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Thursday, April 6, 2017

Daily update 4/6 What Happens When The Fed Warns The Market Is Overvalued

The bulls and bears keep taking turns.  The question as always is which side has the bigger hammer.

SPX got above the 20 SMA for a little bit before falling back in the afternoon.  Breadth was a strong +72%.  New highs dropped a bit to 69.  New lows were stable at 22.  It is interesting that 5 of the last 6 days SPX got above the 20 SMA, but failed to close there.  The other day the high was a couple points below the MA.  That is a very rare pattern.  Most of the time that SPX hangs around the 20 SMA it is on the top side.  Those SPX consolidations on top of the 20 SMA usually end up with more upside, but occasionally they drop through the bottom.  That may mean the odds favor a downside break, but we probably can't rule out an upside move though.  Helpful huh.  The longer we stay between the 20 and 50 SMAs the bigger the move out of that range should be.

The futures got just above the 100 SMA before turning back.  They ended the day back below the 20 SMA again. 

The red count turned down a bit, but remains above the green line.  Neither side has been able to grab the reins and take control.

So far the sellers have only showed up on strength.  They seem to have no desire to sell into weakness.  I guess we stay in this narrow range until one side runs out of ammo.  Hopefully that won't take too many more days.

The market may be calling the FED on talk of reducing the balance sheet.  I read somewhere that Janet Yellen was suddenly scheduled to talk after the market closes on Monday.  That may prove to be market moving if she gives any more indication one way or the other on reduction. 

This is a look at the history of what happens when the FED talks about stock valuations.  What Happens When The Fed Warns The Market Is Overvalued


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