Daily update 4/30

Key reversal day down.

After a gap up the sellers proceeded to rule the day.  SPX closed back below the 20 SMA and near the low of the day.  Breadth was -60%.  New highs were stable at 71.  New lows were also stable at 48.  Whatever happens the last day of the month is often reversed on the next trading day.  In this case that next day is also the day before a FED meeting which for a number of years has gapped up.  When SPX closes so near the low a gap up the next morning usually tests that low.  Key reversal days on 2/27 and 3/13 saw downside follow through the next day and beyond.  Resistance at last year's close held again today.  I wonder if SPX is tracing a big triangle pattern shown by the yellow lines. 

The futures made a new bounce high overnight.  However, they turned down shortly after the open and reversed back below both the 20 and 50 SMAs.

The red count turned back up.  It remains above the green line and just a tad below 50.

Earnings have been great.  NK is talking peace.  Despite all the great news the market can't hang on to a rally.  That is a pretty good sign the correction has not completed yet.  The overhang of supply is still lurking out there.  The dip buyers can't get any traction.  I did not see any particular reason for today's sell off.  That usually is not good.  It is rare to sell off through a FED meeting, but anything can happen.  Maybe this is one of those times if the market does not bounce tomorrow.

Bob

Daily update 4/27

Resistance held today.

SPX is finding resistance at last years close (2674).  It was like a brick wall today.  Breadth was +54%.  New highs were stable at 63.  New lows dropped again to 48 as bonds rallied.

The futures tested yesterday's high, but failed to stay above it.  No confirmation of a break of the 20 yet.

The green count did not quite cross the red line, but it is close.

The bulls have more work to do to get control.  I do not know how stiff the resistance at last year's close is.  Will the earnings next week keep the buyers interested?  AAPL is up on deck Tue. after the close.  The FED on Wed. There has been lots of worry about IPhone sales which has been hammering the SOX index.  FB and AMZN did their part to hold the market up.  Will any other companies rise to the challenge?  I guess we will see.

Have a great weekend.

Bob

Daily update 4/26

Buying spree.  Thank you FB.

SPX rallied through most of the day.  There was a bit of a late day sell off.  Volume was relatively heavy.  Breadth was +64%.  New highs increased a bit to 61.  New lows dropped way down to 73 as bonds rallied today.  SPX closed back above the 20 SMA, but remains below the 50 and 100 lines. 

As  mentioned last night if the futures closed above the lower channel line they might go up to the 20 SMA.  They did indeed test above the 20 intraday and that is when the late day selling took over.  After the 4 PM close they rallied back above the 20.  I see AMZN is up 7% in after hours on earnings.  That could be supplying the bullish mood.  Will they confirm a break or roll back over?

The green count picked up a bit today.  Another strong day could give these lines a positive cross.

It was clearly a big cap tech day after FB's blow out earnings.  NDX was up 2%. SPX was up 1%. Bringing up the rear was R2000 up only .5%.  Did FB save the market or was this just another one day wonder? The bulls had a good day, but they still need upside follow through.  This market reminds me a lot of 2000.  The market was going up and down rather violently at times.  FB earnings clearly sparked buying today.  The market has demonstrated a very short attention span lately.  Yesterday the transports had a good day, today they were down .75%.  While NDX was up 2% today XLF was up only .1%.  If the downtrend is still in effect the market could head back down tomorrow.  A close above today's high could indicate a higher low on the daily chart and a resumption of the rally.  I don't know what the higher odds play is.  The market is a bit dysfunctional at the moment.

Bob

Daily update 4/25

Successful test of yesterday's low at least for today.

SPX dipped slightly below yesterday's low and found some buyers.  It came within four points of the 200 SMA.  I hate it when it does that.  Now we are left to wonder was that it.  Did SPX really get that close and not tag it.  Breadth was -54%.  New highs dropped down to 21.  New lows spiked up to 159.  With rates rising the new low list probably has plenty of bond funds and related ETFs.  The 10 year closed over 3%. 

The futures are up about 11 points as I write this.  I would guess there was some good earnings news behind the move.  Unfortunately that has been no guarantee for the next day.  The futures are currently testing the lower channel line.  They could get rejected there.  If not then a test of the 20 SMA might be in order.

