Volume was very light today. Breadth was -52%. New highs dropped back to 133. New lows were stable again at 20. There was very little intraday movement today. Volatility is contracting and the VIX even dropped below 11 for a little bit. That low VIX could be scaring away buyers. Everybody was waiting for somebody else to push the Dow to 20000. It may not happen without a pullback. Hard to say.
The futures closed below the 20 SMA for the first time since early Dec. They have not confirmed a break yet. The low volatility is really evident as the futures remain very quiet overnight.
The red count crossed above the green slightly today, but both remain below 50. The bottom panel is another indicator I created which is also calculated on all the stocks in the index The green and red counts are very short term. This is more of an intermediate indication and is the percent of stocks in bullish mode.. The 50 level tends to be pretty important. The higher it gets the more momentum the bulls have. At 71 it is not particularly strong. It reached 85 on the summer break out and 89 on the rally off the Feb. low. This is yet another indication this latest breakout is not as broad as other up moves.
I always hate much talked about levels like this 20000. Sometimes the target is never reached. Sometimes there is a pullback that scares people out followed by another surge up to the target. It always seems to be hard to decipher which is happening in real time. A pullback here could just keep on heading south while people are holding on waiting for 20000. At this point I don't have a clue how this plays out. The low volume shows many people seem to be already stepping away from the market. Hey why not. Since nobody is interested in selling before year end there is nothing to worry about. Right.
Lately there has been some problems in the Chinese credit markets. Anybody remember Aug. 2015 and Jan. 2016. China credit problems have caused sell offs in global equities before. Here are a couple of articles on what is happening now.
China Halts Trading In Bond Futures After Record Bond Market Crash
China Cuts Offering Size Of 3, 7 Year Bonds By 40% Over Concerns Of More Failed Auctions
It seems to me the stress might be a bit more severe this time then past incidents. Asian markets have taken more notice then western markets which seem to be living in a perfect world these days. I can't say if the problems in China will eventually affect the U.S. markets or not. Just be aware you may wake up some day and the market is worrying about China again.
Bob
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