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Wednesday, February 11, 2015

Daily update 2/11 Bullish R2000?

Breadth was negative all day long as the market tried to rally.  At one point it was 68% negative and SPX was only down about 2 points.  However,  AAPL was having a very good day.  Its market cap reached $700 billion today.  With SPX being a cap weighted index that means AAPL has a bigger weighting then any stock has ever had.  I don't know offhand what that weighting is, but I wonder if the breadth mismatches we have seen occasionally this year had to do with AAPL.  I will pay more attention to that in the future.  Lets see what the SPX chart looks like.

SPX opened down a bit and bounced.  It sold off hard in the early afternoon for a short while.  It then bounced back and even popped out to a new high of the year for a few minutes.  All the while breadth was negative like a distribution day.  We closed with breadth at -55%.  There were 114 new highs and 26 new lows.  The highs were better then they have been the last two days.  However, still very weak with the indexes so close to the highs.  Are we making a right shoulder here or are we going on up?  Here is a look at the futures chart.

There was a pop in the futures after the close on Greek debt news.  However, as I write this they are going slightly negative from the 4 PM close. There still seems to be resistance in this area during market hours.  There are a lot of white price bars.  We keep going in and out of green.  A strong market usually has runs of green bars back to back.  This action is pretty sloppy.  I still don't see any sign we are in blast off mode.

I have no idea what is going to happen in Europe or how the market will be affected.  It is difficult enough to try to predict what is going to happen in normal conditions.  I don't see how it is possible at all at the moment.  A close by SPX back below the 50 DMA is likely to bring on the sellers.  As long as the bulls can keep it above that they have a chance to get it going up.  They seem to be in a struggle at the moment though.

I saw two articles about the R2000/IWM index getting ready to break out.
Why The Russell2000 Is About To Rally 10%
Stock breakout, Bond breakdown about to happen?

I have seen a number of these types of articles over the last few months.  All pointing to the sideways trading range that is itching to break out.  One thing that usually happens during long trading ranges that are a precursor to another big upside move is that sentiment tends to get bearish.  That usually leads to people doing some selling and/or shorting during the basing action.  Sometimes sentiment can get downright bearish.  However, that is not the case here.  I have yet to read a single article proclaiming IWM is forming a top.  I am sure they are out there, but there have not been any in my usual hang outs.  Zip.  Nada.  Its that bearish sentiment that drives the market significantly higher on the break out.  I don't think that fuel is there at the moment.  On the other hand, if this turns out to be a top there is likely to be lots of downside fuel.  Which will it be?


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