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Tuesday, May 7, 2019

Daily update 5/7

Long overdue profit taking.  The VIX spiked up over 21 indicating there was lots of hedging going on as well.

SPX came within 8 points of its 50 SMA before the late day bounce took SPX 22 points off its low.  Breadth was -80%.  New highs dropped down to 69.  New lows increased to 42.  SPX dipped below  the Jan. 2018 high, but managed to close above that level.  It is below the key 2900 level though.  The question is will 2900 turn into resistance now. 

The futures tested well below the 100 SMA, but the late day bounce took them back above it. 

This is the first time the SPX 20 DMA has turned down since turning up in Jan.  That means the market is slightly weaker than on the other pullbacks we have seen.  We also have the issue of failing the break out above last year's high.  Everything still hinges on what happens with trade.  However, the market got a wake up call this week.  It has been in la la land expecting a trade deal to happen.  The happy talk about how well things were going helped that along.  It is now apparent that the rumors that China was pulling back from previously agreed to terms was real.  There is no way to know how this will play out.  However, the risk on the downside should talks break down seems bigger than upside potential should the deal get done.  I would be suspicious of any bounce lasting until this situation is resolved and there may be more downside to come.


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