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Wednesday, October 12, 2016

Daily update 10/12 Just Say No!

Dead cat bounce day?

After the FOMC minutes came out at 2 PM the market messed around and eventually SPX got up to the key 2145 level.  It stopped dead in its tracks and drifted lower the rest of the day.  That validates that resistance level.  The breadth was slightly positive.  New highs came in at 33 while new lows were 28.  Volume was very light.  I would say today was the very definition of a dead cat bounce. 

The futures are a little lower in after hours.  I don't know if that is because of more poor earnings or what.  We can see the futures tested above the new red resistance line (prior support) on two different bars and failed.  Old support is now resistance (at least for today).

The red count slipped a bit today.  It remains above 50 and below oversold levels.  There is more room for the market to go down.

This was a very wimpy bounce day.  It looks much more like a continuation pattern rather then the start of a bottom.  I think we are going to test the key 2120 level.  Breaking that could unleash the flood gates.  The dollar continued higher today.  It is really on a tear.  That will certainly lower future earnings estimates if it keeps that up.  I heard a couple of people on CNBC today talking about how the expected pick up in the economy has not happened.  You all know that as I have shown you that is the case.  However, the pundits on TV have all been saying the economy is doing great.  Maybe more people are realizing that is not the case.  This is an interesting situation.  The economy is weak, it is possible earnings won't be very good, the FED is insisting it will raise rates in Dec. and nobody is expecting a big down move.  The complacency in the face of obvious head winds is something that never would have happened before the FED left rates at 0 for years.  The market keeps bouncing back from every sell off.  Now everybody expects that to be the case.  There are a lot of things in this world I do not understand.  However, there is never going to be a situation where the market never, ever tanks ever again.  One day it won't come bouncing right back and a lot of people will lose a lot of money.  The only question is when.  Maybe now is the time, maybe it isn't.  I can see there is certainly a risk of a downside surprise.  Whether that risk turns into actual downside likely resides with earnings reports.  Time to pay attention to what is going on there a little more closely.  I heard Bob Pisani today saying things were not starting out very good.  A lot can happen though as more companies report.

This is a very interesting read about the FED.  Just Say No!


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