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Thursday, May 16, 2019

Daily update 5/16

The bulls return.


A small gap up led to a buying explosion right from the opening bell.  The market peaked mid day and there was some selling in the afternoon.  Breadth was +65%.  New highs expanded to 174.  New lows contracted to 40. 


The futures confirmed a break of the 200 SMA.  They ran into resistance at the 50 and 100 SMAs.  I think as long as they remain above the 20 SMA the bounce remains alive.


The red count dropped below 50, but is still above the green line. 

In Daily update 5/9  I wrote:

"Here is my theory.  This downturn started with a tweet and caught everybody by surprise.  The big players were all long as there was so much happy talk about a deal being close.  The last few days were mostly about hedging rather than selling.  The big players will engineer a rally from here which they will sell into and get short for the real downturn to come."

They have engineered a rally this week.  Some people sold into it today.  I would not be surprised if SPX makes a new high.  However, I think the game really has changed.  The rally this year was predicated on a deal being reached with China which investors were being led to believe would be soon.   It is now clear there will be no deal with China anytime soon.  I cannot imagine that will not cause at least some de-risking for money managers.  They will probably all get on TV with happy talk while their office is selling into this rally.

Bob

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