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Friday, June 28, 2019

Update 6/28

There was a bit of quarter end activity which included some Russell index rebalancing.  That elevated the volume late in the day. 

I believe there was some optimism about the G20 meeting  reflected in the market today.  Breadth was +69%.  New highs were 158.  New lows dropped down to 20. 

The futures closed about 10 points above the 4 PM close.  I would assume that was probably something to do with the G20 meeting. 

The green line crossed below the red line yesterday and back above today.  That is a bounce cross and keeps the bulls in control for now. 

In the short term the fate of the current rally rests in the hands of what happens at the G20 meeting.  Anything that does not lead to a commitment to put more tariffs on is probably ok.  The best we can hope for would be a delay in new tariffs and more talks scheduled. 

The last two days have seen big moves in the weak sister indexes (IYT, IWM, and XLF).  That is a positive. It remains to be seen if that buying is for real or just an oversold bounce.  SPX still has to prove it really wants to go higher rather than just fool around up here.  I think the jury is still out on whether we continue higher in a significant manner or not.

Have a great weekend.


Monday, June 24, 2019

Daily update 6/24

This was a rotational day.

The market gapped down a little bit and never really got going on the upside.  Breadth was -59%.  New highs came in at 143.  New lows were elevated again at 61. 

The futures continue to consolidate the move to new highs. 

The green count fell a bit more today, but remains above 50.

The weak sister indexes were not good today.  Especially IYT and IWM which were down over 1%.  I think today saw some rotation into big cap safety stocks which held SPX up a bit.  It looks like this break out to new highs in SPX is likely to fail.  Since SPX got up here so fast a continued move higher was low odds.  A pullback here could still lead to higher prices.  It would just depend on how much it pulls back.  The bulls really need another upside thrust to keep the rally going.

I have been updating this blog daily since 2012.  A lot of days I struggle to find something to write about.  I am writing a book now (not trading related) and I think I would rather spend my time on that when there is nothing to write about on the market.  Therefore, there won't be daily updates anymore.  I will still write when I see something (like today) that could be relevant to a change in direction.  However, on days that do nothing or follow through in the current direction I probably won't.  I will keep the trend direction table up to date every day (at least as long as I don't forget on a particular day).


Friday, June 21, 2019

Daily update 6/21

That is not very good.

It was a pretty narrow range day which is common in this situation.  Breadth was -60% (not good).  New highs dropped down to 130.  New lows picked up to 52 (not good).

The futures ended the day with a reversal candle.  We will have to see if there is any downside follow through from that on Monday.

The green count turned down from overbought.

The really bad part of today was the action in the already relatively weak indexes mentioned last night (IYT -.54%, IWM -.86%, XLF -.73).  It is hard to get any confidence the market as a whole is going significantly higher with this kind of response to the new high in SPX.  Next week will be interesting.  Will the bulls show up again?

Have a great weekend.


Thursday, June 20, 2019

Daily update 6/20

Destination reached.

SPX gapped up to the new ATH we have been expecting.  Volume was elevated again.  Breadth was +69%.  New highs were 330.  That is the highest since Jan. 2018.  This is a rapid retest of a prior high.  Those patterns often lack significant follow through.  Dave Landry likes to say it is hard to run a race after you have just run a race.  Today's candle is a hanging man.  We have to watch that.  This fast move is often similar to the patterns they use in the textbook when showing the hanging man as a reversal candle.  The three days in a row of elevated volume could be some kind of climax buying event culminating with an exhaustion gap today.  Climax bottoms are common, climax tops are not in the general market.  They happen frequently in individual stocks.

The futures popped overnight.  After the open there was a significant move down to close the gap.  Buyers stepped in and sent the futures to a new high late in the day.

The green count is overbought again.

I thought SPX would get here, but I do not know what happens now.   In Daily update 4/30 I wrote:

"Technically the breadth data is strong and new highs are good.  The only question marks are from the other indexes.  The industrials and transports both need to make new highs.  Until that happens the possibility this is just a retest of prior peaks remains alive.  It would be good if R2000 and XLF continued higher as well. "

The problem children indexes are even worse now.  IYT, IWM, and XLF are all significantly below their late April highs. A failure to break out and continue higher by SPX should not come as a surprise.  Bulls would like to see SPX hold up while the rest of the market catches up and also breaks out.  However, the global economy is still struggling so that may not happen.  The possibility of a climax top exists.  A close below today's low in the next dew days would increase the probability.   I am in wait and see mode now.

I happen to catch Art Cashin this morning saying the global slowdown was starting to wash up on our shores.  He said if the global economy keeps slowing at the rate it has for the last two months we could be talking about a recession come year end.  That is exactly what I have been saying.  There is still a risk the economy gets into trouble until the global economy picks up again. 


