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Wednesday, October 4, 2017

Daily udpate 10/4

Getting tired?  Not you the market.

SPX climbed to a new high close, but ran into a few sellers at 2540.  Breadth was slightly negative.  New highs slipped a bit to 226.  This pattern is a bit unusual.  The trend indicator had red bars at the last low, but the rally off that low is pretty straight up.  The few similar patterns like this have pretty varied results.  All the way from SPX continuing up to it going back below the last low with some higher lows also.  There are not enough instances to be able to infer what might happen here.

The futures kept moving higher and are still outside the channel.  However, I think today's selling when SPX hit 2540 may mean we are coming to the end of this accelerated up move.  I would not be surprised to see the futures stall around here and close back inside the channel in the next few days.

The green count decreased slightly today and remains well below overbought.

QQQ was up early in the day and got within .25 of its prior high before settling back a bit in the afternoon.  No break out yet.  SPX price is pretty extended but the internals are not particularly strong.  That combination more often leads to a pullback rather then a sideways consolidation that goes higher.  As discussed above a pullback here could make a higher low or go below the prior low based on the trend indicator. 

The USA Today money section had an article on year 7 Oct. pullbacks.  That means the phenomenon is now widely known.  That creates a bit of a problem.  Quite often we have seen something widely publicized not do what it is supposed to do.  It could mean nothing happens here.  On the other hand, sometimes when something gets widely known it becomes a self fulfilling prophecy.  It is possible the market starts down on a pullback here as the weak internals suggest and sellers come out of the woodwork because they know it is Oct. of year 7.  The intermediate bull percent indicator on the red/green count chart suggests a trip to the 200 DMA could be in the cards. If we turn down without QQQ breaking out to a new high it would likely raise the odds of SPX getting down to its 200 quite a bit.


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