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Tuesday, January 16, 2018

Daily update 1/16

Found a few sellers.  According to Art Cashin the selling started on talk of Turkey amassing troops along the Syrian border for an invasion.  How long worries about that will last is anybody's guess.

Today started with a big gap up and ended in the red on high volume.  It is certainly possible this turns out to be a short term top.  Tomorrow should tell us more.  After starting out at +69% the breadth ended up -65%.  Historically that strong of a reversal has tended to have some downside follow through.  New highs were 406 which is the highest since Dec. 2016.

The futures ended the day just above the upper channel line.  They are currently still there.  Tomorrow they will either resume the rally and stay outside the channel or come back inside signifying the end of the accelerated up move. 

The green count slipped considerably, but remains above 50.

I think we will find out if there is any pent up selling now.  The year started out so strong investors decided to just hang on.  Since we had a strong reversal any pent up selling pressure should be released in the days ahead.  We have not had a reversal bar from a new high this strong since the Feb. 2016 low.  This may turn out to be nothing, but it could be something important.  The VIX has been rising steadily since the second trading day of the year while the market was flying higher.  It did not do that at any time last year.  Sometimes a VIX divergence like thist turns out to be a signal of a significant pullback.  However, that has not been the case since the Feb. 2016 low.  The VIX getting high while price was still near the highs ended up giving the market a shot in the arm to new highs.  I don't know that things have changed, but it is possible.   First off we need to see if there is any downside follow through to today's reversal.


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