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Thursday, May 4, 2017

Daily update 5/4

More equilibrium.

The market dipped a couple of times intraday and both times the buyers rushed in.  However, the bounces didn't get very far.  Despite most indexes being positive the breadth was -63%.  I would say that some money was flowing into the bigger cap stocks of the various indexes holding them up while the rest of the stocks were down only a little.  New highs came in at 142 while new lows increased considerably to 97.  Another not good day for bulls.

The futures ended the day above the 20 SMA, but no confirmation of a break yet.  More consolidation.

Not much change in the counts tonight.

The bulls showed up overnight causing a gap up.  However, the sellers showed up right after the open and kept hitting the bids all day.  The bulls kept their hopes alive, but not much else.

The cup and handle pattern was made famous in the book "How to make money in stocks" by Bill O
Neill.  His method was to look for high volume breakouts of the pattern before buying the stock.  He made it clear in the book one must wait for the break out because the pattern itself does not always lead to break outs.  So while SPX looks very bullish in its cup and handle pattern it is still possible it never breaks out.  Commodity prices are falling on fears of a slow down in China.  The stock market has ignored that so far, but there is no guarantee we won't wake up some day and it matters.  With the slow data in the U.S. there could be real fundamental reasons holding the buyers back.  The longer we go without a break out the more negative the internals seem to be getting.  That in the end may make it even harder to successfully break out.

Yesterday turned the short term trend down in R2000.  Sorry I missed that.  A close below yesterday's low will turn the trend down for SPX.


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