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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.


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