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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