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Monday, February 22, 2016

Daily update 2/22

The rally continues to pick up believers.

SPX came within 6 points of the 50 DMA.  The breadth was +76%.  I saw a piece today about the strong breadth on this rally meaning the worst is over and the market is making a bottom.  If you see such info consider the source lying or just plain clueless.  Bear market rallies are sharp and broad.  They suck people in because of the apparent strength.  Then the rally gets overbought and rolls over to new lows.  New highs were a paltry 56.  New lows dropped way down to 13.  People have quit selling their losers at the moment.  That could be another sign of people believing in the rally.

The futures got up to the resistance area from the early Feb. high.  Could be significant resistance here.

The green count is now in the overbought range.  That could be trouble for this bounce.

The VIX close at 19.38 giving us a sell signal.  With the market in an overbought condition just a few points below the 50 DMA upside progress is likely to be tough to come by.  A sell signal in a bear market is not a signal to short.  It is a signal to cut back on long exposure.  This has been a decent bounce and this is a good time to book some profits.  Bears need to wait a bit for a sign the market is rolling over before shorting.  While this market could start rolling over tomorrow it could also continue higher after a down day.  Patience is important in a bear market.  It is no fun to get stopped out of shorts only to see the market roll over without you.  Been there done that.  Didn't like it.  The market is likely to chop around tomorrow while people assess what they want to do here.


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