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Monday, November 13, 2017

Daily update 11/13

Dip buyers to the rescue again.

This is the third day in a row the market gapped down, but each day we closed above the open.  The dip buyers have been doing their duty.  Despite the positive close on most indexes breadth was -54%.  New highs were up a bit to 101.  New lows were up a lot to 93.  New lows started running well above where they should be on 10/23.  This type of pattern usually ends up with a pullback at some point.  NYSE ticks are still spending a lot of time in negative territory during the day.  That has been going on since 10/23 about the same time the new lows picked up. 

On 11/9 the futures closed below the 20 SMA for one bar then came right back above it.  I commented at the time that usually means the rally will continue.  The futures gapped down the next day and again today.  While the dip buyers came in to buy those dips the rally still hasn't resumed.  The futures have gotten above the 20 SMA a few times, but have failed to stay there.  The futures do not seem to be doing what they usually do.  This makes me wonder whether the rally will resume or not.  For the moment the futures are stuck between the 20 and 50 SMAs.  We need a confirmed break of one of those MAs to signal the next move.

The green count picked up a bit today.  The bulls are still holding on.

IWM is still hanging on to its 50 SMA.  It isn't clear to me whether it is going to bottom here or not.

Internally the market looks like it wants to have a pullback.  However, SPX and COMPX have been resisting that idea so far.  The elevated volume of late is different then what we have seen in recent years with SPX near its high.  The NYSE ticks are also acting different then they have in a very long time.  There also seems to be some rotation into defensive stocks.  All this suggests the market is not ready to spring higher at this time.  It is possible we are making a top of some significance.  Some markets around the globe are seeing some selling.  Japan is particularly interesting having just made multi decade highs.  The volatility seems to be picking up there.  I have previously mentioned the selling in the high yield market.  There are a number of little things that all seem to signal some caution is warranted for now.  I am still watching that 11/9 2566 low as a possible tipping point should SPX close below that.  What we might tip into should that occur is unknown. 

We have the kind of bullish sentiment seen at prior bull market tops.  I find it interesting how so many articles and people on TV are busy telling me we do not have the conditions normally present at the ends of a bull market.  None of these people have ever spotted a bull market top in real time in their life.  There isn't any particular thing that usually happens at bull market tops.  If there was it would be easy to spot them.  Every top is different.  We are only going to know for sure in hindsight.  I said a few months ago I have the feeling I should be worried about a bull market top forming, but we did not have a technical condition for that.  Since early Oct. the internals have clearly deteriorated.   This may pass and the market may get another shot of adrenaline, but we might be seeing signs of impending trouble.  I am not sure yet.  I think this is a good time to be vigilant and keep abreast of what is happening.


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