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Wednesday, May 9, 2018

Daily update 5/9

Bulls come out to play.

SPX made a second break out over the resistance box.  It stopped a little ways below the 100 SMA and the downtrend line.  Key hurdles the bulls must get over.  Breadth was +59%.  New highs expanded to 144.  That is the most new highs since 4/18.  New lows were stable at 60.  The volume was below yesterdays, but better then the first two days of the rally.  That is a positive.

The futures held above the 50 SMA overnight.  After some sideways action early in the day the bulls took over.  They closed above the 200 SMA which they have not done since way back in March.  Another positive.

The green count crossed above the red line, but remains below 50.  The intermediate indicator is creeping higher again.  Getting above 50 would greatly increase the odds the correction has come to an end.

I have not shown the bull pressure chart in quite some time.  The rally into the March top did not get the bull pressure line above the peak of the bear pressure line of the Feb. bottom.  However, the selling pressure into the late March bottom was lower.  The bull lines crossed slightly above the peaks of top of the bear lines at the 4/18 high.  The long term line was just fractionally above it, but still it was above it.  That condition often signals a bottom.  Usually the green peak is noticeably higher then the red peak when the market bottoms.  These are barely higher which is why I did not notice it before. 

Ever since the news hit that Buffet bought a bunch of AAPL shares this year the market has acted much better.  It is possible this correction is coming to an end and the market is embarking on a test of the high.  SPX must clear the 4/18 peak (2717) to confirm.  That would get it above the downtrend line and the 100 SMA.  Both the COMPX and R2000 have bettered their 4/18 peaks.  Those indexes are leading on the upside which is usually a positive. Both XLF and the SOX index have come to life also.  The weight of the evidence suggests the bulls are taking control again.

One thing to watch is oil and interest rates.  Rates tend to follow oil up and down to a certain degree.  The U.S. pulling out of the Iran agreement was bullish for oil today.  That pushed the 10 year to close above 3% for a second time.  It did not stay there the first time.  Something to watch in case rising rates become a problem for stocks.  That might not happen if the market has truly turned bullish until SPX gets much closer to the Jan. high.


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