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Wednesday, May 20, 2015

Daily update 5/20 Transports break down

The bulls pushed SPX to a new high after the FED minutes came out at 2 PM.  However, once again there were no buyers up there.

When SPX traded below yesterday's low the bulls stepped in to stem the decline.  However, they could not get anything going on the upside before the FED minutes.  The breadth was slightly positive.  So far SPX has been unable to stay above 2130 for any length of time.  It is important to note that because of the trading range we are not overbought on longer term measures.  That leads me to believe that buyers are shy because of price/valuation.  I guess not enough investors think the fundamentals justify higher prices.

We can see some upper tails indicating resistance at higher levels.  The futures are down a few points as I right this giving us a red price bar.  They are now sitting on the potential support of the 18 SMA.  Will they be able to hold up tomorrow?  The bears need to see a break of that MA.

The airline stocks crashed today taking the transports below key support.   Nobody seems to know the reason why.  Look at that volume.  This is either a great wash out low or a serious break down.  If this is a fake out they should be able to overtake support within a few days.  Since they have not made a new high at all this year this could certainly be an important break down.  People have been starting to talk about this index not participating on the upside the way it should.  I am sure they will notice the break down.  This sets up the potential for a Dow theory sell signal should the Dow also break key support.  With the weakness we are seeing in the economic data this could easily be for real.  It is time to pay very close attention to what happens.

The bulls have really tried hard to keep the market going up, but they are not having much luck.  This looks like an extremely exhausted market to me.  The kind of exhaustion that often precedes a bear market.  In Is both Dec. and Jan. down important? I noted that when both Dec. and Jan. were down it was usually a sign of a bear market.  The only time it was not was the 1983-84 occurrence.  Even in that year stocks continued down with the low in July.  Now we have the transports breaking down to add some odds that a bear market may be right around the corner.  We also have clear signs the economy is the weakest it has been in this recovery.  The evidence is stacking up that there may be trouble ahead for stocks.  Stay tuned


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