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Monday, October 6, 2014

Daily update 10/6

Today had something for both the bulls and the bears.  Here is the daily SPX chart.

The good news for the bulls is that SPX held above the 100 SMA at the close.  The good news for the bears is that SPX tested the 50 SMA and the blue trend line and got rejected.  Price was above the 50 and below the 100 during the day.  Breadth was dead neutral at the close.  However, it started out the day 70% positive so there was considerable selling into strength.  New highs were 38 and new lows were 75.  Not much there for the bulls to grab on to.  Lets see what the futures chart looks like.

The futures crossed the 200 SMA and ran up to test the lower green line overnight.  They appear to have been soundly rejected there.  They ended the day well back below the 200.  Will they follow through on the downside tomorrow or reverse again?

IWM closed below Friday's low making its daily chart look like this was a dead cat bounce.  The transports were down over 1% today which is not a great vote of confidence either.  However, SPX is still above the key 100 DMA so the potential bottom pattern is still alive.  Now that the pattern is widely known it is only a matter of time before it fails.  This may be the time. 

Lets see how the micro cap index is doing.

IWC looks like it is still in risk off mode.  So far this is looking like an even bigger divergence then we saw in 2007.  How much longer will this go on?  Which way will they recouple?

Here is a chart I have not shown in a long time.  This the NYSE bullish percent indicator.

This is the lowest this indicator has been since June of 2012.  Notice the huge divergence at the Sept. high.  There was a clear lack of participation off the Aug. low.  While the sell off in late Jan. looked way more scary then this one has so far it did not do as much damage. 

I think both bulls and bears went home today thinking their side was in control of the market.  Their was definitely some bearish looking action today.  The breadth faded from a very strong start.  However, the dip buyers showed up in the afternoon and held the bears off.  As I was looking at things near the close I could see both positives and negatives.  I think tomorrow is going to be an important day.  SPX is likely to decide whether to do the 100 DMA bounce or fall back down through it.  If we head down again the exit is likely to get very crowded.  With the 100 DMA bottom pattern widely known it stands to reason a failure will be noticed by a lot of people.  Those looking for an excuse to take profits will find it.


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