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Monday, October 13, 2014

Daily update 10/13

More down.  Here is the daily SPX chart.

My extreme short term oversold buy signal fired tonight.  Odd that it barely triggered despite the straight down nature of this down move.  This is the first time SPX has closed below the 200 SMA since Nov. of 2012.  Breadth was 65% neg. so the selling was broad based, but not extreme.  There were 14 new highs and 445 new lows.  The TRIN closed at 1.83 showing a bit of panic, but not much.  In addition to closing below the 200 SPX also closed below two important support lines.  The Aug. low and resistance area from earlier in the year.  Breaking the Aug. low technically confirms the summer double top pattern (slightly higher high on the second top).  The closing price was below the April high so price has now back up 6 months.  That means I have to change the primary trend to a question mark now.  I think a break of the April low will turn the primary trend down.  That may change as the pattern unfolds. The COMPX dropped back below the Jan. high so it has now backed up nearly 10 months.  This is an important index and so far it is getting clobbered.

The last two days the market sold off pretty hard going into the close.  That suggests that money is being pulled from mutual funds.  I don't know if that is a short term phenomenon or more longer lasting.  If it lasts for a short term only then it could mark an important bottom.  If it persists for weeks then it could be marking an important top.

So now we are finally oversold in the short term.  Will the buy the dip crowd show up now?  The next two important support levels are marked on the chart.  This market has been in runaway mode on the down side.  Be careful about stepping in front of it with new long trades.  It could bounce from around here, but it does not have to.  That may all depend on what we get from earnings.  We should know more on that this week.


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