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Friday, January 2, 2015

Daily update 1/2 A little more profit taking

It was a mixed day to start the year.  As I suspected in the Wed. update the bears sold the gap up this morning.  However, the bulls showed up in the afternoon and almost had SPX green at the close.  Here is the chart.

SPX held the 2012 trend line and the 18 SMA on the close.  Volume picked up a bit today, but was still light.  There probably was a lot of traders off today.  Breadth was only 53% negative.  There were 90 new highs and 20 new lows.  Not a very pretty chart.  The potential double top is obvious.  I have not seen anybody talking about it yet though.  Lets see what the futures chart looks like.

The futures appear to be attempting to find support at the 50 and 100 MAs.  The -DI line crossed the key 35 threshold giving us a sell warning.  We just had one of those back in Dec.  They have been few and far apart the last 3 years.  The MACD crossed negative today adding another sell signal to the mix.  Since the 100 DMA bounce pattern started in June of 2013 none of the bounces have seen any sell signals of any kind so close in time to the low.  It is truly different this time.  We just need to figure out what different means.  The -DI crossing 35 opens the door to a bigger sell off.  Will the bears step through that door?  It looks like we have pretty good reasons to be cautious on the market in the short term now.  However, the futures often bounce from the oversold condition when the -DI crosses 35.  If the futures gap up again on Monday I think they will have better odds of holding on to the bounce longer. 

The VIX closed above its weekly 200 SMA.  This is the third upside cross of that MA since Oct.  Considering such a cross on a weekly closing basis had not happened since 2011 that seems odd.  This looks like another sign that things are different now.  Maybe the volatility that has been present in the currency, gold, and emerging market stocks and bonds is coming to the U.S. stock market.  I have long thought it would, but I have been surprised how long it is taking.  It is time to monitor your positions closely no matter the time frame.

The market is oversold enough in the short term we could get a bounce on Monday if the news flow permits it.  I think we need to see some real strength to eliminate the threat of a bigger pullback.

It looks to me like the investment world is changing.  The market is acting differently then it has the last few years.  Traders must adapt to market conditions whatever they may be.  We have had a period of sharp V bottoms and long roll over tops for a long time.  That may be coming to an end.

SPX and COMPX closed below the low of the previous 8 days so I think I have to change the trend to down.  However, both indexes are above their 18 DMAs so I added a question mark.  The price structure is a little funky on the daily charts.


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