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Tuesday, January 30, 2018

Daily update 1/30

More selling.

Global selling preempted the usual pre FED day gap up.  However, SPX found its low in the first hour and traded sideways the rest of the day.  Breadth was -79%.  Another very negative day.  New highs dropped way down to 46.  New lows were up again to 246.

For the first time this year the futures made it down to the lower channel line.  They found support there early in the day and held it all afternoon.

The red/green count got a negative cross today.  A cross will often bring out buyers in a strong market.

The 10 DMA lines also got a negative cross.  The McClellan oscillator is even oversold.

Some people were blaming the selling on fears of rising rates.  I believe that is probably not the case.  The best explanation I heard is that the big move up this month in stocks and down in bonds caused pension funds to need to rebalance about $20 billion out of equities.  I would not be surprised if they didn't mostly finish that up today.  The selling has caused a bit of a short term oversold condition.  If the market is still as bullish as it has been all month the dip buyers may show up in the morning.  If the selling continues the 20 DMA (2788) could provide support.  The market was so extended that even after two very negative breadth down days SPX is still well above its 20 DMA.  You don't see that every day.  Curiously McClellan's bitcoin chart I showed in Friday's update shows a dip right about now.  If SPX continues to follow that pattern we should have another pop to new highs coming up soon.  It looks like we have the ingredients to make a bounce to new highs with the VIX sitting just below 15.

The state of the union address is tonight.  The president enjoyed a big bounce the next day after speaking to a joint session of congress last year.  It could happen again.


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