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Tuesday, December 4, 2018

Daily update 12/4

I didn't expect SPX to retrace the entire news driven up move in one day.

SPX closed back below the 20, 50 and 200 SMAs.  Breadth was -82%.  The downside volume was 94% of total volume.  New highs were 77.  New lows spiked up to 350.  Quite a smack down.

The futures closed below all the MAs.

The green count went from overbought to a negative cross in one day.  What a slam.

The market is closed tomorrow in honor of Pres. Bush.  I wonder if that put some additional pressure on the market today.  People knew they could not trade tomorrow.  The bear market trader's mantra is buy the dip and sell the rip.  That has been working since Nov.  Expect lots of this type of action until they finally figure out that algorithm trading should not be allowed.  Sure it is fine in a bull market and the machines are buying.  It won't be so fine when the bear market gets established and the machines are relentlessly selling.  Margin debt unwinds are just plain vicious on their own.  Imagine what will happen with machines selling the downside momentum.

I guess today means we are in for another test of the lows.  The TRIN finally showed some fear closing just over 3.5.  That kind of reading often means a bounce in the morning of the next trading day.  Whether that bounce happens and lasts all day remains to be seen.  Historically a rejection like this at the 50 and 200 DMAs is not good for bulls.  As I mentioned before the breadth on the bounce outside of the two news driven up days was very weak.  That historically means the rally will be mostly if not completely retraced.  This is essentially the same situation as the rally off the April low I warned about so much.  This one just didn't last so long.  That rally was mostly wiped out.  Maybe the market has an agenda to wipe out the rest of that big rally.  Time will tell.  The bulls need to get a confirmed break above the 20 SMA to stem the tide.


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