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Friday, January 4, 2019

Daily update 1/4

The bulls showed up to keep the bounce alive for now.  The overnight rally was attributed to China cutting its bank reserve ratio.  A better then expected employment number also contributed.  Apparently Powell also made some comments the market liked.

SPX touched its 20 SMA before pulling back a bit.  This is the lower most target for this kind of situation.  This is also in the area of the Feb. low which could provide some overhead resistance.  Breadth was a super strong +88%.  New highs were still low at 6.  New lows dropped way off to 10.

The futures closed above the 50 SMA and just below the upper channel line.  This might provide some resistance. 

The green count shot up to the overbought level.  The last two times we got here a short term top was at hand.

The McClellan oscillator reached overbought levels as well.  The last time it was here SPX turned down. 

SPX is at potential resistance.  The short term internals are showing an overbought condition.  We have conditions that could bring sellers out again.  There is an interesting facet to this pattern.  The Feb. low was a long intraday spike down.  Most of the price action the rest of the spring and summer into the final high took place above the 2575-80 area.  It is possible the major overhead resistance is a little further up.  A pause or pullback from here might not end the rally attempt.  Expect volatility.

These bear market rallies are sharp and short.  They get bulls all excited thinking the worst is over then pull the rug out.  I have no reason at this point to believe this is anything else.  Odds favor a retest of the Dec. low eventually.  The market could chop around a lot before that happens though.


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