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Thursday, December 8, 2016

Daily update 12/8 NAAIM fully loaded

A little bit of follow through to yesterday's buying panic.

SPX hit 2250 today and found a few resting sell orders.  Half century marks like that often provide short term speed bumps.  This price pattern looks a little exhaustive here doesn't it?  New highs were 478.  That is the most since 2013.  In this bull market getting over 470 has been important.  Not counting multi day high readings there have been 7 previous occurrences in this bull market.  Four of those times there was a short term top within a few days.  Three of those times the market proceeded to continue on higher.  However, in each of the cases that went higher there was eventually a pullback that went lower then the day of the first 470+ reading.  Should the market continue significantly higher from here the odds favor there will be a pullback in the future that comes back to this area.  Only one of the previous instances did not touch the 50 SMA (early 2013).  All the other instances touched it and some penetrated it considerably.  The breadth tapered off a bit to +59%.

The futures are looking pretty extended there.  Might be time for some rest.

The green line shot up a bit today.  It remains below the last peak and below the overbought level.  This could continue higher for another day even if SPX does not go higher from here.  It might reach overbought this time.

The NAAIM sentiment survey reached 101.6 this week.  That was the highest on the chart.  It was slightly above the 7/27 reading earlier this year.  After that reading SPX climbed another 18 points before correcting into the election.  It took almost three weeks to do it though.

In the decade of data from the NAAIM survey there are very few 100+ readings.  Upside is always hard to come by.  Combining that fact with the potentially climactic number of new highs it seems like we could be very near a short term top.  The early 2013 occurrence of the climactic number of new highs continued on for about another three weeks.  That was the only time the pullback did not hit the 50 DMA, but it was pretty close.  If we get a top in the next few days then odds would be pretty high SPX will end up hitting the 50 DMA (currently 2161).  While the sample size is small it covers this entire bull market.  Therefore, I believe it to be valid. 

Lots of talk on TV today about animal spirits and all the wonderful things the government is going to do for the economy.  It truly is amazing the change in sentiment.  Lets keep it real for a minute.  The republicans have a slim majority 51-48 in the Senate.  The democrats can make it pretty tough to get things passed.  I am sure there will need to be deal making and they will want something.  Things in D.C. never move all that fast in the first place.  I believe it will take more time to get all the proposed massive changes through congress then market participants seem to believe.  It seems to me there is at least a small chance the market is a little ahead of itself.


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