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Tuesday, November 20, 2018

Daily update 11/20

So retest sooner rather then later it is.

SPX closed fractionally above the 10/29 close.  That makes today the second lowest close in this correction.  This constitutes a test of the low whether we go lower or not.  Breadth was -82%.  TRIN was 1.6 (finally a TRIN above 1 on a down day).  New highs dipped to 32.  New lows spiked up to 546.  That is the most since Feb. 2016.  Volume increased considerably.

The futures opened down and saw follow through selling early on.  There was a sizable bounce intraday, but the sellers took them down to slight new lows before another bounce.  The buyers seem to be protecting today's low.  That happens to be slightly below the low of the high volume big up day on 10/31.

The red count crossed above 50.  There are divergences in the red count and the intermediate indicator as we retest the low.  That is good if the market finds a bottom.  On the other hand, there is also room to go lower before getting an extreme oversold condition.

Based on the strength of the rally I mentioned in the blog I thought a retest of the low would be successful.  The way this decline has unfolded has lowered my confidence on that somewhat.  This decline has acted more like a bear market then a bull.  In a true bear market strong breadth readings do not mean a retest of the low will be successful.  I don't get the feeling the selling is getting exhausted.  No sign of panic in the air or anything like that.  Today the market sold down this morning and V bottomed sharply back above the open.  That was not exhaustion that was dip buyers coming to the rescue.  The afternoon retest of the morning low also bounced, just not as strongly.  Again buyers stepped in rather then exhaustion.  That 10/30 now looms large.  There was a lot of buying that day.  If SPX gets significantly below that will those buyers hang on or capitulate?  With the lack of signs of exhaustion there is risk the Oct. low does not hold.  A third leg down would greatly increase the odds the bear market has started.  Without selling exhaustion it is still possible the sellers will stop and wait for higher prices.  That could allow for a successful retest now.  That scenario could see a bounce to a lower high though.  Now we wait and see what happens here.


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