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Monday, June 26, 2017

Daily update 6/26

The bulls ran the futures up overnight, but nobody came to their party after the open.  I think the VIX is just plain too low. 

The volume was super light.  Simply no buyers up here today.  The breadth was +62%.  That is pretty strong for the small move in SPX.  Technology was considerably red.  The rotation out of tech and into most everything else continued today.  New highs increased to 143.  New lows dropped way down to 8.  That suggest some buying in the recent laggards.

The futures got up near the upper channel line, but reversed sharply.  Here we are back at the 50 SMA again. 

The red count remains above the green, but below 50.  SPX was less then 4 points from its all time high and yet we could not get a green cross.  This seems like a negative divergence that could be big enough to mean something.

The tech sellers showed up on this mornings sizeable gap up in QQQ.  Volume increased considerably today.  There is clearly the possibility of a lower high and more selling to come.  The bulls need to show up again tomorrow.

They sometimes talk about the media especially magazine covers giving sell signals.  While there are some instances of bad timing, it is not something you can usually see in real time.  However, CNBC is having FANG week.  Seriously.  I could not believe it.  Now that you know that, take another look at that QQQ chart.  This might end up being one of those examples of the media calling a top.  Time will tell. 

I heard a guy on TV say you always have to be bullish when you don't have an inverted yield curve.  We did not have an inverted yield curve at the time of the 87 crash.  We might not have had one at the time of the 29 crash.  I don't have data back then so I can't say.  What I can say is that when margin debt is this high you have to be worried inverted yield curve or not.  That is especially true when nobody is worried like in our current situation.

Friday I wrote "The market is unlikely to go up from here with the VIX already that low.  I think odds are we will see more downside next week.  Get the VIX up to 11.50 or higher and the bulls might step in. Unless QQQ collapses again.  That could change the picture. "

I think today made it obvious the low VIX is a problem.  The action in QQQ today probably increased the odds QQQ rolls over.  I don't know if we are headed for a bigger pullback then we have seen since the 2016 low.  It would not take all that much to be the biggest pullback since then.  I do know this is the weakest technical position at the highs since 2015.  That does not always translate into a big pullback, but it is a good idea to pay attention just in case though.


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