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Tuesday, April 28, 2015

Daily update 4/28 Watching IBB

The bulls showed up for the post reversal day bounce.  Tomorrow will probably tell us more.

SPX found a bottom during the early morning selling at the 18 SMA.  The dip buyers did their job the rest of the day.  Breadth was a respectable +60%, but new highs dropped way down to 60.  That is really pitiful for one day off an all time high.  With this being a positive day that makes it all the worse.  I could see that if we were down 1.5% or something.

The futures bounced off the 50 SMA this morning.  The DI lines recrossed back to positive.  This is starting to get that braided look which is an unstable pattern.  ADX backs that up with an 8.85 reading.  I don't know if I have ever seen it that low on the futures.  It is a rather amazing lack of trend.  That usually means something big is about to happen.

I think the key to what happens next lies with the biotechs.  They are clearly a bubble very similar to tech stocks back in 2000.  They have a fairly big influence in QQQ and IWM.  If this turns into a top it could easily take the entire market down with it.  A month of over sold bounce was essentially wiped out in  two days.  We have important support at the green line.  Lets see if we test that support in the days ahead.

I just wanted to refresh your memory of the biotech bubble.  It will be pretty shocking if that is not a major top in this ETF.  They will likely fall hard.

Tomorrow is FED day which is a bit of a wildcard even though nobody expects anything to change.  After that is over we can get down to the business of figuring out if yesterday's key reversal day was meaningful or not.


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