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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.


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