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Tuesday, August 2, 2016

Daily update 8/2

Selling pressure.  How odd.

SPX tested below the last 3 weeks of price action, but rallied back some into the close.  It ended the day above the 20 SMA.  The breadth was -75% though so there was considerable selling.  New highs dropped way down to 97.  Volume was relatively heavy.  While SPX closed above the 20 SMA it was still below the low of the last two weeks. 

The futures confirmed a break of the 20 SMA.  They closed below the 50, but have not confirmed a break.  Since SPX made a new all time high the -DI line needs to get above 35 before it would signal the possibility of a bigger down move. 

The red line got above 50 today, but is below oversold levels.

The short term bull pressure lines also have a negative cross.  I would say the long term lines did an excellent job of signaling the likelihood of the upside break out with all the strength back in April.  I did not have any history showing two big negative surges like we had not ending up in a much longer bear market so I was unsure how to interpret that strength.  I think this indicator works as I intended it to when I developed it.  I just hope that with a little more practice in real time that my analysis will one day be as good as the indicator. 

Both the 10 DMA lines and MCO are negative.  The MCO is actually oversold even though we are only one day off an intraday high.  That is rather unusual. 

SPX broke down from the recent range, but the dip buyers stepped in to minimize the damage.  That is not necessarily a good thing.  It depends on what happens next.  A close near the low of the day and a TRIN over 2 would have been a better buy setup.  The TRIN was never very high today and it closed at .83.  If this market is truly strong this test of the 20 DMA might be all that is needed to bring in buyers.  A close below today's low will turn the short term trend down. 

I will be honest I don't have any idea what to expect here.  I can clearly see there is a pretty high risk the U.S. could be in recession even before the year is out.  Credit standards have been tightening for four quarters in a row and default rates on the high yield bonds is over 4%. That has traditionally caused problems.  The oil price is sinking again as the summer driving season did nothing to alleviate the really high inventory.  Now gasoline inventories are building which will only cause less oil to be refined thereby adding to the oil inventories even more.  It looks like the odds oil has another 2nd half swoon is likely.  I think it could end up in the 20s again by year end.  With ultra high stock valuations already it seems hard to make a strong case for going higher.  However, as long as SPX stays above the 2130-35 area the break out stands and higher prices could be in the works.  If that is going to happen I would think the bulls might step right in and at least stabilize price right here. 

The R2000 turned its short term trend neutral today, but the COMPX did not.


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