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Friday, January 10, 2020

Update 1/10

All morning Bob Pisani was on TV proclaiming the market was over valued with narrow leadership.  That is a recipe for a pullback.

SPX gapped up to a new high, but reversed early on.  It closed near the lows of the day.  Breadth has been pretty weak lately.

The futures had a wild ride after Iran fired off some missiles.  They look like we have an expanded volatility pattern forming.  I am not sure this means much with news playing a big part.  We can see a sideways looking pattern since late Dec. despite making slight new highs.

The green line has not been above 50 since late Dec. adding to the consolidation look the futures show.  This could be the beginning of a braided pattern which would confirm we are in consolidation mode.

Both the 10 DMA lines and the McClellan oscillator show breadth has been tapering off for a couple of weeks.

There seems to be a lot of optimism in the air.  The Fear and Greed index shows that to be true.

This index is at the highest level in the last three years.  I think this confirms upside will probably be limited in the short term.  The market probably needs to work off some froth.

Market internals show the technical strength has waned while there is quite a bit of optimism.  It looks like the market needs to work off the exuberance of the last few months.  With weak internals like this at the high a 5% or so pullback is possible, but not a guarantee.  Upside progress is likely to be slow if we continue higher.  How aggressive people take profits from last year's big rally remains to be seen.  So far, not much.  How aggressive dip buyers are if there is a pullback also remains to be seen.

Have a great weekend.


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