Despite ending in the red the breadth was +61%. Quite a few indexes were positive. New highs popped up to 45 as post FED buying was quite strong. New lows dropped slightly to 32. Kind of an ugly candlestick there. SPX got up near the upper Keltner channel which puts it slightly into the over bought category. It is still outside the triangle so the break out remains, but was not confirmed today with the lower close.
The futures crossed the 100 SMA, but failed to stay there. This indicates we have worked off the over sold condition. ADX remains low just as on all other rallies over the last few months. It is starting to turn up, but that has been a good indication the market was ready to sell off. The market must continue higher to wrest longer term control from the bears.
The McClellan oscillator is very over bought. At 172 it is still below a level that would greatly increase the odds a retest of the low would be successful. The bulls need to come out again tomorrow and push this indicator over 200. If this turns out to be the peak the bulls could be in trouble.
The green/red bar chart showed some strength, but may have started to roll over already. If this drops back below 50% we are probably starting the retest move down. Lets look at how the 2011 bottom was made.
The yellow arrow marks day 16 of the bounce just like where we are at now. At that point the green bar count got up to 94% as opposed to our peak so far of 73%. The buying on this oversold bounce has not been as strong.
The SPY option configuration suggests they will try to pin SPY around 200 tomorrow. It might be next week before we know the true feelings of the market on the no rate hike scenario. Both the bulls and bears took turns in the market after the announcement.
I can find no sell off with this much technical damage that did not retest the low in some fashion. Therefore odds are high that will happen. How that plays out depends on how strong the bounce is before it rolls over. At this point we do not have the strength to suggest a retest will be successful. I find it curious that the bounce off the Aug. 2011 low peaked on day 16 and here we are on day 16 with a big reversal candle. It may just be a coincidence, but it bears watching to see if we roll over in the next few days.
This is a great article from the infamous technical analyst Martin Pring. A Turn of the Tide Revisited It has this interesting chart and many others.
Martin Pring happens to agree with me that we are still in a secular bear market. I am a nobody so don't believe me. However, his opinion might be worth considering. It will only take a few minutes to read it.
Bob
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