If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Monday, October 24, 2016

Daily update 10/24

Merger news causes global excitement in stocks.  However, the 10:10 sellers were still active.

SPX closes above the 20 SMA.  The 50 is another 8 points higher.  Notice the high today kissed the uptrend line from the Feb. low again.  The breadth ended at +57% after being +75% early in the day.  New highs were 109 while new lows were 23 (slightly elevated for the size of the gap up). 

The futures got above the 100 SMA.  This is a neutral price area. 

The green count increased a bit more today, but remains below 50.  Still neutral.

As I suspected the sellers were not finished last week.  Every day that the market sees some buying in the first 30 minutes after the open the sellers come out by 10:10.  Once again SPX made its high in the first hour and its low after noon.  This has become the prevalent pattern for weeks now.  I have never seen it persistent like this outside of a bear market.  While it happens some days during pullbacks and the bigger corrections it does not happen nearly every day like this in a bull market.  The bulls are clearly trying to support the market.  I just don't think they will succeed unless the selling stops.  Apparently earnings so far are not good enough.  The dollar may also be causing a bit of a problem.

In Daily update 9/29 IMF's SDR change on Oct. 1 I wrote:

The announcement caused a big move down in the dollar the first trading day.  The market has had plenty of time to adjust.  I suspect this adjustment is what has been holding the dollar index down.  I think this could be a case of sell the rumor and buy the fact.

Since Oct. 1 the dollar index has been straight up.  Unless the FED comes out and removes the rate hike expectations for Dec. the index is likely to continue to the 100 area to test the prior highs.  This will lower earnings for SPX in Q4.  Since the prevailing wisdom on Wall Street was for the dollar to decline I doubt many companies did enough currency hedging to handle this big move up.  The move up has hit gold some.  It has not hit oil yet.  I believe that is simply because of the deal talk about a production freeze at the late Nov. OPEC meeting.  When that deal falls apart oil is likely to head down sharply.  The commercial hedgers (part of the Commitment of traders report) have put on the biggest short position in WTI futures since mid 2014 just before the big oil crash started.  That will keep the oil flowing and probably put pressure on price above and beyond a rising dollar.

Here we are with SPX back between the 20 and 50 DMAs.  The MAs are only 12 points apart so we won't stay here long.  I would guess it is the 20 that gets broken and SPX tests the 2120 area again.  The technical condition is poor and the VIX is already down to 12.  That is not really a dream buying setup.  The bulls are going to have to push prices higher after the first hour to really get the market going up.  I don't see the will to do that at the moment.

Today turned the short term trends neutral across the board.


No comments:


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