with a slightly higher high.  Market internals are showing many divergences.  The number of stocks already more then 20% off their highs is really typical of what the start of a bear market looks like.  The technical picture has now joined all the other things that appear at bull market tops.  If the bulls fail to get a clear and decisive break out here I think the bears (are there any left?) will get their day.


Tuesday, September 16, 2014

Daily update 9/16

Well, we did not get the new normal gap up on pre-FED day, but they came out and bought the gap down.  Here is the daily SPX chart.

SPX closed fractionally above the 18 SMA.  Today relieved the modest oversold condition we had.  I think today's action was primarily headline driven.  There was talk that the FED's mouthpiece said the "considerable period"  language will still be there tomorrow.  There was also talk of liquidity injections in China.  Often news induced moves end up getting reversed.  We will have to wait and see if that is the case this time.  Here is a look at the futures chart.

Here we are with a green price bar again.  Every other time that has happened in Sept. they sold it the next day.  Will it be different this time?  Breadth was 62% positive.  New highs were a whopping 47 with 75 new lows.  That on a day when the Dow made a new intraday all time high.  It failed to close at a new high though.  Obviously internals left a lot to be desired for the bulls.  I think there was a lot of index positions put on and not so much in individual stocks.  That is consistent with a news driven move.

Yesterday the number of stocks above their 200 MA had a big whack.  Today that number only bounced back a little.  Market internals continue to weaken this month.  If the bulls don't get it together and break this thing out on the upside it is going to correct.  Tomorrow is FED day and often the market marks time until after the announcement.  I also find trying to predict what will happen after said announcement to be a waste of time.  Will the resistance above 2005 still be there if tested?  Will support in the 1980 area hold again if tested?  I am suspicious of the way the internals are falling apart that in the end we will head lower.  However, the market can jerk around for quite a while before finally deciding.  I am going to need to see true strength at the highs that indicates rally chasers are alive and well to change my mind.  The numbers of new highs are so low that just seems like the lower odds scenario.  Stranger things have happened I suppose.


Monday, September 15, 2014

Daily update 9/15

It was a mixed market day.  Technology stocks hit the skids while the Dow was up slightly.  Here is a look at the SPX daily chart.

SPX was down only slightly today and is hanging in between the 18 and 50 SMAs. The dip buyers did just enough to hold SPX up today and no more.  This is expiration week which typically has an upside bias, but so far not so much.  I want to show the 60 minute futures chart of intraday data tonight.

It looks like we have a downtrend channel forming over the last several days.  We ended the day right about in the middle.  Which line get hits next?  I don't think we have had a perfectly formed downtrend channel like that in quite some time.  The three pullbacks we had so far this year were too steep and too volatile to form a channel.  I don't know if that means this one will last longer then the others or not.  I guess we will see.  Lets see what the overnight futures chart has to say.

The futures tested the green line today, but failed to stay above it.  I want to see a clear rejection of this line before saying it has become resistance again.  The -DI line got up to 34 which is really close to the key 35 level.  Is that enough selling pressure to make a low?  It can be sometimes.  It just depends on how the bulls are feeling.  Lets have a look at the IWM chart.

 IWM took quite a tumble today and ended up back below its 50 and 200 SMAs.  That looks like a pretty clear rejection at the .618-.786 retrace zone.  This is looking more like a top all the time.  Will the dip buyers come in at the 200 yet again? 

Wed. is FED day and all the talk is about whether they will change the language around rate hikes.  I have no idea if they will or if the market will care if they do.  The day before the FED meeting has seen upside gaps pretty often lately.  I wonder if that pattern will repeat tomorrow.  The market may idle until after that announcement on Wed. 

Here is an interesting article.  Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market
Here is a snippet.

Beneath the U.S. stock market’s record-setting gains, trouble is stirring.  About 47 percent of stocks in the Nasdaq Composite (CCMP) Index are down at least 20 percent from their peak in the last 12 months while more than 40 percent have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index (SPX), which has closed at new highs 33 times in 2014 and where less than 6 percent of companies are in bear markets, data compiled by Bloomberg show. 

