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Monday, November 2, 2015

Daily update 11/2

Another buying explosion.

SPX has not been this far above the 50 SMA since 2012.  Breadth was a super strong 78%.  Oddly high for a market this over bought.  Possible capitulation by some shorts.  New highs were only 99 so the buying was not really in stocks near their highs.  We had more new highs then that a couple of weeks ago.  New lows dropped down to 29.  Still elevated for this close to the highs though.  Volume was a bit light for such a strong day.  SPX is just 28 points from its intraday high.  Still no sign of any sellers. 

The futures tested their overnight high today.  ADX is making a lower high.  This kind of qualifies as a retest should we turn back down from around here.  The 18 SMA has done a great job of catching pullbacks on this rally.  I wonder what happens when it gets broken.

Today helped the green count some, but it is still just barely over 50.  Obviously this rally is still a bit fragile. 

The MCO is back to over bought.  The 10 DMA lines are not showing the same strength we had back in Oct. when the MCO got extremely over bought.  That means it would be easier for the market to roll over this time. 

The market keeps on getting more and more over bought.  So far it has not mattered.  Today's rally was on more bad economic data out of China and right here in the U.S. as the manufacturing ISM came in at just 50.1.  All the FED's regional surveys were negative in Oct.  The Chicago ISM was the only bright spot coming in oddly strong.  We don't have any sign yet manufacturing has turned the corner.  Many energy companies have announced more layoffs and capex cuts.  None of which is likely to help the economy.  I think we still need to be on recession watch which seems to make this rally totally disconnected from reality.  The market has done that in the past.  Sometimes reality catches up to the market and sometimes the market catches down to reality.  Our current reality is a slowing economy and declining revenue and earnings.  Normally that is not especially bullish.  So either things are about to get better or stocks are about to get worse.  Which will it be?

Bears need to get a confirmed break of the 18 SMA on the futures chart.  Until that happens SPX could still test the high.


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