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Wednesday, November 12, 2014

Daily update 11/12

Wow.  An actual down day for SPX.  I thought those had been outlawed.  Here is the daily chart.

Price is getting squeezed between the 6 SMA and the upper trend line.  One of those is going to break.  Whatever caused the gap down this morning put a bit of a damper on the market.  The breadth was slightly negative.  Usually the Russell2000 follows breadth as it is a very broad index.  However today it was up .55%.  I take that to mean that even the money going into small cap stocks is being concentrated in those stocks with the biggest cap.  That pushed the cap weighted index up despite the negative breadth.  The number of new highs dropped down to only 140.  They had been running over 200 almost every day.  The new lows remain elevated at 38.  That is not normal for a market starting a new leg up.  It would be completely normal if this is a blow off top though.  Lets take a peek at the futures chart.

The price action has lost all upward momentum now and is basically sideways.  If we break the 18 SMA I think SPX will move down to test the 2000 level. 

I think the market needs a news catalyst to really move much higher.  It is clearly showing exhaustion on what we know at this point.  While the dip buyers did rush in to buy today their enthusiasm is waning.  The market even sold off a bit going into the close which is the opposite of what it has been doing lately.  So far nobody has been very anxious to sell.  Until they do there is nothing to worry about on the down side.  Lets take a look at the GWL ETF weekly chart.  This an ETF based on the rest of the world without the U.S.

This ETF bottomed in early June 2012 very near the same time SPX did after its spring sell off.  It moved up along with SPX until June of this year.  It has clearly broke its 2012 uptrend line.  While some U.S. indexes are back to new highs GWL is not even close.  It is clear that global stocks are now in some kind of corrective phase that they have not seen since that 2012 low.  The oil traders keep talking about weak demand.  Is the global economy weakening significantly now?  Will the U.S. be able to stand alone in the face of global weakness?  Remember what the cold weather did last winter.  We are looking at another cold winter and possibly even colder by some forecasts.  When I look around the world it makes perfect sense to me why the U.S. market looks so much like a bull market top.  All those market divergences are still in place.  Can SPX stay out at new highs long enough to clear them up?


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