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Thursday, August 25, 2016

Daily update 8/25

The market tried to bounce, but was met with a few sellers in the afternoon. 

Third day in a row with the high in the morning and the low in the afternoon.  While this is not very good action for bulls no important support has been broken.  The selling is pretty mild so far.  The breadth was slightly positive.  New highs were 116.  Not very good this close to the high.  SPX closed below the 20 SMA again, but above yesterday's low so it did not confirm a break yet.  More often then not that pattern ends up in a bounce.

The ADX indicator continues to act strange.  It is now up to 30 indicating a fairly strong downtrend, but I still can't see an actual downtrend in the price.  Odd, but probably meaningless in the big picture.   The market has been sideways long enough for the 100 SMA to get caught up to price.  Breaking that most often sets up a run to the 200 SMA which at the moment is 50 points lower. 

The red line crossed above the green again, but remains well below 50.  This is starting to look like the market is churning here.  At highs that is a form of distribution.  It started with the early Aug. pullback.  Evidently there are a few investors out there that don't believe the market is going higher from here.  I can understand that point of view.  Time will tell if they are right.

Yellen is on tap tomorrow.  I don't expect it to be relative to the market, but you never know.  It is likely to be more esoteric central bank gobbledy gook. 

The market has shown a bearish change in character three days in a row.  Despite the lack of technical damage so far if the pattern keeps up the market will eventually break down.  The first key support is the Aug. low of 2147.  Below that is the 2130-35 zone.  A break of 2147 should accelerate down to the second zone.  In theory 2130 should be strong support and a good place to bounce from.  On the upside 2193 appears to be stiff resistance.  We could easily keep on churning the rest of the month.


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