The SPY 291 option resistance is holding SPX in check. However, there seem to be plenty of dip buyers on every little intraday pullback. Breadth was barely positive again. New highs slipped to 106 while new lows remain very elevated at 84. Something not bullish is going on under the covers. New lows should not be that high. I can't remember a time they were this high that was not followed by a correction of some sort (or bear market as in 2000). In Oct. 2007 I complained about too many new lows with SPX near the high when they were in the 30s and 40s. I keep looking for signs this break out is going to stick, but I can't find them. The market keeps throwing up caution flags instead.
The futures were hanging around the daily high when a headline hit about Trump wanting to put on another $200 billion of tariffs on China. That sent the futures down to test yesterday's low. They found buyers one tick above that low and rallied slowly all afternoon. That is bullish action to test a prior day low and bounce back.
The green count remains below 50.
There is a hesitation to chase price here. Investors clearly prefer to buy dips. Selling activity remains muted outside of China trade war related headlines. I don't really know what to say. The rally looks feeble, but up is up. Until something comes along that causes real selling SPX seems likely to drift higher. If they go ahead with the tariffs that may change things. For some reason I cannot fathom it seems most people think the China situation will get quickly and peacefully resolved. I have expressed my thoughts previously. Needless to say I will be shocked if this gets resolved quickly. I am sure the market won't like the escalation. How much it won't like it I have no idea. I heard David Tepper yesterday saying SPX could be down anywhere from 5 to 20%. That narrows it down nicely. He also mentioned he was about 25% long in relation to SPX stocks and is holding a cash reserve. The trade situation was his number one worry.
SPX seems to be limping higher. I can't shake the feeling it is possible we are tracing out a bull market top. The divergence between what the U.S. is doing and what foreign markets are doing is probably the biggest ever. On the flip side the U.S. economy is strong enough that a bull market top should be very low odds at this time. The question is will the U.S. hold up long enough for the rest of the world to turn back up or will the rest of the world drag the U.S. into the mud. Beats me.
Have a great weekend.
Bob
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