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Wednesday, November 9, 2016

Daily update 11/9 How do you spell relief?

Not a single robo call today!

Apparently one speech turned the man that was going to crush the global economy into the man that is going to save it.  Markets can certainly be amazing sometimes.

Wow, look at that volume.  Look at that price action after the brexit vote.  Doesn't this look kind of like a mirror image?  That move down was totally crazy.  The brexit vote did not change anything in the near term.  It would be a long time before any economic affects would be felt.  We have the same situation now.  Trump will not take office until Jan. 20.  Then it will take some time to get anything important economically implemented.  After that it will take months before it could be felt across the economy.  Even if Trump turned out to be the greatest president ever and got the economy growing strongly it would likely be 18 months or longer before we knew.  The markets attention span is nowhere near that long.  Tomorrow people will realize nothing fundamentally has changed for now and investors will go back to obsessing with whatever is going on in the short term.  That could be a rising dollar, falling oil prices or who knows what.  Today's ultra high volume could be a buying climax that leaves few buyers left out there.  We don't really know yet.  One indication today was not as strong as it looked was the breadth was only +54%.  That was really low compared to the size of the move up.  Ticks were not particularly strong either.  The day looked largely index driven.  New highs increased to 200 while new lows spiked up to 113.  That was higher then any time in the recent pullback.  That seems a little odd since the market opened basically flat.  Did I mention last night that today might be interesting.

That is some futures chart.  I left the lower trendline from the triangle pattern on the chart which turned out to be resistance today.  That could be nothing but a coincidence, but I don't know for sure. 

The green count crossed 50 today, but remains below overbought levels.  The market has room to run if it wants to.  However, this is pretty close to where the market peaked twice back in Sept.  I don't know if that is relevant or not.  Was the selling that month and in Oct. purely related to the election or not? 

The short and intermediate bull pressure lines are close together (still slightly negatively crossed).  The makes them neutral, but the long term line still has separation and remains bearish for now.  The bulls have more work to do here.

I heard Pete Najarian talking on CNBC that they had hedged their client portfolios in case a Trump win caused a market move down.  I suspect many other money managers did the same thing.  The VIX dropped 23% today.  I think a piece of the move today was caused by people taking the hedges off since the market opened flat.  The weak ticks and internals do not give me much confidence today was the kick off to a big move up.  SPY volume was also huge.  I think a lot of people bought in some index positions in case the market follows through on the upside.  They did want to miss the move, but did not have the conviction to go buying a lot of stocks.  There was a mixture of opinions today.  Some people were very bullish and some were pretty skeptical.  Index driven moves like today are fickle.  Sometimes people get confidence and start piling into individual stocks and send the market higher.  Sometimes they lose confidence and start selling causing a roll over.  The fact is we do not know exactly what Trump will do.  We also know we will not know for quite some time what the affects of his actions will be.  I look at this move as not being based on fundamentals.  When I combine that with the weak internals I suspect that investors will lose confidence

Since SPX closed above the 50 DMA that line should make a nice downside pivot.  SPY has an open gap up at 218.15 that could be filled if we continue higher.  It has been open since 9/9.  SPY got into the gap a little bit today.  On the flip side, that gap could be massive resistance and today was as close as we are going to get to closing it.  I really don't know.  While I don't think this is a particularly good place to pile in on the long side I don't know that the market will roll over immediately either.  I am real curious to see if the 10:10 selling crowd comes back or not.  Maybe they were just raising cash before the election.  In that case we should not see them again.  If they do come back I think the odds we are in a bear market would go up dramatically.  Another important thing to watch is the action in the transports.  They followed through on the recent break out today.  If they can keep going up it might be a good sign.  We got a valid Dow theory sell signal back in Jan.  To give a Dow theory buy signal both the Dow and the transports need to make new all time highs together.  To some extent the market is guilty until proven innocent.


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