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Wednesday, April 11, 2018

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.  


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