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Friday, September 30, 2016

Daily update 9/30 Deutsche Bank liquidity


SPX closed right at the 50 SMA, but sold off pretty hard going into the close.  The futures kept going down after hours also.  This is the third test of the 50 SMA since the 9/9 big down day.  Curiously we have a white bar this time.  The other two tests had green bars.  Theoretically this makes it slightly easier to reverse.  Breadth was +68%.  New highs were over 100 again at 117.  New lows were just slightly less then yesterday at 21 (a bit elevated for a gap up day this close to the high).  The volume was higher then yesterday. 

The futures stuck their head above the upper trend line, but sold off pretty hard going into the close.  The good news is the lines are getting close together so a break out is coming soon.  The bad news is a downside break looks like it might have higher odds.  A rejection at a line this close to the apex usually means it is going to break the other way.

Despite the strong day the green count barely increased.  However, the red count dropped enough to get below the green.  This is not a strong looking positive cross though.  The damage done yesterday was clearly not repaired today.  Two days ago the green count was 65 now only 35.

The 10 DMA lines are showing a slight negative divergence, but look at the MCO.  It is showing a triple negative divergence with the three tests of the 50 DMA.  It has been a long time since I have seen one of those, but they give pretty good reversal odds.

The short term lines are showing a similar divergence to the green count line.  The intermediate lines are negatively crossed.  The long term lines while still positive are really close together.  They could cross easily.

I have not had the occasion to show this chart in years.  Notice there are negative divergences in the number of stocks above their 10, 20, and 50 SMAs.

This being the third test of the 50 DMA I would expect a lot of selling if the market turns back down again.  I think that is the most likely scenario.  Today looked more like quarter end window dressing then strong buying.  The last two days sure left the market with a bunch of internal negative divergences.  Of course they will be meaningless if we continue up.  On the other hand, if we turn back down the market could do so with a vengeance.  The upside seems limited to me given the already low VIX.  Oct. has the well deserved reputation for volatility.  It looks like that could happen again.

Here is a pretty good article on the liquidity shape of Deutsche Bank.  This Is How Much Liquidity Deutsche Bank Has At This Moment, And What Happens Next  They don't seem to be in an emergency situation based on the numbers the bank gives out.  Which begs the question why all the commotion.  Does the market know something the bank is not saying?  It is a curious situation to say the least.

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


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.