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Thursday, November 17, 2016

Daily update 11/17 Dollar breaks out while SPX tests the high

This is going to be interesting.

SPX kissed the underside of the uptrend line again.  It closed just 3 points below the high close.  Oddly the breadth was barely positive at the end of the day after being +70% at 9:50 AM.  While price advanced all afternoon there was considerable selling underneath the covers.  New highs picked up to 170 while new lows dropped down to 23.

The futures made it over the trendline again.  Will they stay there this time?  If you look at the price action the last several days it looks like a bearish rising wedge forming.  I added white lines to help visualize it.

The green count dipped a bit today.  This confirms the selling into strength today.  That is not what bulls want to see.

The weekly dollar index chart shows the breakout.  The dollar moved up swiftly after Oct. 1.  Wow.  Who could have seen that coming.  Oh wait.  I did see.  Daily update 9/29 IMF's SDR change on Oct. 1  I think this break out is for real and DXY is probably headed up towards 120.  The global economy is not going to like this.  I don't think SPX will either.

SPX tested the all time high from back in Aug.  The internals did not look very good.  Bulls want to see momentum and strength going into such a test.  They got people selling into strength.  Not a particularly good sign.  I have heard some mention of the dollar on CNBC, but not much.  If this break out sticks this is truly an extremely important event.  Rising rates and rising dollar are rapidly tightening monetary conditions.  What the FED does at the next meeting is really irrelevant.  Their little teeny tiny raise means nothing.  The markets have already tightened way more.  Against this backdrop I have a hard time seeing what will drive SPX higher.  Q4 earnings are going to be hurt by the market's actions.  This seems more and more likely to be a blow off top.  Those can reverse sharply so stay tuned.


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