Wednesday, June 19, 2019

Daily update 6/20

No sell off after the FED meeting as many seemed to predict.

The market traded sideways all day until the FED announcement.  After a very brief sell off on the announcement buyers stepped in and held the market higher the rest of the day.  Breadth was +59%.  New highs were a respectable 175.  New lows were 29.  SPX remains within a stones throw of the high.

The futures are still consolidating after the Trump tweet about meeting Xi. 

The green count picked up a bit more, but remains below overbought levels.

The market has an underlying bid in it.  Intraday dips are being bought.  That suggests higher prices ahead.  There is not much else to say until we see some real selling pressure.


Tuesday, June 18, 2019

Daily update 6/18

Bulls show up on cue.

The market gapped up and was helped when Trump tweeted about a meeting with Xi at the upcoming G20 summit about 10 minutes after the open.  Breadth was +69%.  New highs picked up to 231.  New lows dropped back to 27.  This was the heaviest volume in a while.

The futures popped above the recent high and held on all day.

The green count turned back up and recrossed 50.

It appears SPX is resuming the up move after a brief consolidation.  I don't know what happens tomorrow with the FED meeting, but unless the selling pressure really picks up SPX should be on its way to test the highs.


Monday, June 17, 2019

Daily update 6/17

Somebody wake me up when the market decides to move again.

The volume continues to decline.  There is still no selling pressure to speak of.  Breadth was +53%.  New highs were good at 159.  New lows continue to be oddly high at 74.  SPX remains constructive above the 50 SMA.

The futures continue to hold the 20 SMA.  They have not lifted off of it yet though.

The green count dropped below 50 which indicated the short term overbought condition has been worked off.  In a strong rally that will sometimes bring the buyers out again.

Wednesday is the next FED meeting and often the market gaps up the day before.  I heard one guy trying to set the expectation the FED would cut rates and the market would go down if they don't.   I don't see anyway in the world they cut rates and I don't think anybody expects them to.  However, the statement will be highly scrutinized for clues how soon they might cut.  The recent data is still showing some weakening so backtracking to a more hawkish stance seems very unlikely.  That leaves us waiting to see if they will be dovish enough to make the market happy.  That I can't answer.  However, nobody seems worried about it judging by the lack of any real selling pressure.  So we wait until something causes investors to do something with a little more enthusiasm than the last few days.


Friday, June 14, 2019

Daily update 6/14

More consolidation.

SPX tested below yesterday's low three times this morning, but the dip buyers showed up each time.  Breadth was -58%.  New highs were 132.  New lows picked up to 72.  The high number of new lows is a bit odd.  Volume remained subdued in another day of consolidation. 

The futures continue to consolidate.  The 20 SMA caught up to price on the last bar.  Will that push the market higher on Monday?

Bad earnings news in the semi sector (SOX -2.6%) put a bit of a damper on the bulls enthusiasm.  However, the market held up despite multiple tests below yesterday's low.  The market still acts like it wants to go higher.  There is an underlying bid at the moment.

Have a great weekend.


Thursday, June 13, 2019

Daily update 6/13

A little more buying.

The market gapped and the sellers came out shortly after the open.  The selling pressure was mild again and there were plenty of dip buyers around at a higher level than yesterday.  Breadth was +64%.  New highs came in at 127.  New lows dropped down to 43.

The 20 SMA is nearly up to price now.  When it gets there it could slap price higher once again.

The market is still consolidating the recent gain.  The underlying bid appeared stronger today than yesterday.  I don't know if that means the profit takers are getting weaker or if it was just overnight news making bulls slightly more ambitious.  Unless SPX closes back below the 50 DMA the bears do not have much to talk about.

There is one thing that worries me.  I keep hearing people suggesting the FED has figured out how to prevent recessions.  I think that is dangerous thinking.  The U.S. has avoided recessions largely due to natural disasters.  In 2012 the economy was getting quite dicey and along came hurricane Sandy.  The fires, floods and hurricanes just kept on coming.  Hundreds of billions of dollars in damage.  Natural disasters are bullish for the economy and we have had some bad ones during this expansion.  There really was no FED magic or economic miracle needed.  People seriously underestimate just how much affect these things had on the economy.  They are becoming very complacent about the economy as a result and will likely be very surprised when a recession comes to fruition.  It will some day.


Wednesday, June 12, 2019

Daily update 6/12

A little more profit taking.

Volume dropped way off today.  Not all that much profit taking so far.  Breadth was -51%.  New highs were 114.  New lows picked up to 79 which seems a bit high.  The low today was just above the 50 SMA. 

The 20 SMA is rapidly coming up to meat price.  In another day it should be getting pretty close if the pause continues.

The green count is back out of overbought.

