SPX got above the upper trend line early today, but sellers showed up once again. It even made the low in the afternoon. You might recall we saw a lot of that action preceding the election. This is the first time I have noticed it since. I will be watching to see if that pattern becomes prevalent again. Breadth was +59%. New highs popped up to 129. Resistance was very obvious today.
The green count picked up a bit, but remains below 50.
The current action is slow and sleepy, but the weekly IWM chart is interesting. A friend pointed out a very clear megaphone pattern on the weekly chart (tnx vixn). Remember this is the index most clearly at bubble valuation. Earnings are negative on this index now so there is no P/E officially. However, I read the other day that if you take the stocks with positive earnings the P/E is around 250. Bubble. The megaphone pattern is a bit rare in indexes, but is often a reversal pattern. What scares me the most about a bubble in small caps is how hard it is to get out. When the tide turns on this index the exit will be very crowded.
While most indexes were positive today the Dow was slightly negative. The bulls quest for 20,000 remains illusive for now. While dip buyers show up in SPX there is clear resistance at the highs. Which side has the bigger hammer? With the low VIX I am going to guess it will turn out to be the bears. The pattern of the market running up into inauguration day then selling off has been widely noted. I think I read or hear of it nearly every day. It could easily be a self fulfilling prophesy at this point. Inauguration day happens to fall on option expiration day this year. That might be a short term top. Will we make 20,000 before then? We had no year end tax year selling last year. We have not had any new tax year selling yet either. I have to wonder if there isn't some pent up selling pressure waiting for inauguration day to be released.
Have a great long weekend.
Bob
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