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Wednesday, February 21, 2018

Daily update 2/21

The bulls fumbled the ball.

SPX rallied right from the open up to near yesterday's high.  It chopped around until the FED minutes were released at 2 PM.  It then rocketed up and over the 20 SMA.  Breadth was +73%.  About 2:30 the sellers took over.  SPX fell back below the 50 SMA and closed below yesterday's low.  That was the third failure by the bulls to climb above the 20 SMA.  That may be all they get.  Breadth ended the day -52%.  New highs were 79.  New lows increased again to 73 (probably with the help of the bond funds). 

The futures ended the day back below the 200 SMA.  No confirmed break yet.  If we get confirmation then the odds shift to a retest of the low. 

The green count slipped a bit more today.  It would be pretty easy for a negative cross now.

The bulls had a great chance to restart the rally today.  However, after the FED meeting bonds sold off considerably sending all longer rates to new recent highs.  I am sure that helped spark the afternoon sell off. 

What happens to rates from here?  In Daily update 2/1 Has the interest rate environment changed? I showed the monthly chart of the 5 year rate with a 50/100 MA crossover for the first time since rates started falling back in the 80s.  So far rates are doing what one would expect if there truly is a regime change in the bond market. We may be starting a long term uptrend in rates which will completely change the investing environment that we have been in for well over 30 years.  I still need to see confirmation on the 30 year rate chart.  I will be keeping an eye on that. 

In order to keep the rally going I think the bulls need to show up in force tomorrow.  I think the odds of that are low though.  It seems more likely today restarted the down move.  Another down day tomorrow should give control back to the bears.  I have mentioned a number of times that nearly everybody on CNBC is expecting a retest.  That should mean there are lots of buyers just waiting there.  Should we get that retest the market could reverse sharply again. 


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