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Friday, August 31, 2018

Daily update 8/31 SPY option data

More consolidation.

The market was blown around a bit by trade news during the day.  News hit that the talks ended with no deal which sent the market lower for a while.  Then news started to trickle out that the negotiations would continue next week.  That gave stocks a lift late in the day.  Breadth was +51%.  New highs were 90 and new lows were 46.  It is still not clear if the SPY option resistance at 290-1 is going to keep the market in check or not.  If SPY gets much above 191.5 there could be some delta hedge buying.

The futures held support at the 20 SMA and bounced.  The bounce came on news the trade negotiations would continue next week.

The green count recrossed 50. 

It looks like they have piled into calls at 295 and 300.  If we get solidly through 291 then 295 would be the next resistance level.  It could be significant.  That 300 strike is likely to be a brick wall.

So far SPX is holding above the Jan. high and just at the edge of the 290-1 SPY option resistance area.  Next week the multitude will be coming back from the beach.  I am curious to see what kind of mood they will be in.  Will they bring something to worry about or will they be all happy?  There are emerging market currencies going haywire, but that took a back seat this week to trade negotiations.  I have no idea what will happen in Sept., but I have a feeling it will be interesting one way or the other.

Have a great long weekend.


Thursday, August 30, 2018

Daily update 8/30

No positive trade news on Canada and a reminder of more potential tariffs on China led to a down day.

SPX closed right around the upper channel line.  Breadth was -65%.  New highs dropped down to 113.  New lows picked up considerably to 62.  That is awful high one day off a new high close.  The market was reminded today of the possible implementation of more tariffs on China mid day which sent SPX down a few points. 

The futures are just inside the upper channel line.  Will they bounce or fall back into the channel.

The green count fell back below 50.  Not a great sign one day off a new high close.

Trade headlines are clearly pushing the market around.  I don't have any idea how the negotiations are going with Canada.  Yesterday there was optimism early in the day.  I did not hear anything today.  I don't know if it was a good day or not.  Trump imposed a deadline for tomorrow, but that seems aimed at rushing Canada into a deal.  I don't get the feeling from Trudeau that he will be easily pushed around.  This might not be resolved tomorrow.  Hard to say.  If the market unwinds the optimism over the potential trade deal then SPX will end up back near the Jan. high and we will have to worry about the break out to new highs failing.  A failed break out will leave a textbook topping pattern in SPX.  It is very important what happens here.  This rally back to new highs has not had the same vigor every other rally in this bull market had.  Coming off the other corrective lows there was a lot of technical buying strength.  That did not happen this time.  While the U.S. economy is doing fine the global economy is not.  The FED is withdrawing dollars and some emerging market currencies are going haywire.  Things could go wrong in the global economy that would certainly affect the U.S.  I am trying to be as objective as I can, but I see yellow flags all around.  Lets see if the bulls can keep SPX above the Jan. high.


Wednesday, August 29, 2018

Daily udpate 8/29

More positive trade  news, more rally.  I happen to catch CNBC showing the Canadian lead negotiator saying she was very positive on reaching a deal.  That brought on the buyers.

The beat goes on.  Sellers on vacation.  Buyers coming in on every bit of positive trade news.  Breadth was +58%.  New highs were 146.  New lows were up a bit to 34.  SPX is climbing further above the trend channel. 

The futures remain above the upper channel line.

The green count picked up a bit, but remains below overbought levels.  We have not had a good strong thrust in this indicator on this rally.  After the April low there were three strong bounces with the green count getting above the red line.  The mid May rally did not achieve that level.  In late June SPX slipped back below that mid May high before the rally resumed.  It is not clear exactly how strong this break out really is.

XLF still bothers me.  I saw a headline that financial companies made record profits of over $60 billion.  Still XLF is well below the Jan. high.  Is this some kind of warning?

Sept. is going to be interesting when the bigs get back from vacation.  Will they sit, chase the market higher, or take some profits?  Will the mid term election pullback still happen?  The Dow is getting close to its Jan. high, but still has not reached it.  The transports made a slight new high, but went nowhere after that.  The SOX is also a little short of its prior high.  The VIX is refusing to break down below 12.  It was in the low 10s earlier in the month.  It looks like we will be going into Sept. with SPX overbought and some lingering questions about the strength of the SPX break out. 