The red count slipped a bit, but is still above the green line.

SPX was actually slightly red with 5 minutes to go, but there was a big spurt into the close.  The futures climbed even more after hours.  That seems like somebody new something doesn't it.  Even if the futures are still up by the open they might not stay there.  The bulls need to prove they can hang on to a rally.  We will see what happens tomorrow.

Bob

Daily update 4/24 SPY option data

Houston we have a problem.

The market gapped up on what was perceived as good earnings.  However, the sellers emerged and did they ever sell.  Once the support I mentioned last night at 2660 was broken the flood gates were opened.  Breadth went from +68% at 9:50 to end at -63%.  Volume was heavy.  It was even heavier then option expiration on Friday.  Notice SPX fell all the way through the bottom of the resistance box that we broke above on 4/16.  Prior resistance could have become support, but it didn't.  Now that SPX is below it the odds of the rally restarting seem low to me.  I think it more likely we test the March low.

I mentioned last night the pattern usually leads to a test above the 20 SMA.  In the night the futures came within .5 points of the 20 before turning around.  While they were up at the open they were well off the overnight high. 

The red count crossed the green line and ended above 50.  The intermediate indicator turned down while below 50.  That often indicates the prior low will be broken.

The SPY option data shows a lot of puts at the 260 and 255 strikes.  That 260 strike could be strong support.  If SPY gets down below 259.5 or so it could really accelerate down as delta hedging kicks in.  I don't think there are enough calls at any strike to provide resistance or acceleration levels.  Maybe as the month progresses that will change.

Some people were blaming the 10 year rate hitting 3% early in the day (it did not stay there long).  Some people were laying some blame on the CAT conference call where they mentioned that Q1 might be as good as it was going to get this year.  I don't have a clue.  It is obvious there was a rush to the exit though.  I think the Feb. and March lows are in jeopardy of breaking.  The McClellan oscillator has three peaks that were strong enough in a bull market to have ended the correction.  Instead of indicating initiation of a new leg up the market sold off hard after each peak.  That rarely happens in a bull market.  The advance/decline line made a new high.  Earnings are coming in great.  The economy seems to be chugging along.  So why isn't the market rallying back to test the high?  The market is clearly worried about something(s).  It could be a slowing global economy, rising rates, trade wars or something else entirely.  At the moment those worries seem to be stronger then the positives.  Are those worries real or just something that will be short lived?  The stock market tends to top when things are as good as they are going to get.  Maybe we have hit that point, but I don't see any way to know that.  The global economy is slowing.  China loosened reserve requirements recently so even their economy is slowing.  It is possible the worries are well founded.  I am not smart enough to know. However, I can see some technical things like the action in the SOX and my intermediate indicator that are worrisome.

Bob

Daily update 4/23

Lets call it a draw.

SPX tested Friday's low and found some buyers.  It even got back to slightly positive.  Breadth was -53%.  New highs were stable at 57.  New lows were also stable at 106.  Volume was rather light.  The dip buyers held off the bears so there was no confirmation of Friday's break of the 50 SMA.

The futures tested the lower channel line and bounced.  Still no confirmed break of the 20 SMA.  Usually a pattern like this ends up bouncing with the futures testing above the 20 SMA.

The green count turned up despite SPX being flat.  That is a good sign especially if there is upside follow through tomorrow. 

I mentioned XLF as a possible problem in the bullish case.  The SOX might be an even bigger problem.  It has fallen out of bed the last few days.  I think it will be hard for SPX to make new highs if the SOX does not get turned around.  This is definitely something to keep an eye on.

The 2660 area on SPX has held as support the last two days.  With SPX still above the 20 DMA the rally could resume here.  A close below 2660 would confirm the break below the 50 DMA. There are a lot of earnings announcements scheduled this week.  Maybe that will inspire a little more buying.  If earnings can't drive this market to new highs what will?  So far this earnings season the overall action has not really been all that inspiring.  The market still seems to be seeing some serious de-risking going on.  The advance/decline suggests the indexes should recover and make new highs.  I think these sellers are going to have to back off considerably.  I don't know if that will happen or not. 

