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Wednesday, June 20, 2018

Daily update 6/20 SPY option data

Selling into strength.

The market gapped higher, but SPX was frozen in place.  The sellers came out to make use of the strength by hitting the bids.  Nothing excessive, but enough to keep SPX from running higher.  After a morning dip SPX was able to make slight new highs on the day during lunch (when the big boys were out).  However, after 1 PM the sellers went back to work and dominated the afternoon.  Breadth was +58%.  New highs increased considerably to 113 while new lows dropped to 38. 

The futures briefly got above the 20 SMA.  After that the sellers dominated the rest of the day. 

The red count dipped a bit, but remains above the green line.  This could still be a bounce cross if the bulls come out to play tomorrow.

The SPY call data still shows a large number of calls at the 280 strike.  That is a key resistance or acceleration point if broken.  The puts show support or acceleration points at the 270 and 265 strikes.

The rotation continues as the COMPX and R2000 indexes showed considerable relative strength today.  I hear somebody on TV loving this market because those indexes are at new highs.  It is true that those indexes often lead SPX.  However, in this instance the outperformance can easily be explained and might not be as bullish as usual.  The tax cut benefits small caps more then large caps and they are less susceptible to tariffs.  Tech stocks have been the darlings of the market for years and also are less susceptible to tariffs.  They are often the last to top in a bull market.  To counter that bullish outlook the financials are seriously lagging.  The XLF is still hanging around its 200 DMA.  What is up with that?  As a whole the market is still not quite acting right.  The possibility a bull market top is forming still exists.  The FED is raising rates and withdrawing liquidity which is causing problems in some emerging markets.  The global economy is clearly slowing.  The pundits on TV are almost hyper about how good the fundamentals are.  While the U.S. economy is doing fine it is possible this is as good as it is going to get for this cycle.  In today's global economy no country is totally immune if things go bad around the world.  We don't yet know if things are going to go bad, but that could be one explanation for the behavior of the financials.

Tomorrow should be interesting.  Will the bulls try to build on today's gains or will the bears show up to take advantage of the higher prices to sell into?  Closing below yesterday's low would clearly break the uptrend line from the early May low.  That could increase the selling pressure.


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