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Thursday, January 8, 2015

Daily update 1/8 FED speaks, market soars

I noticed last night a big pop in the futures.  Apparently it was caused by a FED official saying they should  not be in a hurry to raise rates.  I guess if the FED keeps talking enough we can get the Dow up to 36000 before year end.  I want to look at SPY and IWM tonight.  Study the charts for a minute.

We have two very similar looking launch price bars from the two recent swing lows.  However, the volume pattern is radically different.  Both SPY and IWM saw big volume on the first swing low.  Both had much smaller volume the last two days.  My best guess is the rally from the Dec. low saw a lot of fresh longs while the last two days was more in the way of short covering.  Even with that big launch off the first low both these ETFs barely made new highs before selling off again.  This does not look like as strong a launch as that was.  Will they make new highs or fall short?  Lets see what the futures chart can tell us.

The futures price bars went green overnight and continued higher during market hours.  That gives some confirmation of the short term up move.  They ended the day slightly above the 100 SMA.  This move worked of the oversold condition and puts us in a neutral state.  Notice the blue ADX line in the bottom panel.  It was very high on the rally indicating a strong trend.  It turned down briefly when the sell off started then turned up again.  It once again reached a high value indicating the down trend was also strong.  This is pretty rare and indicates a struggle for power.  Usually the second trend ends up winning.  In this case that would be the bears.  The prior launches off the SPX 100 DMA have seen the futures stay above the 6 SMA all the way to new highs.  Will the bulls pull that off again?

This does not look like as strong a launch as the last one.  I have no idea whether it will carry to new highs or not.  The big moves up and down are increasing the instability of the market.  Imagine the emotions of people managing billions of dollars.  There is uncertainty in the global situation and the market is flying up and down  The market is changing its stripes at the drop of a hat and often on news that is more then likely totally irrelevant.  The instability means it is unpredictable.  If you cannot be nimble then sit back and let the bulls and bears fight it out.  There is clearly a sizable contingent on both sides at the moment. 

The big move up has changed the trend to neutral on the indexes in the trend table.  However, the price bars on the futures chart are confirmed green so the bulls have the edge at the moment.  I will be watching for a confirmed break of the 6 SMA on the futures as a sign to flip back to bearish.  With price in an area of possible resistance and the oversold condition removed the market may need some time to decide what to do next.  Tomorrow is the employment report.  I don't know if that will shake things up or not.

Rant on:

This article is not market related.  However, it is about the world we live in and I think it summarizes thoughts I have had for many years.  The Zombiefication Of America  I am very disturbed by how the media seems to be purposely trying to create racial tension.  The author says this nicely.

Our society is breaking down in thousands of different ways, and we can see the evidence of this all around us.
But instead of coming together as a nation, anger, hate and division just continue to grow.  And all of this anger, hate and division is being fueled by the talking heads on television.

I would add that the internet and social media have given a huge voice to anybody that wants to stir up trouble.  In today's world 10 people can create a firestorm in the media.  Barbarian invasions of the Roman empire are widely viewed as playing a major part in its downfall.  What is the difference between people that use social media to stir up trouble and barbarians?  I am having a very hard time trying to figure out how this can possibly be good for civilization as a whole.  While technology has made things way more convenient then they used to be I am not sure I can say life is truly better.  I am glad I grew up when I did rather then today.  I know from talking to other boomers I am not alone.  I find that rather sad.   I apologize for the divergence from the usual market related content.  Even though I have a very even keeled personality I guess I still need to rant occasionally.

Rant off:


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