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Wednesday, February 3, 2016

Daily update 2/3

Interesting day.  The dollar took a big fall while oil rose sharply.  In the midst of all that stocks took a big fall from the open then rallied back in the afternoon.

SPX printed a hammer candle and closed above the 20 SMA.  Talk about a wild ride.  The breadth opened up at +75%, swung to a low of -75% by 10:40, then ended up +60%.  I have been doing this a long time and I can't remember ever seeing that many big swings in a day in breadth.  What the hell is going on?  New highs came in at 87 with new lows at 225. 

The futures sold off all the way to the lower Keltner channel.  They never confirmed a break of the 20 SMA and ended the day back above it.  In the 20 months I have been watching this chart I am not sure I have ever seen a bounce with so many pokes below that 20.  This rally is really struggling, but the bulls still have control.

The green count has come back to neutral, but still above 50 and well above the red count.

The dollar index started down a little bit as the ADP employment data came out at 8:15.  I have no idea why that data would set it off.  While weaker then last month it was slightly above expectations.  I am not entirely sure that data was the catalyst.  The sell off in stocks after the open looked like forced liquidation.  I am guessing somebody had a big margin call.  It is possible the selling in the dollar index was related to that.  I can't say.  The dollar selling really gathered some steam through the morning.  A lot of hedge funds are long the dollar so it is a possibility.  The old saying "sell what you can not what you have to" comes to mind.  It will be interesting to see what the dollar does in the days ahead.

Everything seems to indicate the bulls still have control of this market in the short term. That grip looks extremely tentative though.  Monday's high (1947) is my target on the upside for the moment.  If we get there with some vigor maybe SPX can get up to its upper Keltner channel.  Since the Jan. low SPX has struggled to stay above 1900 except for the day Japan announced negative rates.  While we closed back above that level today I can't really say it has been conquered and resistance in this area is gone.  Lets see if the bulls can generate some upside tomorrow.  Be aware that if the market sells off again tomorrow morning it would probably be less likely to come bouncing back like it did today.


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