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Tuesday, February 23, 2016

Daily update 2/23

Oil down, SPX down.

The supposed oil production freeze deal that everybody knew would never happen fell apart today.  That caused oil to drop and stocks went along for the ride.  The breadth was -65% so it was broad based selling,  New highs dropped down to 39 while new lows picked up just a bit to 24.  The volume was light.  Bulls would say that is a good thing, but when SPX is down 1.25% that means buyers put their hands in their pockets.  It did not take much selling pressure to send SPX down considerably.  That is a hallmark of a bear market. 

The futures pulled back to the 20 SMA.  This could provide support for a bounce.  A break of that MA will probably indicate the bounce is over.  Notice that ADX is staying on the floor on this rally.  No trend strength in this move up yet.

The market got fully overbought and the VIX got below 20, but we are still in a short term uptrend.  I don't think I can say with any confidence the market is rolling over just yet.  Another down day like this will probably do it though.  Will oil be up or down tomorrow?  That may be the deciding factor since this entire rally seemed to be predicated on the oil bounce.  I was thinking SPX would get to its 50 DMA with all those divergences noted at the low.  Maybe it won't make it there if oil keeps heading lower.


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