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Thursday, March 29, 2018

Daily update 3/29

Failure to launch.

I have marked out a resistance zone I think SPX needs to clear to give a rally a chance.  SPX rallied nicely today, but late in the day it sold off and closed well off its high.  Not a particularly good sign.  Breadth was +75%.  New highs were stable at 32.  New lows continued their declining pattern in recent days and were 52.  SPX could still make a short term bottom, but the pattern is starting to look more like a consolidation to go lower.  The bulls need to show up and win on Monday.

The futures got briefly above the 20 SMA.  Then the sellers showed up with some force.

The red count came down from oversold, but is still well above 50.  The intermediate indicator dropped below the Feb. low.  Not a particularly good sign.  Here is a look at how the Sept. 2015 and Feb. 2016 lows looked.

Both those lows had big divergences in the intermediate indicator.  We have a much different situation this time.

I am not seeing anything at the moment that suggests the market is making an important bottom.  That does not preclude a good bottom from forming, but nothing seems to suggest that is the higher odds outcome.  I keep hearing people talking about the LIBOR–OIS spread spiking higher.  There is still a lot of loans indexed in some way to LIBOR rates.  I do not know the particulars, but I have not heard this much talk about LIBOR since 2008-9.  Some people are getting concerned.  Whether that will turn into a problem I cannot say.  I can say there appears to be a bigger overhead supply in this market then we have seen in many years.  A lot of intraday bounces are getting sold into sharply.

The technical condition at the Jan. high would be very unusual for a bull market top.  However, the price action since then has acted like we could be in a bear market.  Because of all the leverage in this market there is significant risk on the downside.  We have already seen some big range days both up and down.  Those happen more often in bear markets then bulls.  The liquidity is very thin at times.  The algos that were pumping the market higher over the years appear to be really nasty when they sell.  Be careful.

Happy Easter to those that celebrate it.


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