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Wednesday, February 17, 2016

Daily update 2/17

Nothing like the upward bias of option expiration week.  Its pretty rare to get one this strong though.

There was a lot of skepticism of this bounce after yesterday.  I wonder if that will continue much longer.  The breadth was strong again at +81%.  The new highs picked up slightly to 27, but remain very low.  New lows dropped down to 20.  That is lower then the we saw on the bounce attempt from the Jan. low.  That makes sense with the big divergence in new lows noted in the blog at the recent low.  Despite the skepticism I hear from traders on TV there are obviously believers in the potential double bottom. 

The futures got a confirmed break of the 100 SMA.  They popped a bit after the market closed.  That is probably amazing in itself with as far as we have come in such a short time.  Panic buying.  We still have another 13 points or so to go before we get to resistance.  The futures are getting pretty stretched from the 20 SMA though.

The MCO has reached very overbought levels.  This halted the last rally attempt, but that was off a V bottom.  Since we have a better looking bottom structure the MCO might only cause a pause.

The green count is just short of overbought levels. 

Price is obviously a bit extended short term and is overbought in the market internals.  Getting this overbought below the 50 DMA is generally not particularly good.  At the same time there does not seem to be many believers out there in the media.  Sometimes bear market rallies last until many  people become believers.  The VIX is at 22.  The last bounce did not stop until the VIX closed below 20.  There is room to go higher, but this big a move off the low in such a short time seems likely to cause some profit taking tomorrow. 

This rally started with the pop in oil caused by some of the oil producing countries talking about freezing production.  This has certainly caused oil shorts to run for cover.  The rise in oil has inspired stock buyers.  The trouble is that this is really just countries talking up the price of oil.  There will be no real action as Iraq and Iran are very unlikely to make any agreement of that sort.  Iran wants to increase production in a big way.  I don't believe the other countries are going to just sit back and lose that market share.  The oil market may come to that conclusion at any time, but there is no way to know when that will be.  The only sell signal I know of at this point is the VIX under 20.  Lets see if the bulls can keep this thing going until that happens.

Today turned the short term trend up across the board.  Just remember the last time the trend turned up the market rolled over.  I don't expect that at the moment, but it is a possibility (some might say a likelihood since I don't expect it).


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