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Wednesday, June 13, 2018

Daily update 6/13

Key reversal day.

SPX gapped up slightly and climbed above recent highs.  However, once there it stalled.  It made a couple of attempts to go higher, but was thwarted.  By the time the FED announcement came SPX was already of its high a ways.  The immediate response was negative and SPX traded down below yesterday's low.  The dip buyers rushed in and retraced the entire post FED move down.  However, that rally ran out of steam and sellers pushed SPX to new lows.  At the end of the day we had a second key reversal day from the same area.  Breadth was -64%.  New highs slipped down to 100.  New lows picked up slightly to 33.  Volume was heavy.

The futures closed back inside the upper channel line.  That ends the rally and puts us in consolidation/pullback mode.  They stopped at the 20 SMA for the moment.

The green count took a significant hit, but remains above 50.

The sell off from the Jan. top started when the strong employment report got people thinking there could be four rate hikes this year instead of three.  Until today the FED never indicated they were thinking about that extra hike.  They spelled it out clearly today they expect two more hikes this year.  I am a little surprised the selling was as muted as it was.  Tomorrow will be interesting.  Does the market still care if there are four hikes?  We will find out in the coming days.  The market already looked tired and in need of a pullback.  It seems likely there will be some follow on selling from this key reversal.  Individual key reversal days do not have all that great of a track record.  The one back in March obviously was key.  A friend of mine did a study and found key reversal days more then a month apart like we have now are much more effective.  I recently mentioned that SPX could be forming a wide double top lower high pattern.  Today clearly opened the door to that pattern.  It remains to be seen if the bears step through that door or not.  I have not liked the quality of this rally at all.  It won't be a surprise if the market reacts strongly on the downside.  I am changing my mind on the idea of a pullback here being a buying op.  I will have to wait and see what happens.  The bulls really need to show up with some enthusiasm tomorrow to show the extra rate hike is not a problem.


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