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Thursday, March 1, 2018

Daily update 3/1

More down. 

SPX confirmed a break below the 50 DMA and closed below the last swing low (2/22).  It tested the 100 DMA and held for now.  The breadth was -58% which was not terrible.  The weakness was largely in the big cap stocks.  New highs plummeted to 16.  New lows spiked again to 163. 

The futures made multiple attempts overnight and during market hours to get back above the 200 SMA, but could not hold it.  In the afternoon they plunged below the 2/22 low.  They rallied off the low late in the day back to near the 2/22 low. 

The red count crossed above the green line, but is still below 50.

The breadth data is negative across the board.

The bull pressure lines all have negative crosses for the first time since last Aug.  Those negative crosses didn't last long as the buyers came back in when talk from congress that they would work hard on tax cuts came out.  We seem to have more things to worry about like rising rates and trade wars then things to look forward to at the moment. 

Well I was totally and completely wrong to give the confirmed break above the 50 DMA any credence whatsoever.  I thought that greatly lowered the odds of a retest of the low in the near future.  Then Powell happened followed by Trump announcing tariffs and the market sharply reversed.  With a confirmed break below the 50 DMA a retest of the low is back on the table.  Internals are now negative and SPX broke below the last swing low.  The pressure for a retest is rising.  Intraday rallies are getting hit hard.  There is some urgency in the selling, but no panic.  The TRIN closed at 1.2 today.  Not high enough to give us good odds of a bounce in the morning.  On the other hand, we have had three big down days in a row which might be enough to bring out some bargain hunters.  The bulls need to get SPX back above the 50 DMA and stay there to get out of trouble. 

When Powell was appointed to the FED a lot of people said he was like a continuation of Yellen.  I had my doubts about that because he is not an economist.  However, I really did not have enough information to know whether the pundits were right.  I believe it is crystal clear things will be different.  Yellen panicked any time the market was down 5%.  If she said something that sent the market down out came a correction the next daynto make the market feel better.  When the market was down 10% what came out of the FED was a statement that the decline was not sufficient to be a problem for the economy so it was none of their concern.  This is as it should have been all along, but that is not the way it has been.  The Powell put is much lower then the Yellen put was and the market needs to adjust to that.  There is definitely a new sheriff in town.


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