I mentioned the trouble with Russell stocks on the blog before.  However, I did not realize the COMPX was in such trouble.  It was very strong over the summer and made new highs in Late Aug. along with SPX.  Many stocks more then 20% off their highs is a common occurrence just before a bear market.  I honestly don't know how many times you get numbers like that and you don't get a bear market though.  Nobody ever compiled that statistic that I saw.  Time to be very careful.  This market is slowly falling apart from the inside.


Friday, September 12, 2014

Daily update 9/12

The sellers showed up again without hesitation.  Here is the daily SPX chart.

SPX closed below the 18 SMA again.  It also closed below July's high close for the first time this month.  However, it did not close below the recent intraday low.  Volume increased again.  Breadth was 77% negative so the selling was broad based.  Lets see what the futures chart has to say.

The futures closed slightly below the support line.  They made a slight new low for this pullback, but they rebounded enough to get above the prior low.  The -DI line has moved up, but is still below the key 35 level.  If we are going to go down significantly here that should happen soon.  Just like they have all month sellers showed up on the green price bar from yesterday.  Obviously there are people looking for strength to sell into.  How much ammo do they have?  This is one of those tricky situations.  We closed below support, but there is the possibility of a double bottom and bounce. 

Things are muddled at the moment in the short term.  That should not be a surprise with all the question marks in the trend table.  There are people selling strength, but whatever the reason is it does not seem to be widely known.  There are so many things going on take your pick.  However, despite all that the dip buyers keep showing up.  We are oversold a bit short term with a possible double bottom so those dippers might show up again.  Longer term I believe we have started down for the biggest move down in quite some time.  We had the weakest technical condition this entire bull market at the highs.  This week we had Wall Street strategists jumping all over themselves raising SPX targets.  It even prompted one of the TV hosts to ask the question where did all the bears go.  Overly bullish sentiment combined with a weak technical pattern usually means a sizable down move.  Even if we bounce next week I don't think we will get much past the highs.  If we continue down we have the 50 DMA 1972 and the 100 DMA at 1944 as support.  There is also a rising trend trend line in the middle of those moving averages that could come into play.  Who is going to show up to play on Monday?

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


Thursday, September 11, 2014

Daily update 9/11

Wall Street started off with a somber tone remembering 9/11.  I think that kept market action rather muted all day.  Here is a look at the SPX daily chart.

SPX ended with a slight gain after starting with a gap down.  Once again breadth was only marginally positive.  There were only 43 new highs (13 in SPX).  With SPX only 10 points below its all time high close that is a really odd stat.  We have not even broken the 18 SMA yet.  Looking at those numbers you would think it was a down day and was trading around 50 SMA or below.  So far this two day rally looks like a dead cat bounce.  Will it catch fire or roll over?  Let see what the futures have to say.

The price bar turned green again today indicating the short term oversold condition from the blue bars has been worked off.  Every other time this month the bar has turned green the sellers showed up again.  Will that happen this time?  Key support has been holding, but the bounces are not very strong.  Now that we have a green price bar I suspect that support line will break if tested again.  If we are going to test the highs again I think we need to rally strongly tomorrow.  IWM showed relative strength today for a change.  Lets take a peek at the daily chart.

While IWM showed some strength today it stopped right at the .618 retrace line again.  Is that line going to hold as resistance or do we break through this time?  I sure wish I knew the answer.

Do we roll over or test the highs from here?  I kind of think we might get that decision tomorrow.  Given the weak start to this rally I don't have a lot of confidence that a retest of the high would be successful and lead to further gains.  We are going to need a good strong day and blast out to new highs.  I am not sure what it would take to make that happen.  As I commented the other night the news flow is actually pretty good lately.  One thing that might be a worry to some investors is the rally in the dollar.  Slow moves are not a problem, but this rally has been very steep for the dollar index (over 5% since July 1).  That move has been particularly acute against the British pound and the Euro which account for a large share of our exports.  That will have a negative impact on foreign revenue. 

