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Monday, August 21, 2017

Daily update 8/20

The eclipse probably explains the very light volume today.  I saw some really great video.  We had about 90% coverage here.  I did not expect it to affect the wild life, but I was wrong.  We have frogs here that go absolutely crazy at sunset.  All was quiet as the maximum eclipse approached.  Suddenly the breeze picked, the temperature dropped, and the frogs started croaking like crazy.  We get breezes and temperature drops like that from summer storms and the frogs don't go crazy.  It was not any darker then we would normally see from a storm either.  Somehow they knew something was odd.

SPX tested below Friday's low, but failed to collapse.  Dip buyers stepped in and pushed the market higher.  The afternoon saw some selling and a higher low form as the bulls returned going into the close.  This looks like a reasonable attempt at a short term low.  The ABC pattern remains a possibility.  All the bulls should need is a rally day tomorrow to complete the reversal.  Breadth was about dead even.  New highs increased a bit to 51.  New lows remain elevated at 140.  SPX also touched its 100 SMA this morning as an extra area of possible support.

The futures ended the day on a bullish engulfing candle.  That is a good way to start a reversal.  They are up a couple of points after hours.  The usual way we make a bottom is for the bulls to run the futures up enough overnight to make the shorts run for cover after the market opens.  Lets see if they pull that trick again.

The red count dropped a bit and the green count picked up some.  However, the red line is still above 50.  These counts don't look all that bad considering SPX made a new pullback low.  However, the intermediate indicator is getting pretty weak.  If the market does not bounce here the selling pressure could pick up considerably.

It looks like we have a reasonable pattern to make a short term low.  If the market rallies from here the ABC pattern indicates a high likelihood of a retest of the highs.  The intermediate indicator is low enough we would have to keep a close eye in case the market rolls over before it makes it back to the highs.  However, with congress not getting back until Sept. to argue over the debt ceiling there could be enough quiet time to get SPX back to new highs.  Should that be the case we will probably be looking at some sizable negative divergences that could be a problem for this fall.


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