Bob

Daily update 4/20

More selling.

SPX closed below yesterday's low and therefore the 50 DMA.  Breadth was -66%.  New highs dropped again to 46 while new lows increased to 101.  That makes two days in a row with more new lows then highs.  At this point in the bounce that seems odd.

The futures dipped down to the lower channel line and bounced going into the close.  They bounced into the close yesterday as well.  That could be a sign of some fund inflows.

The green count dropping below 50 indicates the market has worked off the overbought condition.  This will sometimes bring out the buyers.

The bids that were underneath the market for a couple of days totally disappeared again.  There is talk about disappointing smart phone sales and a slow down in the semiconductor sector.  It think that took the wind out of the market's sails the last two days.  The question now is will the bulls show up again on Monday.  I think they must to keep the bounce going.  A close below today's low would be a confirmed break of the 50 DMA and would put the rally in jeopardy.  The new lows spiking up is a bit troublesome.  If this rally fails to make new highs after the strong thrust from the double bottom  we could be in a bear market.  Next week will be interesting one way or the other.

Have a great weekend.

Bob

Daily update 4/19

Pullback day.

SPX traded below the 50 SMA.  It waffled around down there for several hours then rebounded into the close.  Breadth was -67%.  The selling was broad based, but the bears could not keep SPX down below the 50.  New highs contracted to 77 while new lows shot up to 92 (possibly bond related).

The futures dropped down to just above the 20 SMA.  There was a significance bounce off the lows which should be bullish.

The green count slipped out of overbought.  The intermediate indicator is getting ever closer to 50.

I think this was a successful test of the 50 DMA.  A lot of stocks were down, but the market held firm once SPX got below the 50.  The volume was fairly heavy, but the bulls were able to absorb the selling.  Bonds took a pretty good hit.  That may be inflation fear as commodity prices especially oil have been doing well lately.  Generally financial stocks have tended to rally when rates rise.  XLF was up on good volume today.  There might be a make up trade in that sector.  If you like leveraged ETFs then take a peek at FAS.  I don't know if that is going to pop, but it may be worth a watch.  I would consider a close by SPX below today's low (2682) as a warning sign of potential trouble.  Otherwise the bulls have the ball.

Bob

Daily update 4/18

Pause day.

SPX rallied up to the blue upper channel line and found some resistance.  Breadth was +52%.  It was +65% earlier in the day so there was some selling into strength in the afternoon.  New highs increased again to 148.  New lows also increased to 54.  Not sure why that happened.  It seems odd given the circumstances.

The futures remain outside the upper channel line.  Sometimes they test it from above and bounce.  Other times they come back in and signal a consolidation period.

The green count turned back down.  The market should start working off the overbought condition now.  That does not mean price needs to pullback.  It can do that while moving slightly higher in an extremely bullish market.  The intermediate indicator continued higher.  It will cross 50 within a few days.  That does not mean SPX will make new highs, but it should mean the market is unlikely to roll over quickly and head lower.  That indicator crossed 50 after the double bottom in Oct. 2015.  SPX rallied nicely, but never made a new high before heading lower into early 2016.  We should have a few weeks of rally at the very least.

The all company advance/decline line has already made a new high.  That should be foretelling that SPX will make a new high as well. 

The last two days the bid under the market has returned.  Investors seem to be much more comfortable buying stocks now.  It would probably take a severe news event to change their minds.  Maybe something like the sign a trade war with China is likely.  Barring some shocking news we should see higher prices in the next few weeks.  As I said last night I will be watching for a confirmed break below the 50 DMA to signal a change in the market.

Bob

Daily update 4/17 SPY option data

SOX powered through the 50 and 100 DMAs.

SPX closed the 3/22 gap down.  There is some potential for resistance there.  Breadth was strong once again at +68%.  New highs increased a good bit to 112.  New lows were stable at 42.  Up above there is the blue upper channel line, the yellow downtrend line, and the purple upper channel line as possible resistance points. 

The futures sped up overnight and today.  There was very little selling all morning.  Some sellers emerged in the afternoon, but not as strong as we have been seeing.  Maybe there were more bids today (with good earnings news and a bit less geopolitics to worry about) to absorb the selling. 

