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Thursday, July 7, 2016

Daily update 7/7

Another interesting day.

SPX not only ventured above 2100 it actually got slightly above the 7/1 high before turning back.  Even with a furious last hour rally it still closed below 2100.  As we know those last hour moves are not reliable for future direction so it did not really help the bull case.  Breadth was slightly positive despite the slight negative close.  New highs dropped down to 172 despite this morning's strength and new bounce high .  New lows also dropped and came in at 20.  The bulls really fumbled the ball today.  It remains to be seen if the bears pick it up and run with it though.

The mid day sell off sent the futures down slightly below the 20 SMA.  However, the late day bounce had it well above the line at the close.  This chart looks pretty neutral here.  It won't take much to turn it down, but it isn't there yet.

The green count increased slightly today without upward progress in SPX as mentioned last night it could.  While the count is still not overbought we have one more day where it could increase without upward progress in the market.  Unless the market tanks tomorrow it seems likely we will reach overbought.

Just like yesterday the bulls need to get SPX higher or risk losing control.  A close below today's low (2089) is likely to bring on more significant selling.  I still think this is an important battle for the bulls.  I heard Bob Pisani on TV saying the market does not appear to be in for any serious downside.  He cited the advance decline line and the number of new highs.  I agree that by those measures the market looks strong.  However, there are some serious problems with market internals.  Especially with the various indexes.  SPX is near 2100 and previous highs, but check out XLF, IYT, QQQ and IWM.  None of those important indexes are near their rally highs.  The market appears to be vulnerable to me.  Big down moves can happen when the market goes down unexpectedly.  From listening to traders and money managers on CNBC of late there is practically no worry about the downside whatsoever.  Pisani's confidence seems to be shared by many and may itself be a contrarian indicator.  This may not be a time to be lulled into a false sense of security. 


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