So far this appears to be just a pause before going higher.  There is very little profit taking from the big move up last week.  Bad economic news is good for hopes of a rate cut.  The idea of a cut seems to have taken away the worry about not having a trade deal with China.  Until we see some real selling pressure there is not much to do but buy the dips.  SPX looks like it wants to test the highs.


Tuesday, June 11, 2019

Daily update 6/11

More profit taking.

Global markets were up overnight causing a gap up in the U.S.  Sellers showed up to take some profits and pushed SPX slightly below yesterday's low.  However, buyers showed up and held the market up into the close.  Breadth was dead even.  New highs contracted to 130.  New lows picked up to 35.

The futures paused as they should after the sharp run up.  They could continue that pause until the 20 SMA gets closer.

Two days of profit taking and so far there have been enough buyers to absorb the selling.  The selling looks mild enough the market should head higher after this pause.  That does not mean we won't pullback a little further first, but probably not too far.  A new high in SPX seems likely.  However, keep in mind new highs in the summer months are often a little fickle.  The market might not see much upside follow through.  I will keep watch to see if any real selling pressure develops that might indicate the bounce could fail.

The transports and small caps were relatively weaker today and have been on this bounce.  That would seem to indicate there is still some worry about the economy.  That could easily keep a lid on the market.


Monday, June 10, 2019

Daily update 6/10

A little profit taking hit after more upside in the morning.

The market gapped higher on confirmation of no tariffs on Mexico at this time.  After some more buying into mid day a few investors started taking some profits.  That lasted into the close.  That left SPX with a gravestone doji candlestick.  This was the first real profit taking since this bounce started.  As big a move as we had last week a little more pullback would be normal.  Breadth was +58%.  New highs were 206.  New lows dropped down to 27.

The futures are well extended from the 20 SMA.  A pause or some retracement to let that MA catch up would not be unusual. 

Obviously the market got very overbought in the short term.  The trouble is how do we interpret this move.  The internals were very strong.  However, the entire move was spawned by headlines that did not actually do anything fundamentally.  The FED said they would consider lowering rates, but have not done so.  Headlines hit that the threatened tariffs on Mexico might not happen.  Those tariffs were never actually put on.  It is not like tariffs were removed.  We still have the outstanding issue of trade with China which is what sparked the first leg down of the May sell off.  The second leg down was largely on overnight news with very little selling into the weakness.  There was no panic type climax low to suggest the selling is over with.  SPX has now returned to the area where there was some resistance developing after the initial sell off in early May.  Are money managers happy with their positioning relative to the trade war with China?  Unfortunately I do not know the answer to that question.  If the market ends up selling off again that seems like the most likely culprit.

I don't think there is any more particularly good news on the short term horizon.  The situation with Mexico has been resolved for now.  The FED is not likely to cut rates at the June meeting.  It is unlikely we will get a deal with China in the near future.  I hear they are sending stuff out with fake made in XXXX labels to get around the tariff issue.  We still have some time before the next batch of earnings.  I do not know what the market is going to focus on in the mean time.  Some consolidation seems likely in the short term.  The 50, 20, 100, and 200 SMAs are all below SPX (in that order) at the moment and any of them could provide support.  Until the bears do something significant the bulls are in control.


Friday, June 7, 2019

Daily update 6/7

Worse than expected unemployment data (remember bad data is good for a rate cut) drove today's buying.

SPX crossed above the 50 SMA.  Breadth was +71%.  New highs spiked up to 288.  That is the most new highs Jan. 2018.  New lows dropped to 42.  Quite the straight up move.

The futures blasted through the 200 SMA.  Sometimes we get overshoots of that MA.  We will have to wait and see if the 200 holds on a pullback (if a pullback happens).

The green count is very overbought now.

The last leg down has  now been completely retraced.  Unfortunately this move has been entirely driven by hope headlines.  Hope for rate cut and no tariffs on Mexico.  I think the next rate move by the FED will be a cut, but I have no idea how soon that will happen.  I have no idea on the tariff situation.  The problem is that news driven moves are often retraced.  We could come in on Monday and hear the tariffs are on.  Alternatively we could be welcomed with some kind of deal and the threat of tariffs are removed.  Since I don't have a crystal ball to see into the future I have no idea what happens next week.

Have a great weekend.


Thursday, June 6, 2019

Daily updatre 6/6

More buying on headlines the tariffs on Mexico might be held off.

Before the headlines hit the breadth was negative and the down volume was well ahead of advancing volume.  At the end of the day the breadth was +55%.  New highs were strong at 194.  New lows were also high at 94 which seems a bit odd.

The futures made it up to the 200 SMA and closed the 5/23 gap down.  There are no more open gaps above.  Sometimes in this position that 200 SMA can be resistance at least for a little bit.

