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Wednesday, October 28, 2015

Daily update 10/28

The exact opposite of the last FED day.  After the last announcement stocks rallied then sold off into the close.  This time they sold off first then rallied into the close.  Did I mention that the statement might move the market.  Amazing how no actual action can cause such a stir.

SPX makes a higher close confirming the 10/23 break of the 200 SMA.  The one caveat here is that what happens on FED day sometimes reverses over the next 2-3 days.  However, the last meeting saw follow through so maybe this one will also.  New highs came in at 107 while new lows dropped a bit to 56.  SPX is getting really far from that 50 SMA now.  So far no problem though.

The futures stayed outside the Keltner channel and powered higher.  They are really extended from the 100 SMA, but so far nobody cares.

The green count barely crossed the 50 threshold today.  While the breadth was strong this thrust might be lacking in power.  We will just have to see what happens in the next few days.

Commentators read the FED statement as a hike is still possible at the Dec. meeting.  That sent the dollar up strongly along with SPY and sent gold lower.

The FED is threatening to tighten and the ECB is threatening to ease more.  That is very positive for the dollar index as the Euro is the heaviest weight.  Therefore this move makes a lot of sense.  Many of the companies that have reported have basically said the rise in the dollar ate their earnings.  Some companies have said it made a 10% difference.  Theoretically a rising dollar that is bad for earnings ought to be a negative for big cap stocks.  Not so far.  There may be a pause/consolidation here at resistance, but I expect the dollar will get through it this time.  Then it should be on to test the highs.  If that were to play out at some point I would expect a negative effect on SPX.

There theoretically should be lots of overhead resistance in this area on SPX.  However, there has been no sign that is the case.  If nobody sells SPX is going to test the highs.  There will be so many divergences I seriously doubt it will get very far into new high ground.  I have commented a few times how this year reminds me of the 2000 top with IBB playing the role of QQQ.  That top started with the transports topping in 1999 now 2014.  In 2000 SPX and QQQ made their highs in the spring.  SPX retested that high in late Aug. early Sept. while QQQ was much lower.  SPX made a slightly lower high on the retest then fell apart.  We now have SPX testing the highs and IBB considerably lower.  While the charts are not identical to what happened in 2000 they are similar.  I don't think SPX has to make a new high just because we are this close.  Maybe it does and maybe it doesn't.  They always say that it don't matter til it matters.  That is what is going on with the dollar.  We may wake up some day and all of a sudden it matters.  Since I don't have a crystal ball I will have to just take things one day at a time. 


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