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Thursday, November 20, 2014

Daily update 11/19

SPX makes a slight new closing high.  Here is the daily chart.

The bulls bought the gap down this morning showing continuing support at 2040.  However, they did not show much buying enthusiasm above 2050.  Breadth was 62% positive as IWM had a strong day.  However, there were only 104 new highs and 38 new lows.  SPX did not close above Tuesday's high.  Will the bulls show up again tomorrow and chase price higher?  Here is a look at the new highs/lows chart.

The number of new highs has dropped off dramatically over the last couple of weeks.  This is very similar to what happened back in Sept. before the early Oct. swoon.  A rally needs some days over 200 to sustain itself.  A few days under 100 usually leads to a pullback in the near future. 

We had clear support at 2040 the last two days.  A close back below that level should be a good indication a pullback has started.  Market internals continue to weaken as SPX creeps higher.  We had a low volatility pattern and a range expansion to the upside.  However, we did not push any higher over the last two days.  That still leaves the door open that Tuesday was a head fake.  Will the bears step through that door and take control?

In Signs of a bull market top  I wrote "5. Surge in M&A and IPO activity". So I thought this tidbit from Mike Larson was interesting.

For the year, we’ve seen a whopping $1.5 trillion in transactions involving U.S. companies announced. That would make this the biggest year for domestic corporate buyouts since 2000. Throw in overseas firms and you’re talking about $3 trillion — a massive 50 percent increase year-over-year to the highest since 2007.

The years 2000 and 2007 should ring a bell.  We certainly have this sign of a bull market top in spades.


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