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Wednesday, January 31, 2018

Daily update 1/31

The selling may have run its course.

The market gapped up, but failed to rally.  Apparently there was some left over selling from the last two days.  After the FED meeting SPX traded down below yesterday's low for a while, but did not collapse.  Late in the day the market staged a strong rally.  That could mean we have a successful test of yesterday's low.  A gap up tomorrow might have better luck sticking.  Breadth was +51%.  New highs increased a bit to 88.  New lows dropped down to 110.  Bond related items have been causing a lot of the new lows.

The futures made a second test below the lower channel line, but came right back in.  Usually a positive sign.  They are trading up a bit at the moment. 

The red count increased a bit, but is still below 50. 

I would guess the pension rebalancing would be over now.  The first few trading days of the month are often bullish and we have a potential short term bottom in place.  If the bulls can engineer another gap up they might find more willing buyers tomorrow.  If the bears show up again and break today's low then the 20 DMA should be the next downside target.


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