The green count shot up to the highest it has been since July 2016 when the market was coming off the brexit low.  This could be initiation of a new upside thrust like that was.  However, SPX is still below the downtrend line.  I don't know if it will be able to conquer that or not.  One positive is the intermediate indicator is finally turning up sharply.  It still needs to get across 50, but that is starting to look likely unless we turn down sharply again.

Here is the latest SPY option data.

There are more calls then puts at the 270 strike. That could cause some resistance.  SPY actually got up through the 270.5 level that could have caused acceleration.  It continued a bit higher, but at the end of the day it sold off some.  If it gets above today's high before Friday there could be some delta hedging upside acceleration.  The next level of importance is 275.  That should be much stiffer resistance with the very large number of calls.  That might be too far to go by Friday though.

Everybody seemed quite positive on CNBC today.  I did not note any skeptics.  I don't know if there were any or not. I like the trader interviews, but I don't catch all of them.  There may be some resistance in this area from the gap close and SPY options.  However, good earnings could keep the buyers coming in and maybe SPX powers through.   The technical condition is improving.  One fly in the ointment is that financials are lagging behind.  I think every big name that has reported has ended in the red even though earnings seemed to be pretty good.  Lets take a look at XLF.

Friday it gapped upped considerably on some big bank earnings, but failed to hold it.  It gapped up again today and failed to hold it.  I do not know what the reason is or if it will continue.  I do know that a lot of people watch the financials for the health of the market.  This may not be a problem in the short term, but if the lagging persists it could be down the road.

For now I will be watching SPX's 50 DMA on the downside.  A confirmed break below it could be a sign the market is rolling over.  Will the bulls keep on keeping on?

Bob

Daily update 4/16

A new rally closing high, but it was below Friday's intraday high.

The market gapped up then traveled sideways all morning.  A brief spurt in the noon hour took SPX above Friday's high.  However, the afternoon saw some selling and SPX settled back below Friday's high.  Breadth was very strong at +68%.  New highs expanded some to 64.  New lows dipped a bit to 38.  The high came within .5 points of the 50 SMA.  The close was a little bit above the resistance box.  Now the question is can it stay there. 

For the last week the futures look like they are slogging higher.  Today's high was right at the 100 SMA.  A slow and steady march higher so far.

The green count shot up 50 points to reach overbought levels.  It is unusual to have such a big move.  The question is will the bulls keep buying now that we are overbought again.

The market continues to grind higher.  It has gapped up 5 of the last 6 days.  R2000 has crossed its 50 DMA, but SPX and COMPX are still below theirs.  April is one of the strongest months of the year for stocks and we have moved higher.  The problem is we have not moved all that much and May is right around the corner.  Coming off a double bottom formation like we have there should have been a flurry of buying by the big boys.  This grinding action does not usually happen until we get near or at new highs.  I think the bulls still have some more proving to do.  Both SPX and COMPX need to get across their 50 DMAs and demonstrate that they can stay there.

Bob

Daily update 4/13 SPX stock correlation

The top of the recent trading range was tested, but resistance won the day.

The market gapped over the top of the resistance box, but started selling off immediately.  The selling was broad based.  SPX dropped below yesterday's low, but dip buyers rushed to the rescue.  Breadth was -57%.  New highs slipped a bit to 45.  New lows increased a bit to 47.  More new lows then highs.  Not a great sign at this point in the rally attempt.

The futures tried to break out over resistance, but failed.  They also dropped below the bottom line, but bounced off the 20 SMA.  They ended up back inside the box.

The red count slightly crossed above the green line.  Does this turn into a bounce cross by bringing out buyers?  The intermediate indicator must cross above 50 to be able to say the correction is probably over.

The internals are not showing a strong bounce, but the rally attempt is still alive.  Will earnings give it some legs?  Some of the selling this week might have been raising money to pay taxes.  That should be pretty much over by now.  Next week is option expiration which usually has a bullish bias.  Earnings could keep some buyers active.  The real question is whether the sellers will still be so eager next week.  Headlines keep buffeting the market around.  Volatility is still the watchword.  No sense trying to predict what will happen.

