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Friday, January 25, 2019

Daily 1/25

Good news sparked some buying, but resistance showed up in the afternoon.

SPX fell about three points short of the 1/18 high.  Breadth was strong once again at +74%.  New highs increased to 51.  New lows dropped way down to 4.  There is the potential of a short term double top. 

The futures are once again above the 200 SMA.  The question is will they be able to stay there this time.

The green count continues to fall, but remains above 50.  This could be a sign the market is getting exhausted.  When below the 200 DMA it is better if the green count drops during a pullback and picks up again on rallies. 

The rally today was predicated on two headlines.  One was that there would be a deal to open the government again.  That sort of came out late last night because my wife mentioned it before we went to bed.  This morning the WSJ said the FED was considering ending the QT program early.  I think this one was the most responsible for buyers showing up.  This headline is rather odd when you think about it.  The FED has never said when they would end QT.  Doesn't that make it hard for them to discuss ending it early?  Just saying.  I also believe Powell said something in the last press conference that it was not completely on autopilot.  If conditions warrant it they would stop.  The market did not sell off because they closed the government therefore that headline is not going to last long.  After the announcement was officially made this afternoon SPX even took a dive.  The other headline is actually nothing new and should not have a lasting affect either.  I can't say if today's strength will continue.

This rally continues to pick up believers.  A friend of mine mentioned that he saw a number of people that started out calling this a dead cat bounce are now starting to back off of that idea.  Sharp sell offs in a bull market scare people even without the indexes getting below their 200 DMAs.  The opposite happens in a bear market.  Even without the indexes reclaiming their 200s people become believers that the worst is over and they better climb on board.  The breadth on this rally is strong, but in a bear market that does not necessarily mean it is over.  During this rally the market has ignored continuing weak global economic data.  The global economy and therefore the U.S. economy is not out of the woods yet. 

I have no idea what will be the tripwire that starts the retest of the low.  I continue to think that will happen at some point.  The more people believe in this rally the more likely we do a full retest.  Bulls want to see skepticism not optimism at this point. 


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