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Thursday, April 23, 2015

Daily update 4/23 Gaps

The COMPX made a new all time closing high today (it only took 15 years).  SPX made a slight new intraday high, but failed to close at a new high.

There were sell orders resting for SPX at new highs as it was only there for a couple of minutes.  The breadth was a decent +65%, but new highs were low at 127.  The close was also below the 3/20 highs.  Not exactly a pretty looking break out.  This chart looks really feeble to me.  Maybe it is just my bearish bias.

There is something pretty odd in this chart did you see it.  Look at the indicators.  The futures made a new high today, but the DI lines still have a negative cross.  I don't think I have ever seen that before.  I am sure it is a very rare phenomenon.  Rare does not necessarily mean important though.  Time will tell.  Needless to say the ADX is on the floor indicating there is absolutely no trend strength on this move.  In fact since March the only time the ADX has risen has been during down moves.  That is the exact opposite of what bulls want to see. 

Other then the fact that some indexes made a new closing high I am having trouble finding positive things.  The number of new highs is low.  The Dow, transports and financials did not make new highs and are a ways away.  The SOX ended up -1.5%.  In Signs of a bull market top  I talked about investors ignoring fundamentals.  Economic data is very soft both here and abroad and earnings estimates have been greatly reduced.  And yet the market marches to new highs.  There is a big disconnect between fundamentals and price. 

I think sometimes the market has an agenda.  They have been talking about the COMPX making a new high for over a year now.  Is this going to be a case of mission accomplished?  Do people really feel good enough to push prices into new high ground and beyond?  I kind of doubt that.  This market feels like it is completely exhausted to me.  I will still be watching the 18 SMA on the futures chart for a sign this rally is over.  In the mean time lets see if rally chasers show up or not.

I was talking with a friend the other day and I realized we viewed gaps a bit differently.  Here is my terminology on gaps.  I make a distinction between closing a gap and filling it.  To have a gap in the first place the open must be above the high or below the low of the prior day.  A gap is closed anytime price overlaps the price range of the day before the gap.  To fill a gap price must get to the closing price of the day preceding the gap.  The exception to that is the S&P futures.  Over many years of observation I noticed a pattern of price stopping at the high or low of the last 30 minute price bar of the day preceding the gap.  On the futures I consider the gap filled if it gets to the high or low of that last 30 minute bar.  So when I talk about a gap being closed or filled you will know what I mean.  Here is why I look at gaps this way.  The high/low of the gap day is often support/resistance.  If price gets into the gap there is often support/resistance at the high/low of the day preceding the gap.  If price gets past that support/resistance there is often more support/resistance at the closing price of the day preceding the gap.  Sometimes those support/resistance areas only cause a pause in price and sometimes they are like brick walls.


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