I often hear the Wall Street pundits compare the current situation to 1995-96.  They do this to try to convince us there is lots of upside left.  I will leave out the valuation situation which is quite different this time.  Lets look purely at price.  Here is a chart of SPX in 1995.

After crossing the 100 SMA in Jan. of 1995 it never touched it again that year.  In fact it rarely even hit the 50 SMA.  That was a strong pattern.  No doubt about it.  Lets look at the current rally.

Most of the time SPX has made marginal new highs then sold off to the 100.  Only off the Oct. and April lows did the market really zoom past the prior high.  Does this look the same to you?  It doesn't to me.  This doesn't look nearly as strong of a pattern.  Not all uptrends are created equal and I don't think these two are the same.  The 95-6 rally saw a lot more gains.  Do we also get that from here?

Today's strength in the Russell2000 has upgraded the short term trend back to neutral from down.


Wednesday, September 10, 2014

Daily update 9/10

We got the expected bounce.  Here is the daily SPX chart.

SPX closed back above the 18 SMA.  However, it was not the strongest of bounces.  Breadth was barely positive and new highs were only 54.  AAPL rallied strongly which probably contributed to the buying. Lets have a look at the futures chart.

The green support line held and the futures bounced after the European close.  In the afternoon they stopped right at the 50 SMA line.  Has that become resistance now?  We should find out tomorrow if that is the case. 

Tomorrow is a little tougher to call then today.  We got the expected bounce, but it was weak and stopped at possible resistance. The only real known resistance at the moment is up above 2005.  Do the sellers wait until we get back up in that area before acting again?  If the bears come back in the morning then today was likely a dead cat bounce and we are going lower.

One of the things that happens at tops is that many stocks top out and start heading lower.  This is the main reason why I monitor new highs.  The fewer there are the fewer stocks are still going up.  However, that does not really tell the story of how much damage is being done to individual stocks.  Here are a couple of charts from a Bespoke article on the topic Average Stock Declines From 52-Week Highs

Broken out by market cap really shows the weakness in small caps.  However, there is also weakness in the mid cap market as well.  The next chart is by sector.

One of the strongest sectors this year was energy.  I was surprised to see that sector with so many stocks well off their highs.  I have been hearing a lot about slumping global demand for oil which indicates the global economy may be slowing down again.  The weakness in consumer discretionary indicates the consumer is still struggling.  You would not know that by looking at RTH though.  That ETF would seem to indicate all is well.  I am not sure what the real story is there. 

I heard Jim Cramer talking about a bifurcated market the other day.  These charts certainly show that is true.  The market is correcting internally.  How extensive the correction will become remains to be seen.  Anybody remember people talking about a bifurcated market before?  I do.  Anybody remember that talk not being associated with some kind of top?  I don't.


Tuesday, September 9, 2014

Daily update 9/9

A little bit of selling.  I thought selling had been outlawed.  I guess there are a few people out there that didn't get that memo.  Here is the daily SPX chart.

SPX closed below the key 1991 level and below its 18 SMA.  It held above the important 1986 level though.  Volume increased and breadth was 75% negative so it was a serious distribution day.  Will the bulls buy the dip yet again?  Lets take a look at the futures chart.

While SPX closed below its July high the futures did not.  We have a little bit of a disagreement there.  We now have three blue price bars (indicating price was below the lower Bollinger band) in a row.  Most of the time the futures actually bounce after a blue bar.  On the rare occasions where there is more then one the odds favor more downside to come.  You can see on this chart where it bounced after the first two times there were blue bars and continued down the third time with back to back blue bars.  Even if we bounce off the green support line tomorrow the pullback might not be over.  The MACD crossed the 0 line today giving the bears a little more support.  Lets see what the IWM chart looks like.

