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Thursday, November 6, 2014

Daily update 11/6

A little more up in most indexes.  Here is a look at the SPX daily chart.

Break out players continue to pile in.  The breadth dropped down to only 54% positive.  There were 191 new highs and 60 new lows.  The market is losing steam in both breadth and new highs now.  The new lows remain very elevated.  Lets see what the futures have to say.

The futures managed to climb above the resistance of the last few days and hold onto the gains into the close.  The -DI line is now down to 12 which is a very overbought level.  Most of the time they struggle to go higher and often pullback from that.  The last time that line got that low was 7/3.  You can see the struggle that ensued.  Lets take a peek at the IWM chart.

IWM is still below its high from Friday.  You might recall it bottomed a few days ahead of SPX at the last low.  I don't know if this is an early warning or not, but it could be.  It is worth keeping an eye on.

The futures indicate the market is extremely over bought short term.  At the same time market internals are weakening indicating a loss of momentum.  Bullish sentiment is at extremes I have not seen since 2000.  This still just feels like a blow off move to me.  I guess we will see what happens.

The July closing high in SPX was 2011.  A close below that would bring about a possible double top and could bring in some selling pressure.  Below 2000 and there could be a lot more sellers.  In the mean time lets see how far the break out players are willing to push price.

I have shown many market internal divergences.  Here is one that involves the credit market, not just stocks.  This is the Bloomberg financial conditions index.

Just like the stock market internals this one started diverging back in July.  This all happened at the same time oil started falling and the dollar started rallying.  I don't know exactly what is happening, but something seems to be in the works.


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