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Friday, June 24, 2016

Daily update 6/24

Devastating day for the bulls.  I will show what I mean.

While SPX is above my support line it was the first close below 2040 since 3/28.  It has also formed another head and shoulders top and is working on a break of the neckline.  Remember we had a failed head and shoulders pattern back in May.  All the market could do was form another one.  That seems unlikely to be a good thing.  Breadth was -82%.  New highs were strong at 155.  It is likely a lot of those were closed end funds and gold miners.  New lows came in at 54, the highest since back in Feb.  I think the holding of support is only temporary.

That is some futures chart huh.  Gotta buy, gotta buy, gotta buy.  Oh no, they voted to exit.  Gotta sell, gotta sell, gotta sell.  Like I said, the polls were way to close to call and within the margin of error.  Right now there is a bunch of people trapped long.  There was a reluctance to sell into the weakness so they will be looking to exit on strength.  No doubt in my mind.

The red count sky rocketed today as you can imagine.  It almost made it to oversold.  The bears are in control here.  Lets look at the weekly chart.

The red count crossed above the green, but is still short of 50.  The first red cross was enough to end the rally off the Oct. low last year.  This likely means the rally of the Feb. low is over.

Both the short and intermediate lines had a negative cross today.  The long term lines are getting ever closer together.  It won't take much to do the job now.

The weekly SPX chart shows an outside reversal bar to the downside.  This kind of bar at prior resistance is likely a very bearish signal. 

There is a lot of technical evidence the rally from the Feb. low is probably over.  Remember the VIX crossed below 20 before SPX crossed above the 200 DMA.  That signal has always meant lower lows were coming.  I see no reason for this instance to be any different.  People piled into this market after the Feb. low on the thesis that Q2 would be the trough in earnings.  The brexit vote calls that into question now.  This could end up being pretty bullish for the dollar.  I think it was bottoming anyway.  Lets look at the daily chart again.

After tapping the 500 SMA a few times it launched today.  It does not like being below 94.  I also read some comments about a global dollar shortage today.  Makes sense to me.  I have talked about the built in dollar demand due to the foreign dollar denominated debt.  This is probably going to start working its way to new highs now.

I heard numerous comments on TV today about the lack of panic.  They all talked like that was a good thing.  I have been around quite a while now and I have yet to see a 3% down day on no panic a good thing.  My guess is there lots of panic in money managers that piled into stocks this year expecting new highs.  I know for a fact they are overweight Europe which got rocked today of course. 

That brings up the potential for margin calls.  You know what they say about that right.  Sell what you can, not what you have to.  In this case that could be U.S. equities, but we will see.

There may have been no panic evident in the market, but I can assure you behind the scenes there are many money managers in full panic mode now.  It is time to sell rallies.  Expect higher volatility and lower prices to come.  I expect central banks and governments will be working overtime this weekend to calm the markets.  Hopefully that leads to a bounce early next week.  Any strength should be used to sell, hedge, or flat out short if you do that.  I think it extremely unlikely this is a one day event.

Today turned the short term trends down across the board.  Unusual pattern.

The market and sector status pages have been updated.  Have a great weekend.


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