IWM closed below the neckline of the possible head and shoulders pattern I mentioned last night on an increase in volume.  This could be the end of the rally off the Aug. low.  Follow through is key though.  It could be a false break down. 

SPX closed below its 18 DMA for the first time since the Aug. low.  That is a common bounce point.  The futures are also sitting on support.  In the absence of bad news the bulls might try to engineer a bounce tomorrow.  If we follow through on the down side instead then we are likely in pullback mode and headed for the 50 DMA.  Today's action forced me to downgrade the trend status table.


Monday, September 8, 2014

Daily updatre 9/8

The consolidation phase continues.  The bulls did not show up today to capitalize on Friday's strength.  Here is the daily SPX chart.

We had a slight gap down this morning which a few dip buyers came in on.  However, as soon as price got up around yesterday's high sellers showed up and took SPX back down to 1995.  Buyers showed up there and pushed price back slightly above 2000.  We still have sellers above 2005 apparently.  Until the bulls decide to over power them or they run out of ammo we aren't going significantly higher.  Lets take a look at the futures chart.

We can see there was absolutely no follow through from the bounce off the 50 SMA on Friday.  Today's price range was completely contained inside Friday's last bar.  The market is struggling to decide what to do.  In Sept. we have tried to go up and down and failed in both directions.  Are we getting close to resolution?  Lets take a look at IWM again.

IWM was up slightly today despite SPX being down.  However, it is still below the .618 retrace line.  The bulls need to get going here pretty soon.  This is starting to look a bit like a possible head and shoulder top over the last two weeks.  Since we know the market can't go down that was probably a stupid observation.  Why waste time even thinking about a possible top pattern?

We have had one positive breadth day out of the last five trading days.  That is distribution going on, but the market still has not broken down.  I have seen a number of articles mentioning how positive the news flow has been lately.  Still we do not go up.  What exactly is the market looking for?

This is a rather odd situation.  SPX has bounced off its 100 DMA 6 times now and ran right back up to new highs.  I first wrote about this pattern last year after the first 3 bounces.  This is one of the few times any pattern I wrote about kept happening.  This obviously has to be very widely known by now.  How many more times will it work?  This is the first time IWM did not join the new high party with SPX.   My guess is if we roll over here this will be the time it does not work.  What happens the first time it does not work will be interesting to watch. 


Friday, September 5, 2014

Daily update 9/5

The bulls strike back as SPX closes at a new high.  It did not manage to make a new intraday high though.  Here is the chart.

SPX tested the key 1991 level twice this morning before rebounding the rest of the day.  Was that a big enough dip to get people to chase price at new highs?  Breadth was 59% positive and there were only 105 new highs (33 in SPX).   Those numbers indicate a lack of enthusiasm by the bulls today.  Lets see what the futures chart looks like.

That last bar shows a pretty strong bounce off the 50 SMA. The bulls need follow through on the upside to end the consolidation/pullback phase.  Lets have a look at the IWM chart.

IWM bounced off the 18 SMA.  It is showing clear relative weakness to SPX.  This is the first time in this bull market that SPX has been at bull market highs this long that IWM did not make a new high.  So far it has not been able to get above the key .618-.786 retrace zone.  I still think it is going to have to do that to keep SPX going up. 

SPX ended the week in the area where the sellers were waiting the last two days.  Do the bears strike again next week?  Will bulls capitalize on today's bounce and push prices clearly through resistance?  It seems to me there has been plenty of good news lately while the market has been struggling with resistance.  I am not exactly sure what the market wants to see to go higher.  We have tested 1991 on multiple days so it has been validated as an important level.  The bears need to see a break down below there to begin to take control.  In the mean time the current consolidation could be either a top or just a pause before going higher.  We are in wait and see mode.  Just realize the market internals are weak.  If this turns out to be a top I would expect we will get a bigger pullback then we have been seeing lately.

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



The information in this blog is provided for educational purposes only and is not to be construed as investment advice.