Tuesday, August 28, 2018

Daily update 8/28

Pause day.

The SPY option resistance held for today.  Breadth was slightly negative.  New highs dropped down to 114.  New lows were up a bit to 28.  A little bit of profit taking today.  I should note that breaking out above a trend channel like this and falling back in usually leads to a trip outside the other channel line.  Sometimes it ends the trend completely.  On a closing basis it would be better to stay above that upper channel line.  They will sometimes slide along just above the line for a while.

The futures opened up several points, but were stymied right away.  They are still above the upper channel line.

The green count turned down a little bit.  It has not reached overbought yet.

The upper channel line and SPY options held the market in check.  It remains to be seen if the resistance is significant enough to cause a pullback.  Even if the market is going higher it would not be unusual to go back and test the Jan. high (2872) from above before taking off again.  I must mention that history has quite a few false break outs in Aug. and early Sept.  I don't think it is safe to say this break out is going to succeed yet.


Monday, August 27, 2018

Daily update 8/27

Break out confirmed, but...

SPX has reached the upper trend line of the uptrend channel of the last several months.  Does that still matter?  Breadth was only +58%.  Not especially strong for the size of the move.  IWM was notably weaker.  New highs picked up a bit to 145, but still below the early Aug. peak. 

The futures started the day on the upside after news came out Sunday of an agreement on trade with Mexico.  They never looked back.

The green count is still below overbought levels.

The VIX was oddly green all day.  I am still not seeing this VIX divergence resolve itself.  It is clear the market likes positive trade news.  However, most days there will be no trade news so what does the market do then?  Will buyers keep on coming or not?  Today confirmed Friday's break out, but coming on news that confirmation is not as strong a positive sign.  The SPY option data shows some potential resistance at the 290 and 291 strikes.  It closed just below 290 today.  Combine that with the SPX upper channel line and I have to say there is some potential for a pullback here.  If it pulls back enough to drop below the Jan. high then we could have an entirely different kettle of fish.  This rally has happened because of a lack of selling pressure more than enthusiastic buyers.  Should something come along that brings out more sellers the dynamic of the last several months could change.  A failed break out is something that could possibly increase the selling pressure. 


Friday, August 24, 2018

Daily update 8/24 The stock market’s latest sell signal has happened only 5 other times since 1895

SPX makes a new high close.  Let the celebration begin.

SPX closed less then 2 points above the Jan. high.  Not exactly a clear sign we are going higher.  Breadth was +64%.  New highs were only 114 which was less then the 162 on 8/21.  New lows were stable at 36. 

The futures got above the 8/21 high mid morning, but came nearly to a stop.  They only managed to gain 3.5 points the rest of the day.

The green count recrossed 50, but is below where it was on 8/21.  Not exactly clear the bulls will keep on buying.

The Dow is still quite a ways below its Jan. high.  I think retail investors still pay more attention to that index then SPX.  I don't know that the new high on SPX will generate much excitement in the retail crowd.   

The market has looked for months like it was hobbling back to the high.  That makes this rally a good candidate to fail the retest.  SPX made the new high close cementing this bull market as the longest in history.  The question is how much more it has in it for the near term.  The first order of business is to get a close above today's high to confirm the break out.  The VIX divergence is still lingering out there.  It did not close below yesterday's low.  I don't see any sign the divergence is going to resolve with an SPX pop.  Will the new high excite the retail crowd?  We know much of the professional crowd is taking vacation.  Will buyers step up and chase price higher?  There was very little buying interest today.  Just enough to hold the highs into the close. 

This last leg up started when news came out that the U.S. and China were going to talk trade again.  I believe that sparked the wave of buying that took SPX to this new high.  Those talks ended with nothing new.  Today I heard some rumblings that China was saying there might not be any more talks until after the election.  My guess is that will be the case.  I suspect China is hearing about the so called blue wave the democrats keep hyping.  China is likely hoping that happens which would serve to weaken Trump's bargaining position.  That headline did not take the market down, but there was clearly a lack of buying interest at the high today.  We also have headlines about immunity being given to some people regarding Trump's campaign.  That might have been another reason for the lack of enthusiasm.  I think next week will be interesting because people will have to make a decision whether to hold em or fold em.  Given today's headlines I wonder if there will be enough buying enthusiasm to push SPX significantly higher.  I guess we will find out.