The green count reached overbought levels today. 

The recent decline came mostly on overnight gaps which investors did not seem interested in selling into.  I think that was because there was a lot of hedging on the first leg down when the VIX spiked.  Since we did not have a good panic low I think it is difficult to say if there is leftover selling to be done or not.  Does the hope of a rate cut overrule any worries caused by the blow up of the potential trade deal with China?  I am not a money manager and I have no idea what they are thinking.  The market has worked off its short term oversold condition.  If there is any leftover selling to be done they might come back in the market in the next few days. 

The last leg down was driven by headlines.  This rally has been driven by headlines.  I cannot analyze what the next headline will be.  For the moment the bulls are in control, but we are probably one headline away from bringing on the sellers again.  There is simply no way to predict what is going to happen to this bounce.  I am not going to try.


Wednesday, June 5, 2019

Daily update 6/5

Upside follow through sort of.

SPX gapped up and sold off enough to close the gap before buyers showed up.  Breadth was barely positive.  Downside volume was heavier than upside volume.  The SOX and XOI indexes were down noticeably and R2000 was down somewhat.  It was a rotational day rather than broad market strength.

The futures ran into the 50 SMA and stopped for the moment.  They are currently down a few points from the 4 PM close.  There is still a ways to go to get back to the 200 SMA.

The green count crossed 50 and is approaching overbought levels.

The internals today were weak compared to the amount SPX was up.  I think the bulls need to see another up day on strong internals.  Until that happens this bounce could still turn out to be a dead cat.  The bulls have a chance to take control, but the power is still up for grabs at the moment.


Tuesday, June 4, 2019

Daily update 5/4

From last night:

"Who knows what will be tweeted overnight these days that will affect the market.  If nothing bad comes out tonight maybe we get a bounce tomorrow.  There was a FED speaker out today talking about the possibility of a rate cut.  That was mostly ignored today, but might bring in some buyers tomorrow."

Bring out the bulls it did.

The bulls took the ball and ran with it all day into the close.  Breadth was +79%.  New highs were good at 119.  New lows dropped way down to 20.  Volume was good. 

The futures are up through the 20 SMA.  The DI lines have a positive crossover.

The green count crossed above the red line. 

The bulls really liked the idea the FED might cut rates.  The market is saying there is a 63% chance of a cut at the July meeting.  The chance at the Sept. meeting is nearly 90%.  This is an interesting situation because QT is scheduled to go on until Sept.  I cannot imagine the FED cutting rates before they end QT.  Will the FED at the June meeting move up the schedule for the end of QT to July?  That would clear the path to a cut in Sept.  On the other hand, if the market rallies back near new highs will the FED do anything in June?  I think probably not.  Unless the data gets a good bit worse or the market tanks they might not change the schedule at all.

Today was obviously very strong.  The bulls still need to follow through in the days ahead.  With SPX reclaiming 2800 that very well could happen.  The market really likes the idea of rate cuts so don't tell anybody the last two times the FED cut rates the market ended up crashing 50%.  The bulls might do another test of the high on the hope of a rate cut.  Should the market roll over right here, for whatever reason, then 2650 would be the next logical target.  The Mexico situation is still unresolved so that may become a problem next week unless hope overrules any worry.  The bulls would probably like to see an absence of tweets from you know who for a while.


Monday, June 3, 2019

Daily update 6/3

More down on more overnight news.

The market was dragged down on speculation of regulation in the tech sector which hit a number of different stocks like AMZN.  Since those stocks have such a big capitalization they dragged down SPX.  However, breadth was actually +63%.  Some of that money was going into other stocks all day.  New highs came in at a respectable 100.  New lows were 109.

The futures are up 11 points from the 4 PM close as I write this.  The market looks to me like it has wanted to bounce for two days, but keeps getting hit with negative headlines overnight. 

The red count dropped a bit despite the down day.  It did hit oversold so we might still see a bounce.

I do not particularly like the lack of fear or panic selling for a durable bottom.  The daily chart shows a confirmed head and shoulders top.  So far the pullback has had two legs down.  In a bull market a two step pullback is the norm.  A bounce from this oversold condition would be normal.  However, without any sign of a selling climax it might be of the dead cat variety.  If SPX continues lower the 2650 target is still hanging out there.  That would fulfill the head and shoulders objective.  A break down of an H&S pattern often sees a retrace rally back to the neckline.  In this case, that would be around 2800.  The 20 and 50 DMAs are still considerably higher than that if the market really gets some upside kick. 

Who knows what will be tweeted overnight these days that will affect the market.  If nothing bad comes out tonight maybe we get a bounce tomorrow.  There was a FED speaker out today talking about the possibility of a rate cut.  That was mostly ignored today, but might bring in some buyers tomorrow.



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