The bulls showed up this morning and mounted a strong rally early on. Breadth was +73% just after 10 AM. However, by the close it was slightly negative. That is a significant reversal. SPX closed 1 point below the 200 SMA. Ugly candlestick for bulls. New highs were a paltry 17. New lows were stable at 240.
The futures show a bearish engulfing bar to end the week. They closed back below the 20 SMA. This looks a little bearish for Monday.
The red and green lines came together today. On the way up this condition often brings out buyers. So next week it might bring out sellers.
The bulls were clearly trying to defend the SPX 200 DMA this afternoon. However, today's failed rally may make that a difficult task for Monday. I think we might be in for the retest next week. It is not clear to me it will be successful. At one point on 10/17 just one day after the big upside explosion the breadth was -78%. Yesterday the breadth was -74% and today it was negative after being +73% early in the day. If the recent bottom was a true volume climax then it seems to me the selling the last three days should not have been so strong. SPX can go somewhat lower and still have a successful test if it rebounds strongly. I am not sure what happens if we break the recent low and keep going. Below 2700 support looks somewhat nebulous until we get to the Feb. low. Be prepared for anything next week.
Have a great weekend.
Bob
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