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Wednesday, April 4, 2018

Daily update 4/4 We are Witnessing the Development of a “Perfect Storm”

Bulls strike back after a big down open.

Quite the day.  SPX closed well above the 4/2 high.  Breadth was +62%.  New highs picked up a bit to 25 while new lows were stable at 86.  The volume was relatively light again, but the price action looks more convincing for a bounce.  SPX was below the 200 SMA three times in three days and closed well off its low each time.  The last two days SPX climbed back above the 200 at the close.  This chart looks reasonably good for a bounce, but not so clear for a rally to new highs.

The futures closed above the 20 SMA for the first time since the March high.  They still need to confirm a break though.  The 20 turned up a bit today which usually makes confirmation easier to get.

Both counts increased today.  The red count is still above the green line, but is below 50.  Another strong day could give us positive cross.

The short term bull pressure lines got a positive cross.  That gives some credence to the idea of a bounce.

SPX got a confirmed break of the 60 minute 50 SMA for the first time since the March high.  The bulls need to follow through on the upside tomorrow, but they finally have a good setup to work with.  I am not quite sure what to make of this chart formation.  SPX never tested its Feb. low and the upside days have not had great volume.  It is clear there were dip buyers buying whenever SPX got below the 200 DMA.  There is no clear sign of a selling climax.  That may mean that sellers reemerge at some point if prices get higher.  A rally from here that fails to attain new highs might actually be bearish in the longer run.  We have used up some buying fuel.  That could add fuel to selling should we take out the recent low.  If we get a bounce from here we will have to take it day by day and see what happens. 

This is an older article sent in by a reader (tnx sunny), but it is relevant and an interesting perspective.
We are Witnessing the Development of a “Perfect Storm”


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