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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.


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