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Thursday, July 26, 2018

Daily update 7/26

Consolidation day.

The market gapped down on FB's miss.  However, dip buyers were busy right from the open.  SPX ended up with a doji bar.  Breadth was +56%.  Another negative day on positive breadth.  The strangeness continues.  New highs spiked up to 131.  New lows dropped considerably to 27. 

The futures remain above the upper channel line. 

The green count crossed above 50.

The headline of a trade deal that drove yesterday's late rally turns out to be an agreement to negotiate.  Nobody seemed to notice the difference today though.  All my short term market internals are positive again.  The negative crosses I showed before brought out the buyers as they should in an uptrend.  None of them are in overbought territory.  There is more room to run on the upside.  The question is how much ambition the bulls have.  The weak breadth the last couple of weeks and the disparity in the sectors calls into question a bit the true strength of this rally.  The financials lagging seems pretty important to me.  Another thing a little troubling is the rapid rotation among various sectors.  A sector should not be up and down over 1% in just a few days. I have seen that a few times over the years and it normally means the market is still in correction mode. We will have to watch closely and see how SPX acts on the retest of the Jan. high.  Does it break out and keep going or end up failing?


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