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Thursday, May 24, 2018

Daily update 5/24 New Highs In The A-D Line and the Small Cap Index Are Not Necessarily Bullish

Interesting day.

SPX opened down a bit and sold off slightly below the 100 SMA on news the NK summit was cancelled.  The dip buyers rushed in on the test of the 100 and pushed SPX back near break even.  Breadth was slightly negative.  New highs picked up a bit to 62.  New lows were stable at 47.   The sell off retraced the FED induced up move from yesterday.  Then the rally off the low retraced the news induced sell off.  Leaving SPX down a tad.

The futures nearly made it to the lower channel line again.  They ended the day back above the 20 SMA and are still there at the moment.  The consolidation continues.

The green count slipped to the lowest level of this consolidation.  It remains above the red line.  One thing that bothers me a little is the green count never reached overbought levels.  We have not had a good solid upside thrust on this particular bounce.  Since we broke the downtrend line it seems like there should have been more of a rush in to buy.  So far that is not happening.  Maybe it will, but until it does the rally is at some risk of rolling over.

I am not sure what to make of this action.  When a consolidation forms after penetrating an MA the usual action is to reverse back through that MA.  This can still break out on the upside, but it probably needs to get with the program.  How many more tests of the 100 DMA will continue to bring in buyers.  We now have 11 trading days with SPX on top of the 100.  Time to go one way or the other.

People are starting to talk about economic weakness in Europe.  We have already seen that in Asia.  Remember China loosened reserve requirements and both Japan and S. Korea have seen slowing.  ECRI's prediction that the global economy would slow down is playing out.  The U.S. may be starting to show some signs of losing momentum as well.  The latest word from ECRI a couple of days ago is their long lead indicators still have not turned up.  They expect further global slowing.  Maybe the market is picking up on that.

This is a very good article on market breadth.  New Highs In The A-D Line and the Small Cap Index Are Not Necessarily Bullish


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