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Thursday, May 12, 2016

Daily update 5/12 A High-ly Unusual Breadth Milestone

The bulls gave it a try.

We started with a big gap up which the bears sold into right after the open.  SPX tumbled down to the 50 SMA where the selling magically stopped.  The bulls stepped in and took SPX off its lows and back into positive territory for the day.  However, the bears stepped in and pushed it back into the red.  The breadth was only slightly negative.  New highs were about the same as yesterday at 131.  New lows popped up considerably to 38.  That is the highest the lows have been since coming off the Feb. low.  The bears grip is tightening just a bit.

The futures dipped below the 20 SMA, but failed to stay there.  The bulls did enough to keep the market from collapsing today.  Will the futures launch from this MA or end up breaking down?

Despite being a down day the green count picked up a bit and the red count dipped.  This chart is neutral now.

The short term lines are still negative.  The intermediate lines have a negative cross tonight.  That increases the odds we have seen the peak of this rally. 

This may be the most important thing that happened today.

The transports had a very noticeable positive divergence with SPX back in Feb.  Starting in March they had a noticeable negative divergence as it formed a double top.  Today it closed below the middle low consummating the top structure.  I think this increases the odds the head and shoulders top we are watching in SPX will play out.  The bulls need this to rebound tomorrow.

We keep getting more clues the rally in SPX has peaked.  I think it is only a matter of time before it tests the 200 DMA.  The COMPX and R2000 would be well below their 200s by that time.  As this earnings season winds down it does not appear to have inspired the bulls about the future.  The path of least resistance still appears to be down.

I have mentioned the new high data recently and that I do not really understand exactly what it means.  A reader (tnx satch) pointed me to this interesting article.  Here is a look at similar instances in the past.  A High-ly Unusual Breadth Milestone


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