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Wednesday, November 14, 2018

Daily update 11/14

More down.

The bulls tried again today with another gap up.  It did not take long before the sellers went to work.  If this is going to be an inverse head and shoulder pattern the decline needs to stop right here.  SPX closed below the left shoulder already.  Breaking that low caused a mini cascade which took SPY below the option support level of 270.  However, buyers stepped in and mounted a furious rally.  Unfortunately that left us with another V bottom and no sign the selling is exhausted.  Breadth was -61%.  New highs fell again to 22.  New lows were up again to 163.  The 50 SMA has now crossed below the 100.  Remember the 200 SMA is already trending lower.

The futures confirmed a break of the 50 SMA at the close.  The afternoon bounce might see some upside follow through in the morning.  The question is whether that would last all day or fold up again.

The red count crossed above the green line.  I guess there is a chance this turns into a bounce cross if it brings out serious buying.  I would want to see it happen before betting on that though.

The bull pressure lines are negative on all time frames.

The market is seriously acting like the bear has hit.  Morning upside gaps are fading quickly.  There are V bottom rallies after sizable moves down.  Everybody on TV is telling us don't worry be happy.  Everything is fine.  That is largely true in the U.S.  The trouble is we now have a global economy and across the globe economic weakness is showing up more and more.  How long can the U.S. hold up alone? 

There was a sigh of relief heard on TV after the big bounce from the low today.  V bottoms like we had today are not very effective when SPX is below the 200 DMA.  I would much rather see a low made mid morning and SPX trade sideways the rest of the day.  That would make better odds the selling was exhausted.  A rebound the next day might then entice some real buying.  A rally from this setup tomorrow would be suspect.  A successful retest of today's low might change the look of things.  SPY has stronger support down at 265.  The Oct. low is the next support below that.  Should SPX make a clear leg below that Oct. low it would be a third drive down.  Most bull market pullbacks come in two steps.  Three steps down commonly signals a bear market or at least a very prolonged corrective period.  The TRIN continues to be low on down days.  That also happens more often in bear markets then bulls.  I am not seeing much in the way of worry.  The technical deterioration indicates people should have their guard up at least.  This may all blow over, but we can't know that yet.  If the global economy keeps slowing things here could get a lot worse.

More headlines on global economic slowing.

Japan's Q3 GDP -0.3% quarter-over-quarter, as expected (last 0.8%); -1.2% year-over-year (expected -1.0%; last 3.0%).

Germany's gross domestic product (GDP) shrank 0.2 percent in the third quarter of 2018. It is the first time the German economy has seen a contraction in more than three years.

Oil has been falling on rising supply.  OPEC is now saying that demand is declining. That only happens during economic weakness.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.