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Wednesday, November 30, 2016

Daily update 11/30

High volume reversal bar.

Well, I was just plain wrong.  I did not think OPEC would actually announce a cut.  I also thought that if they did it would be good for both SPX and oil.  Dummy me.  Oil liked it, but SPX not so much.  I will predict that OPEC members will cheat and any cut in production will be less then the agreed upon amount.  We will see how I do on that one.  The market gapped up on news of a probable OPEC deal, but found sellers right away when SPX got above Friday's high.  The last four bars look like a short term reversal pattern.  That pattern needs downside follow through.  That was quite a bit of volume today.  If this chart was upside down the bulls would be screaming bottom.  If only tops worked the same as bottoms things would be a lot easier.  Breadth was -59%.  New highs were up a good bit to 203.  New lows kicked up quite a bit to 49.  That is not good on a day when SPX hits a new intraday high.  Once again I am sure that was a lot of bond funds.  I am not sure that gets the market off the hook though.  SPX closed back below the Feb. uptrend line once again.  Maybe that matters, maybe it doesn't. 

The futures ended the day below the 20 SMA.  They really tried to bounce off that line, but found significant resistance.  Downside follow through tomorrow would put us in a micro downtrend.

The green count slipped below 50.  Not a good thing when SPX touches a new intraday high.

Conspicuously absent from the indexes making new highs after the election is NDX.  Big cap NASDAQ stocks are lagging the market.  Those same stocks are in SPX so weakness in this index is very important to the overall market.  Former market leaders on the upside might now become the leaders on the downside.  I think this is a pretty big red flag.

This week SPX got above 2210 twice and found active sellers.  This was not a case of just running out of buyers.  There was real resistance up there.  If we had just run out of buyers we could be pretty much assured the dip buyers would come in on a pullback for at least a test of the high.  With real resistance there is no way of knowing if that will happen or not.  I will be watching the -DI line on the futures again now.  Since SPX made a new bull market high it needs to get over 35 before a bigger decline becomes a possibility.  If it stays below that then buying the dip at some point for at least a retest of the high would likely work.  We will see what develops.

I am sorry, but it is pretty hard for me to be unbiased here.  I see so many red flags waving at me.  This post election rally looks very much like a final blow off top.  It is not hard to imagine this is one last high before a big fall.  I showed the financial conditions index for the U.S. which is showing some problems.  There is more to it then that.  Credit conditions are tightening all around the globe.  China has been busy lately withdrawing liquidity.  I keep hearing talk about major dollar funding shortages.  Some say the worst since Lehman.  All of this is much more consistent with a global recession then a big bull run.  If the transports manage to make a new high to confirm the Dow I would have to seriously reconsider things.  As it is, we got a valid Dow theory sell signal and the transports have not made a new high since 2014.  I personally find the sentiment shift truly amazing.  The mostly pessimistic mood in retail investors the last two years has turned into outright enthusiasm just on the election of Donald Trump to the presidency.  Who would have thunk that!  Does that really make sense?  There was a big flood of money by retail investors into the market since the election.  Could that be another case of bad timing?


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