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Monday, October 10, 2016

Daily updae 10/10

Buying out of the gate, but once again the sellers showed up at 10:10 AM.

Today looked like a pump and dump.  SPX got above the 50 DMA early in the day, but could not hold on.  The breadth was a strong +69%, but the volume was very light (because the bond market was closed).  New highs increased to 135.  The futures at the 4 PM close were sightly below the open.  While it was an up day on strong breadth it was not really a strong day.  The all too familiar pattern of making the high from 10-10:10 AM and easing lower through the day was present once again.  I have only seen that pattern in corrections and bear markets.  The bull is not raging at the moment.

The futures poked their head up above the downtrend line, but failed to stay there.  They might be making lower highs.

Oddly, the red count crossed up pretty strongly even though it was an up day.  Are the bears going to make an attempt to take control?

This is the third attempt for SPX to get above the 50 DMA.  Will it continue higher tomorrow or turn around?  Looking at the internals I think the bulls need to get it together this time or risk the market breaking down.  In the sentiment category, I heard a big discussion on CNBC today about the market melting up.  Part of the discussion was that NDX 100 was at a new high today.  They also mentioned strength in small caps.  However, the most interesting thing I heard was that the transports were looking good.  I about fell out of my chair laughing.  The transports have not made a new high since late 2014 and even now are below their April intraday high of this year.  They have moved up lately and might possibly break out above that April high, but they are still way off the all time high.  They have had all this time to break out of some pattern on the upside and have failed to do that.  They look like a caution flag to me, not a sign of impending strength.  The last index to top in the fall of 2007 was the NDX 100 so the fact that it is at a new high all by itself today may be a positive, but is not a sure sign the entire market is headed higher.  It would be a rather rare event for the market to actually melt up when all the talk is about it melting up. 

For the moment SPX is still stuck between the 20 and 50 DMAs.  Until that changes it is likely to be a bit sloppy and choppy.


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