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Wednesday, March 1, 2017

Daily update 3/1

I guess people really, really liked what the president had to say.

It is not unusual to undo the move from the last day of the month on the first of the next month, but this might have been a bit excessive.  Volume increased over yesterday's already elevated volume.  Despite the massive move up the breadth was only +65%.  Not particularly strong for such a move.  New highs exploded to 339.  That is the highest since 12/8/16.  New lows increased a good bit to 30 which probably means some bond funds made new lows.  There is probably a non zero risk this was an exhaustion gap since SPX is the most extended above the 200 MA in years.  SPX hit 2400 intraday and sold off a bit going into the close.  There was a little bit of resistance there.  I can't say if it will be significant or not.

The futures holding support at the 20 SMA provided the context for another move higher.  The speech provided the oomph.

The green count picked up considerably, but remains below overbought levels.  There is room for the bulls to push higher if they so desire.

After the big move up a bar like today can be either a continuation gap or an exhaustion gap.  If this is an exhaustion gap SPX probably won't go much further on the upside and should close back below today's low within a week or so. 

In all the years I have been doing this I have never seen the market fly up quite like this on nothing but talk.  Make no mistake it is all talk driving this market.  While earnings for Q4 showed some growth the fundamentals versus valuation is not good.  We are still bubble valuation and now the market is acting like a bubble.  Ever smaller pullbacks and accelerating price.  The risk of a sharp reversal at some point is probably pretty high, but from what level does it start from?


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