This is an interesting article.  The sell signal does not mean sell today, but after the prior five signals a 50% or more crash happened.  The stock market’s latest sell signal has happened only 5 other times since 1895 

I must commend this pilot for a great balancing act.

Have a great weekend.


Thursday, August 23, 2018

Daily update 8/23

Consolidation continues.

There was a slight gap down this morning that was immediately bought.  The bounce took SPX slightly above yesterday's high where the sellers showed up.  The selling took SPX down below the morning low, but then stopped.  The dip buyers came in once again.  Breadth was -65%.  New highs dipped again to 89.  New lows were up again to 37.

The futures are consolidating in a pretty tight range.  It won't be long before the 20 SMA catches up to price.  Sometimes that will cause the move to resume.

The green count turned up just a bit, but remains below 50. 

A lot of stocks were negative, but the major indexes did not go down much.  The volume remains light so there was not a lot of selling pressure.  So we wait until the market makes up its mind what it wants to do.  Either the dip buyers will run out of fuel or rally chasers will show up.


Wednesday, August 22, 2018

Daily update 8/22

Only a minor bit of follow through selling from yesterday afternoon. 

The dip buyers stepped in shortly after the open and held the market above that early low the rest of the day.  Breadth was slightly positive.  New highs were down some to 105.  New lows were up a bit to 27.  Volume was very light so neither buyers or sellers were very ambitious.

Yesterday ended with a bearish engulfing bar on the futures.  Overnight there was some further selling, but none of the next three bars closed below the bearish bar low.  The dip buyers are doing their thing.

The green count dropped back below 50.  The red count is still quite low so there are quite a few stocks with neutral price bars at the moment.  This is still positive.

It looks like yesterday afternoon's selling was largely about politics.  Today investors decided the political situation did not mean the end of the world so buy the dip.  The VIX actually was down considerably today even though SPX was slightly in the red.  I wonder if that is an early warning the VIX divergence I mentioned last night is going to get resolved with SPX going up.  I think the most likely cause of a reversal to the downside would be from trade war fears rising again.  For the moment everybody seems to be talking so the odds of that might be pretty.  With the rest of the world faltering the U.S. market could see some money come in from overseas as a safe haven kind of play.  The market has been sideways long enough that there is surely some sideline money that might be teased into the market on a successful break out by SPX.  As I said last night those VIX divergences often get resolved with a nice short term move.  I can see fuel either way here.  The bulls get the benefit of the doubt for now.  Let see what happens.


Tuesday, August 21, 2018

Daily update 8/21 SPY option data

SPX makes new high intraday, but sold off going into the close.

SPX stuck its head .5 points above the Jan. high.  There was enough resting sell orders to overcome the buyers at that point.  Breadth was +62%.  New highs were 162.  New lows dropped down to 19.  Volume picked up a bit over yesterday. 

The futures popped out over the upper channel line, but came right back in.  The day ended with a bearish engulfing bar.  The futures are down about 10 points from the 4 PM close at the time of this writing.  I have no idea why.

The green count picked up a bit more, but is still not overbought.

Important put support comes in at the 280 strike.  No surprise there.  The important call strikes are 285, 290, and 292.  SPY is above that 285 strike already.  We will see if it can stay there.  These are not huge numbers yet.

At the peak in early Aug. the VIX was down around 10.5.  Today it was just above 12 at it's low.  That is a sizable divergence.  I see VIX divergences from time to time, but I have never been able to figure out how to tell if they are negative or not.  Sometimes SPX keeps climbing and the VIX implodes.  Sometimes SPX sells off and the VIX explodes.  It often leads to a big move though.  The VIX divergence could mean this afternoon's sell off is the start of something bigger.  But then again, maybe not.  If SPX can break out there could be a sizable short covering pop now. 

