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Thursday, May 10, 2018

Daily update 5/10 Stoking the Embers of Inflation

Upside break out.

SPX closed above the downtrend line, the 100 SMA, and the 4/18 high.  Breadth was +67%.  New highs dipped to 130.  New lows dropped considerably to 33.  I circled the last three peaks because they all have something in common.  The third day after crossing the 50 SMA the market started down again.  That pattern can be broken with a close above today's high. 

The futures made it up to a resistance line I had on the chart and sold off.  The dip buyers came in to push them back up a bit into the close. It remains to be seen if that red line will be a problem or not.

The green line pushed across 50, but remains below overbought levels.  The intermediate indicator crossed 50 albeit just barely.  This indicator already crossed 50 once and failed.  In this case I think I want to see 55 because it almost never fails at that level. 

The breadth chart shows the McClellan oscillator around 130 for the fourth time in this correction.  The last three signaled tops rather than initiation of a new leg up.  Will it be different this time?

I honestly don't know what to think.  It bothers me that we did not get any sign of selling exhaustion at the recent lows.  With the McClellan oscillator up high it should not be long before we know if the sellers are going to come out in force again.  What happens if we close right back below the 100 DMA soon.  Will the 50 or 20 SMAs that lie well below provide support if tested?  The correction may have come to an end or we could be forming a second double top lower high.  I think we are getting close to knowing, but are not quite there yet.

This is an interesting look at the FED's effect on inflation.  Stoking the Embers of Inflation


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