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Friday, September 13, 2019

Update 9/13

Test of the highs.

SPX formed back to back doji days.  Breadth was slightly positive yesterday, but -54% today.  New highs were 89.  They peaked back on 9/4.  New lows have been 25 or less on this rally.  They are well contained because this year's laggards have been big winners on the rally.  The money has been coming from this year's big winners which is why the new high numbers are muted.

The futures made it up to an area of congestion from back in July.  A stall here is normal.

The green count has dropped out of overbought and remains well above 50.  The intermediate indicator recovered strongly.

Based on the normal market internals things look fine.  Breadth is good and the intermediate indicator climbed well above 50 which usually means the correction is over.  With the advance/decline line at  new highs SPX should do the same.  I have questions about what happens after that though.  Last week I talked about tick buy and sell signals.  That really was not a good name.  It is more appropriate to talk about accumulation and distribution signals.  I am busy putting the signals on an SPX chart so I can study them better.  Since this rally did not trigger the accumulation threshold I had set I started looking at an almost signal.  For accumulation a green up is a full signal, a yellow up arrow is an almost signal.  A green up arrow with a circle on it is a very strong accumulation signal.  For distribution the red down arrow is a full signal, a light red down arrow is an almost signal.  A red down arrow with a circle on it is a strong distribution signal.  In my studies I find these signals are sometimes buying and selling climaxes.  Sometimes accumulation signals happen on down days.  The distribution signals sometimes happen on up days.  Some days have both signals.  Those are few, but they do happen.  Without further ado here is a look at the signals for about the last year.

The low last Dec. was followed by 4 strong and 2 regular accumulation signals as the big boys piled in.  We have not had an accumulation signal since 7/18.  Since that time we have had 1 strong, 3 regular, and 1 almost distribution signals.  I have put the signals on the chart back to the middle of 2012.  I can tell you that this pattern is different than any I have seen.  When SPX spends time like it did below the 50 DMA there have always been accumulation signals.  Since the Trump tweet about additional tariffs there have been no accumulation signals at all.  This rally happened on news headlines and we know those moves are often retraced.  The headlines did not move the money managers to pile in so the odds of retracing this move are probably pretty high.  I would not expect that to happen until after the FED cuts rates next week though.  SPX could easily make new highs before that.  If we start seeing distribution signals again then the recent low might be in jeopardy of breaking.  For now the bulls are in control so we wait and see how far they want to push things.

Have a great weekend.  Peace.


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