What happens now?  I have commented on the lack of quality of this rally a few times.  It is not hard to imagine this rally failing this retest.  It would not be surprising to see a higher high first.  Today tied the longest bull market ever.  The bulls have been pretty persistent buying the dip.  Would they give up here without breaking that record.  They need to get SPX to a new high another time.  We will just have to see what happens.  No prediction here.


Monday, August 20, 2018

Daily update 8/20

More upside.

The resistance was still in play today.  The market gapped up, but traded sideways all day.  Breadth was strong once again at +65%.  New highs expanded to 144.  New lows dropped to 26.

The futures ended the day slightly above Friday's high.  They are also right at the upper channel line which can provide some resistance.

The green count crossed above 50, but remains below overbought levels.  There is more room to run if the market wants to.

The volume was much lower today then when the market was spinning its wheels in early Aug.  More investors are probably at the beach.  Back in early Aug. I commented that the people on CNBC all seemed to think it was a done deal to make a new high.  The recent pullback seems to have tempered their expectations.  I did not hear much if any excitement about the market today.  There was even talk that there was no news to drive prices higher.  Josh Brown tried to argue we did not need news to get higher prices, but that did not go over very well with the rest of the gang.  I was a bit skeptical then and mentioned it was not a done deal until it happens.  Things look better to me now.  We have had three strong breadth days off the last retest of 2800.  There is only 15 points to go for SPX to get back to the Jan. high.  This breadth thrust could carry it at least that far.  It is not a done deal until it happens and now that I suggested it could I probably just killed the rally.  However, COMPX is lagging behind a bit.  Another interesting thing is this chart of minimum volatility stocks ETF.

USMV has already surpassed its Jan. high.  This is a defensive ETF that is leading at the moment.  That does not seem like a good sign for a sustained break out by the major averages. 

I don't know how this will play out.  It looks like SPX could have enough momentum to make a new high now.  However, it is not clear the broad market is getting itself together to make a sustained push higher.  A turn back down below 2800 would leave SPX with a double top lower high looking pattern.  A break out that fails would make an even more important looking top.  So we will have to just wait and see what happens.  For the moment the bulls appear to be in control.


Friday, August 17, 2018

Daily update 8/17

Upside follow through.

The bulls seem inspired over the U.S. and China meeting to discuss trade.  Breadth was +67%.  New highs were stable at 100.  New lows were also stable at 48.  SPX completely filled the 8/10 gap down.  It closed fractionally below yesterday's high, but essentially above the highs of the last five days.  This looks like it should test the recent highs and maybe more.

The futures sold off a bit early in the day continuing yesterday afternoon's move down.  When they got down to yesterday's open the buyers showed up.  Support showing up at a logical place is bullish in the short term at least.  At the end of the day the futures confirmed a break above the 20 SMA. 

The green count crossed above the red line.  This was a good day for bulls.

The bulls pretty much blew up the potential head and shoulders top.  SPX stopped when it got up near where recent resistance was.  The last two days look pretty strong.  SPX might push through that resistance this time.  That would set up a test of the Jan. high.  It is tough to analyze this situation.  I believe the rally is based on trade resolution with China which may or may not actually happen. 

These are the headlines that started this rally yesterday.
  • White House economic advisor Larry Kudlow confirms that U.S. and Chinese officials will meet later this month to try to work out their trade differences.
  • He says President Trump has a strong resolve to make sure the U.S. gets the best deal possible.
  • Markets have been nervous that the U.S.-China fracas could spill over globally and halt the momentum the economy has seen during the Trump administration.
If talks go south so will the market.  How do investors handicap that?  They have already talked several times and nothing happened.  One thing might be different this time.  There has been talk of some discord within the Chinese government over trade.  If China bends a little will it be enough to satisfy Trump.  There are signs China is having problems with their economy which could make Trump press for more.  I don't know if China is really ready to bend enough to have truly free trade.  Maybe the talks bear fruit and it all works out and maybe not. 

For a few days it looked like investors were looking to take some money off the table.  The last two days look like investors are back in a buying mood.  Maybe the bulls got the news they were looking for to get SPX back to the highs.

Have a great weekend.


Thursday, August 16, 2018

Daily update 8/16

Bulls fight back with the help of news of more talks coming between the U.S. and China.

