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Thursday, March 9, 2017

Daily update 3/9 Sector dispersion

Now that was an odd day.

Oil continued down some more today and took SPX with it early in the day.  SPX dipped below its 20 SMA and it and oil recovered considerably from the lows.  That is not the weird part.  When SPX made it back to green the breadth was still -70%.  That is a narrow market.  Breadth ended the day at -67%.  New highs were 40 while new lows came in at 106. 

The futures still have not closed below the 50 SMA.  Maybe we get a bounce here yet.

The red count reached oversold levels today.  With the intermediate indicator still over 70% this could bring in some buyers. 

The market is oversold short term and SPX is still above the 20 SMA.  That often leads to a bounce.  Tomorrow is the employment report which seems likely to be pretty strong.  I happened to see a map today that showed all the lower 48 states were above normal temperature in Feb. except Washington and Oregon.  That should screw with the seasonal adjustments.  The market is already expecting a rate hike at the next FED meeting so a strong report should not be a problem there.  Maybe it brings in the dip buyers.

Both SPX and COMPX turned their short term trends sideways.

I ran across this interesting chart.

While SPX volatility remains low it appears that sector volatility is rising.  That volatility has reached levels that eventually led to much higher market volatility and severe bear markets.  As long time readers know I have been expecting volatility to pick up based on the many decades of a pattern of low volatility periods lasting a few years followed by much higher volatility.  The last few years have been unusually low sector volatility when compared with the low volatility periods on the 90s and 2000s.  This chart suggests it may be time for the higher volatility pattern to resume.


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