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Thursday, October 4, 2018

Daily update 10/4

Actual selling pressure for a few hours.

SPX gapped down a bit and fell slightly below the FED day low.  Dip buyers came in to support the market, but after a small bounce the sellers returned and broke the FED day low solidly.  That led to a mini cascade down.  However, there was a big bounce late in the day.  SPX closed just two points below the FED day low.  Breadth was -78%.  New highs were 34.  New lows spiked up to 404.  That is an amazingly high number this close to the highs.

The futures traded below the 100 SMA for the first time since early July as they were rallying from the late June pullback.  That sent the -DMI line above 35 opening up the door for a bigger sell off.  That does not mean the bears will walk through that door.  The late day bounce took the futures back above the 100.

The McClellan oscillator has reached a slight oversold condition.

The red count turned up, but remains below 50.  I can't recall ever seeing an oversold McClellan oscillator and the red count below 50. 

All the bull pressure time frames have negative crosses.

Sometimes the market will make what I call an upward sloping correction.  That is where the major indexes keep going up while the internals weaken.  At some point the buyers come back in force and make another big push up in the indexes.  It is possible that is what we are seeing.  What argues against that is the extreme high number of new lows.  I have never seen that type of correction generate new lows like this.  Now that all the internals have turned negative it is decision time for the market.  Either this is a correction and the bulls show up to buy in force or the bears take control and we go down. 

SPX closed just two points below the FED day low so we can't really call that a break down.  The bears need to see follow through selling.  Today could have been a fake out break down if the bulls show up in force tomorrow and the rally lasts all day.  I heard some rumors floating around that tomorrow's employment report will be a big number.  A positive surprise usually (but not always)  causes a gap up.  The late day turn up in the market could have been in anticipation of a strong report and big gap up tomorrow.  Interest rates are breaking out on the upside which could be foretelling that strong report.  I don't know if stocks will like that or not.  Stay tuned.


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