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Tuesday, March 28, 2017

Daily update 3/28 Hedge fund exposure

Dip buyers showed up in force.

SPX came within a few points of hitting the 20 SMA.  Breadth was a whopping +70%.  New highs increased a bit to 89.  Volume was slightly lighter then yesterday which was not particularly high.  Is the market launching from a two step pullback?

The futures got above the 100 SMA and almost tagged the 50.  However, they fell back late in the day and ended up below the 100 again.  Its not exactly clear here whether the futures will continue higher or not.

The red count dropped below 50, but remains above the green.  Not clear yet on this chart if the bulls are going to take control.

The dip buyers are doing their thing yet again.  The biggest fly in the ointment I see is the VIX.  One day off the low and it is already down to 11.53.  That is really low, but I can't say whether that will end up being a problem or not.  Since the 3/21 smack down the futures 100 SMA has been resistance.  If the bulls overcome that line it should set up a test of the high.  A failure to do that would be an indication the sellers have more ammo at this time.

This is an interesting chart.

Hedge funds have had an historically heavy long exposure lately.  This condition has preceded sizable corrections in the past.  However, those corrections don't always start right away.  In Daily update 2/15 McClellan summation index I showed some historical instances of sizable corrections when the major indexes were making new highs and the summation index was negative.  The above chart shows a second indicator that has had similar historical consequences.  The possibility exists the market has a bigger pullback then what most people expect.  Just because the door is open to a bigger correction it does not mean it will happen.  On the other hand, bigger pullbacks often happen when they are least expected.


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