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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.


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