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Friday, January 29, 2016

Daily update 1/29

Thanks to the BOJ the bulls saved the day (for the moment). 

The 20 SMA target was hit and then some.  It was a buying spree as the breadth was +88%.  New highs picked up considerably to 65.  New lows dropped a bit to 41, but that is still high for such a strong day.  What really happened today?  Well, people that were still short pulled their hair out and probably dropped an F bomb or two.  People that were long were cheering like crazy.  People that are bearish, but waiting for higher prices to short were also cheering.  The last group of people will likely end up being the happiest when all is said and done.  More on that later.

The futures got a lift overnight when the BOJ announced negative rates in Japan.  I will have more to say on that later also.  People should not be cheering.  Here we are slightly above the upper Keltner channel which seems likely to provide some resistance.  We should see some give back early next week.  If the market can keep going higher the 100 SMA becomes the next target. 

The McClellan oscillator reached wildly overbought today.  Notice the 10 DMA lines are barely crossed.  This is similar to last Oct. marked by the yellow arrow.  In that instance we had a double bottom formation and price was already close to the 50 SMA.  We have a much different situation this time.  I would not expect this rally to last near as long as that one did.

Now the green count has reached overbought levels.  We are officially short term overbought technically.  In a downtrend that can be trouble.

The VIX closed at 20.20, but was well under 20 intraday.  You might recall last fall I noted that the VIX dropping under 20 with SPX below the 200 SMA was a very good bear market signal.  We now have a second instance.  Expect new lows after this bounce ends.  The higher we go the better the short setup will be.  Over the last few months central bank induced rallies have not lasted very long.  I don't know what the longevity of this one will be.  It could be a one day affair for all we know.  We are overbought enough now the sellers may come right back out in force next week.  Its kind of hard to say after a day like today.  Sometimes it inspires more buying and sometimes it doesn't.  We are going to have to watch and see what develops.

Sometimes I really just plain do not understand the world we live in.  One basic tenet of economics is that savings equals investment.  I think everybody would agree that anybody that spends everything they make and never saves any money will never be truly rich.  Investment is what builds future wealth.  The central bank policy first employed in Europe and now in Japan of negative interest rates discourages saving.  This is an insane policy.  I can't even think of words to describe how stupid it is.  What are central bankers smoking these days?  I am pretty sure that any person with even a little common sense would know this is bad policy.  One interesting thing about economics is that they often talk about a depression but there is no definition of what a depression is.  I firmly believe that both Europe and Japan are in a depression.  China is a basket case.  Things in the global economy are going to get worse from here.  Lets keep our fingers crossed that when things start to get really bad in the U.S. the FED will have better sense then Europe and Japan. 
Today turned the short term trend up across the board. 

Here are a couple of interesting articles for your weekend reading.
This Stock Market is Really Sick, and Big Institutional Investors are Bailing out
Will Record January Stock Volatility Produce Long-Term Tremors?

The market and sector status pages have been updated.  Have a great weekend.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.