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Thursday, February 15, 2018

Daily update 2/15

More buying.

There were a few sellers into the opening gap.  However, the selling did not last long before the dip buyers rushed in.  SPX closed above its 50 SMA.  Breadth was +65%.  New highs were 68.  New lows came in at 46.  So far the selling has been muted on this bounce.  Will it pick up here in the area of the 50?

The early morning sell off took the futures back down to the 200 SMA.  They found support immediately and bounced strongly the rest of the day.  The 100 SMA lies about another 20 points above.  That is an area that could provide some resistance.

The green count crossed above the red line, but remains below 50.  We have completely worked off the oversold condition now based on this indicator.  Sometimes that will bring the sellers back out.

A lot of people seem to expect a retest of the low before the bull market resumes.  Will it become a self fulfilling prophecy or will the opposite happen (V bottom back to highs).  We have had good breadth and volume on this bounce, but I can't say that is enough that we won't see a retest.  The first crash down day (2/5) had a high of 2763.  The 20 DMA lies at 2754.  That area could be significant resistance.  Closing above there could cause FOMO to kick in and those looking for a retest of the low might pile in thinking they missed the bottom.  This deep of a sell off historically has seen the low retested most of the time.  However, in this bull market we have seen many V bottoms.  I have no idea how this will work out.  SPX has about another 25-30 points it needs to get through to shift the odds there will be no retest in the near term.  Can it do that?  Beats me.  There is a real possibility that many people are rethinking the amount of risk in their portfolios.  Some may want to lighten up.  That would not be surprising given the rapidity of the move down.  Now that we have worked off the short term oversold condition this rally may run out of steam.  One possibility few are talking about is that a retest of the low could end up failing.  One thing bothering me is the way Jan. unfolded.  There were huge inflows into stocks that month and we had overly and I mean overly bullish sentiment.  That really could have been a final blow off top.  Should the market roll over and break the recent low the market could be in real trouble.  A close by SPX back below the 50 DMA could bring the sellers back in force.


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