SPX came within 1.5 points of closing the 8/10 gap down.  That is close enough to call it closed.  The sellers did not wait for it to get all the way there.  That happened shortly after noon and the market drifter lower all the rest of the afternoon.  Breadth was strong at +70%.  New highs picked up a bit to 96.  New lows dropped way down to 50.  SPX ended 10 points off the high.  Tomorrow will be interesting.

The futures came within .5 points of closing the 8/10 gap.  They ended the day above the 20 SMA, but without confirmation of a break.

The red count retreated considerably, but remains above the green line. 

Every other day this week has gone a different direction.  If the pattern repeats tomorrow will be down.  The price pattern since the break out above 2800 is starting to look like a possible head and shoulders top.  A break of 2800 (neckline) is likely to bring on considerable selling.  There is clearly things the market could grab onto for reasons to take some profits.  We will just have to wait and see if that is what happens.  Since April the market was clearly looking for reasons to buy.  We have had a few days lately that might be indicating the mood is changing. 

The big picture is muddled here to me.  The advance/decline line made new highs even though SPX did not.  That is supposed to indicate that any pullback from here should be a correction and price should rebound to at least test the high again.  The strength of the U.S. economy also suggests that should be the case.  The fly in the ointment is that globally financial stocks have sold off considerably.  On top of that copper and other commodities have also sold off.  That is because the global economy is clearly slowing.  Normally the mid term election pullback which can be pretty significant some years is a great buying op.  The next year tends to be up big.  However, in this situation with the FED doing QT and raising rates combined with the weakening global economy something could go wrong.  But will it?  I have mentioned a few times that I have always had the feeling this bull market would end because of problems outside the country.  I think I can see storm clouds hovering over the global economy.  The question is whether a thunderstorm is brewing or a hurricane.  I don't think there is anyway to know just yet.


Wednesday, August 15, 2018

Daily update 8/15 SPY option data

Negative overnight news again.

SPX opened in the red and broke yesterday's low shortly after the open.  The buyers stepped in at 2802.  SPX rallied late in the day to minimize the damage.  Breadth was -65%.  New highs dropped way down to 57.  New lows spiked up to 150.  That is a lot of new low this close to the highs in the major indexes.

The futures found support at the 100 SMA.  They are well off the intraday low which suggests they could bounce further.

The red count crossed above 50 for the first time since June.  The bears appear to have gotten control for the moment.

SPY has a large number of puts at the 278, 279, and 280 strikes.  This should be rock solid support until expiration on Friday.

The market looks like it has strong support just below today's low for the next two days.  That could lead to some bouncing around.  This test of 2800 will be very interesting.  Will SPX hold here long enough to make a bottom?  If so can it make it to a new high?  Breaking below 2800 should indicate the mid term election pullback is in force.  I noted the intermediate bull pressure lines are showing the most selling pressure since before the April bottom.  That could increase the odds 2800 breaks eventually. 

The worry of the day was China.  China worries took SPX down considerably in 2015 and early 2016.  It took a G20 meeting with all parties promising to do all they could to stimulate their economies to right the ship.  If things start to really go south like they did then do you think that spirit of cooperation will exist now?  I don't.  I find it interesting that things to worry about so often show up in Aug. or Sept.  Truly amazing.


Tuesday, August 14, 2018

Daily update 8/14 Using Dr. Copper to Check the Pulse of the Global Economy

Bounce day.

SPX rebounded after yesterday's close below the 20 SMA.  It ran into resistance at yesterday's high though.  Breadth was +66%.  New highs picked up to 86.  New lows slipped to 75. 

The futures ran into resistance before they hit the 20 SMA.  They traded sideways after the 11:00 hour.  That leaves them trapped between the 20 and 50 SMAs for the moment.

The red count only dropped a little bit.

The failure to get above resistance leaves the market in limbo.  SPX could continue up to close the gap or roll over and sell off.  The last two days seem to indicate the overhead supply has moved down.  It might take some positive news in the morning to crack resistance and continue the bounce.  A break of yesterday's low should target 2800.  That was good support before, but would it hold now that SPX got so close to the high?

Interesting article on the global economy from Martin Pring.  Using Dr. Copper to Check the Pulse of the Global Economy



The information in this blog is provided for educational purposes only and is not to be construed as investment advice.