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Monday, June 6, 2016

Daily update 6/6

Test of the 4/20 intraday high.

SPX got slightly above the 4/20 high before selling off a bit into the close.  Breadth was strong again at +67%.  New highs were also strong at 207.  This is where the rubber meets the road on this rally.  Will the bulls keep on pushing?

The futures managed to close above the resistance zone.  It remains to be seen if they can stay there.  The first leg up from the mid May low saw a strong ADX reading.  This retest of that high is showing a very low ADX reading.  In other words we don't have any trend strength going into this retest of the April high.  We do have lots of technical divergences, but not all negative.

This morning Tom Lee and Josh Brown were hyping the upside on CNBC.  Josh Brown even mentioned people were talking about a melt up.  Both referenced new highs in the advance/decline line.  Here is a look at the one based only on common stocks.

This line clearly has a little ways to go to make a new high.  The regular advance/decline line is being distorted by closed end bond funds which have been also affecting the new high list.  Notice this line has broken out about the April high.  That is a positive divergence on this retest of the April high in SPX.  There has definitely been stock buying.  Look at the difference to last fall which was mostly a short covering rally.

The number of NYSE stocks above their 200 SMAs is also in a positive divergence with the April high.  Those are the good, now the bad.

The NYSE bullish percent chart shows a big negative divergence with the April high.  The NASDAQ one looks very similar.

There is also a big negative divergence in the number of stocks above their 50 SMAs. 

The bull pressure chart is still showing sizable negative divergences in all three time frames. 

The sentiment shifted towards the bullish spectrum last week.  I am seeing lots of calls for an upside break out these days.  With valuations high and the VIX low along with no discernible pickup in the economy I still think it will be difficult to make new highs and keep going.  I am sure at some point this rally is going to fail.  I am just not sure where.  It could be right here at the April high.  SPX might creep up to the Nov. high (2116).  I can't even rule out a new high (2134) either.  The bulls are in control at the moment.  Until the market does something wrong they have the ball.


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