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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. 


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