This is an interesting chart.

Stock correlation is the highest in the last 40 years with the exception of 1987.  The prior instances of very high correlations (1987, 2008, and 2011) all saw bigger down moves then what we have seen so far this year.  The market could be carving out a bottom and the worst might be over, but caution seems warranted.  There may be more down to come.

Have a great weekend.

Bob

Daily update 4/12 Global growth slowing

A new April high close.

SPX hit the downtrend line connecting the lower peak and pulled back.  Breadth was barely positive.  Very odd considering SPX was up .8%.  It was a big cap day.  New highs were stable at 51.  New lows increased a bit to 41.  That is a bit odd since the day started with a gap up and never traded in the red all day.

The futures finally closed above the lower resistance line.  However, they stopped at the 4/5 high.  They turned back sharply losing 10 points in the last 30 minutes.  Breaking the lower line might increase selling pressure.

Despite the higher closes on the indexes the green count actually fell.  Combined with the weak breadth it is hard to have a lot of confidence in this rally.  Maybe the financials reporting in the morning will rev up the bulls.

The last few days there have been sizable sell programs intraday.  The dip buyers rushed in to scoop up the bargains.  I find it a bit odd though to see the amount of selling here.  SPX is just barely above the 200 and trying to form a bottom.  Despite the outlook for great earnings somebody is selling a lot of stock.  There were four separate sell offs today of 10+ points.  Not everybody is in agreement the market is headed higher.  I am guessing the increase in volatility has unnerved some investors enough to lower their risk levels.  We can't know how long this will last, but the market is going to struggle until it stops.  With SPX near the top of the recent trading range the question is will it break out or turn back again. The bulls still need to prove themselves.  I don't see a technical green light yet.

Late last fall ECRI said their long lead indicators had rolled over and they were expecting global growth to slow down some.  That appears to be happening.

Europe and Japan are showing noticeable slowing.  The U.S. might be slowing some, but not significantly yet.  I have not heard anything from ECRI that their long lead indexes have turned up yet.  They announced that back in 2016 for everybody to hear before the global economy turned up strongly.  I guess they will do that again.  At this point I would say we could still see further slowing.  Slowing is not the same as going into a recession.  At this point it is just a growth slowdown.

Bob

Daily update 4/11 Stocks Spinning Their Wheels, Loudly

No follow through from yesterday's rally.

The dip buyers came rushing in on this morning's gap down.  However, after SPX got green it ran into a bit of trouble.  The afternoon saw sellers hitting the bids again.  Every dip was bought until late in the day.  However, every afternoon bounce ran into a brick wall.  Breadth was dead even.  The 50 SMA crossed slightly below the 100 today.  The last time it did that was right at the 2016 election and marked an important bottom.  

The futures tested below the 20 SMA overnight, but found support.  During market hours they tested above the 50 SMA again, but found resistance.  They are currently stuck between the 20 and 50 MAs.

The green count plummeted back below 50.  That makes a negative cross easier should the market head south again.

SPX tapped the 20 SMA again, but found resistance.  The dip buyers have been coming in quite regular.  The problem is rallies keep running into resistance.  So far that resistance box on the SPX daily chart has been quite stiff.  Earnings are getting started.  Maybe that will be a catalyst one way or the other.  The consolidation has lasted over two weeks now.  That is quite a bit of bear fuel if we end up breaking down.  I still don't see anything that suggests the odds are high the resolution will be on the upside.  Earnings expectations are high.  There is probably more room for disappointment then in recent years.  We will have to wait and see if the earnings are good enough to drive the market higher.

I have commented recently on the volatile consolidation pattern.  Here is a look at similar historical instances.  Stocks Spinning Their Wheels, Loudly

One gloomy observation from a cursory glance at the prior examples on the chart above is that most of them occurred during bad markets, or in the transition to a bad market. That’s perhaps not surprising since elevated volatility tends to occur during corrections and bear markets, etc. But is it just a fluke in this case? Are there enough samples for a rigorous conclusion?

As I said last night at the moment this market is acting more like a bear then a bull.  

Bob