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Wednesday, October 25, 2017

Daily update 10/25 Three charts that prove the bull market has more room to run: Bank of America technician

Selling pressure.  Well at least for part of the day.

I have no idea what sparked the selling.  The futures gapped down a few points, but nothing dramatic.  The sellers just started in.  The market picked up steam when it dropped below the key reversal day low.  Once SPX got down below the 10/19 low buyers stepped in to save the day.  Breadth was -72% so the selling was broad based.  New highs dropped way down to 122.  New lows spiked up to 104.  A lot of participation today.  Look at the volume.  

The futures dipped all the way below the lower channel line before bouncing.  They remain below the 20 SMA, but technically have not confirmed a break yet.

The counts came together today.  Sometimes on a cross like this the bulls show up and drive the market higher again.  The bears need another down day to get a good negative cross.

SPX bounced quite a ways off its low.  Sometimes that is bullish and sometimes it isn't.  SPX closed below the low of the key reversal day thus confirming its bearish message in theory.  In practice we need to see if the bulls continue today's bounce back or not.  The ECB meets tomorrow and the expectation seems to be they will cut the amount of QE buying every month in half while extending its duration.  Will the market react in a big way or not?  Sometimes central banks do exactly what everybody expects and the market still gets a bout of volatility.  It does not always make the move in the direction one would expect though.  Today's selling might have been some people hedging just in case there is a negative reaction.  Before prognosticating too much about where we are headed I think it is best to see what the ECB does and how the market reacts to it.  Closing below today's low would be a pretty big negative sign though. 

The NYSE ticks showed selling pressure we have not seen since 9/9/16 and 9/13/16.  Not even the moves around the election itself or brexit earlier that year showed that much selling pressure.  The gap down on 9/9/16 became resistance for the next several weeks and it was Nov. before the market finally bottomed.  Despite the bounce today from the lows it is certainly possible the market changed today and there will be further downside to come.  

Here is an article for the bulls.  Three charts that prove the bull market has more room to run: Bank of America technician  I found the title interesting.  I have been looking at charts for nearly 20 years now.  I can say with absolutely certainty that charts don't "prove" anything.  They can suggest something, but as anybody that has traded for any length of time knows anything can happen.  I think this is just another example of how confident bulls are at this moment in time.  I think they are even more sure of the upside then they were in 2000.  Back then there were some doubters that were brave enough to get on TV now and then.  Not so much lately.


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