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Thursday, February 11, 2016

Daily update 2/11

Retest of Jan. low.  What happens now?

SPX slightly penetrated the Jan. low and was hanging around when a rumor about OPEC possibly talking about cutting production sparked a big rally.  That saved the day, but it remains to be seen if the bulls have won the battle.  Breadth was -82%.  New lows spiked up to 686, but that is quite a bit lower then the 1368 we had back in Jan. at this level.  Quite a divergence.

The futures slightly penetrated the Jan. low.  Before we had the late day rally the market was acting like people were reluctant to sell as we approached the key Jan. low.  The news flow could easily change that. 

The MCO has reached a slight oversold condition.  There is a pretty big divergence in both breadth indicators with the Jan. low. 

The red count has reached a slightly oversold condition.  There is also an obvious divergence with the Jan. low like the breadth data.

In the absence of bad news the bears might wait to see if the bulls step in for a bounce here.  There seemed to be a reluctance to sell near the lows.  There are big enough divergences that would give very high odds of a short term low here if we were still in an uptrend.  Since we are in a downtrend we are just going to have to wait and see if the bulls make a stand.  Those same divergences could mean there is more downside to come before getting oversold enough to generate the next bounce.  Option expiration is next week and it usually has a strong bullish bias.  While there was a reluctance to sell near the lows it remains to be seen if the bulls are comfortable holding new longs overnight.  Every day seems to bring surprises with foreign markets up or down big.  No way to predict that.


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