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Thursday, August 17, 2017

Daily update 8/17

It is different this time.  The VIX crossing above and closing back below 15 did not make a bottom like every other time this year.

SPX closed below the 8/10 low.  Breadth was -79%.  New highs dropped down to 50 while new lows spiked up to 145.  Not good.  The lower Keltner channel line is just a bit lower and may provide some support. 

The futures went well below the 200 MA lines.  They have done that a few times this year and the decline has ended that day every time.  Will that be different as well?  The -DI line crossed over 35 again.  Selling pressure we have not seen in a long time.

There is a slight divergence in the red line from the 8/10 low.  Not big enough to write home about.  The intermediate indicator crossed below 50.  That opens the bearish door a little more.  That happened last fall and we did not get a big decline.  However, the technical condition at the recent high was much weaker then last year.  That does not guarantee a big decline by any means, but I would have to say the odds are elevated and rising.

I have written a few times this year about the dysfunction in D.C. and my amazement that the market seemed to ignore it.  Since yesterday around 12:30 it has stopped ignoring it.  It all started with news of the business advisory councils being ended.  This morning the bulls were actually buying the down opening.  Breadth had gone from -63% after the open to slightly positive.  Then somebody started rumors that Cohn was going to leave the administration and the selling took over.  Word came out later on that the rumors were 100% false, but by then it was too late.  The market has had a very short attention span for anything negative this year.  Is that still true or are we in a different mode now?  This is where it would be helpful to be hooked up with some money managers.  What kind of conversations are they having?  Are they thinking it is time to reduce risk?  Oh to be a fly on the wall in some of those back rooms.  I was not worried about the spat with NK.  I knew that was not going to end up in war.  However, I can't say not to worry about this situation.  This may be significant, but I have no way of knowing that yet.  The market has looked like it was topping for weeks now.  This could be the catalyst that makes the sell off happen.

The selling persisted all the way to the close as SPX closed on its low.  That means a gap up tomorrow is likely to test today's low.  QQQ, IYT and the SOX closed above their 8/10 lows.  That is a slight positive divergence.  However, I don't see anything screaming at me the market is ready to bottom.  An oversold bounce seems likely, but it might be short lived.  There is enough technical damage this time the bulls need to show up in force in the days ahead to contain the pullback.  For support there is the 100 SMA at 2416.  The next level looks like the 2400-5 area.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.