Legs? 9/25

 When we last left off I was looking for a roll over or a sign a bounce might get some legs.   SPX turned down and made a new closing low for the current correction, but did not follow through on the downside.  The door was left open for a bottom to form and with the last two days of bounce I believe the door is much wider now.

SPX seems to have found support at the 100 EMA.  While the volume was not particularly strong the last two days I got a very strong tick accumulation signal yesterday.  Ticks were pretty strong today, but not quite enough for another signal.  

The futures dropped below the 200 MAs, but failed to keep crashing.  They closed back above the 200s and above the 20 SMA as well.  This is a good place to form a bottom and it looks like that is what has happened.

The short term indicator in the bottom panel is showing an extremely oversold market.  This is a bounce worthy condition.  

The door is wide open for a tradeable bounce.  The bulls just need to step through that door early next week.  The longer term moving averages are still in bull market order.  With the market this oversold new highs would not be a surprise if the bulls come out to play next week.

Peace and good health to all.  Have a great weekend.

Bob

Bounce, but is it only a dead cat kind? 9/22

 The market followed through on yesterday's late reversal.  We closed one of the open gaps below.

Yesterday SPX bounced off the 100 EMA.  After hesitating a while this morning the bulls followed through on the upside.  Breadth was only +54% and volume was light.  So far this looks like it could be nothing but a dead cat bounce.  

The futures found support at the 200 SMA.  The 20 SMA would be the first target and the 50 SMA the second.

The market is bouncing from a short term oversold condition.  It remains to be seen if this is just a bounce or something more.  I don't have a clue at this point.  The sell off after the FED announced free money from now until the cows come home bothers me a bit.  I believe the market wants more fiscal stimulus, but I am not sure that is going to happen before the election.  I am going to keep a close on this bounce for strength to indicate it has legs or a roll over to head down again.

Peace and good health to all.

Bob

Short term bottom? 9/18

 The market sold off pretty hard this afternoon, but bounced well of the low.

SPX tested the 9/11 low, but closed slightly above it.  Today was the lowest close of the pullback, but it looks like a failed new low pattern (FNL).  Breadth was -63% which is not all that bad.  This sell off is largely big cap tech driven.  If they have finished the selling for the time being, we could get a decent bounce.

The futures dipped below the 9/9 overnight low which had been the lowest point of the current pullback.  They bounced from the area of the 200 SMA.  This is a good place to rally from.

The green count dipped just slightly below the red line (middle panel), but is showing a positive divergence into this lower close.  The bottom panel is also showing a positive divergence.

The VIX is showing a rather large drop since the 9/8 low.  This seems like an extremely large positive divergence.

IWM is showing considerable relative strength the last few days.  In recent weeks IWM and QQQ have been at odds with each other some days.  When one is up, the other is down.  Since I believe today was a short term bottom I decided to be long both small cap and big cap tech.  My theory is if one is down on the open Sunday night the other might be up.  If they are both up so much the better.  If both down, well then my guess the bottom is in might not be correct.  Will the bulls take advantage of this nice looking setup?

Peace and good health to all.  Have a great weekend.

Bob

Interesting FED reaction 9/15

The FED was unimaginably dovish today.  They plan on holding interest rates at 0.1% through 2023.  At first the market reacted as one would expect by rallying.  SPX got above the 9/9 high, but reversed and sold off into the close.  Closing below yesterday's low leaves us with a bearish engulfing bar.

 

SPX was briefly above the 20 DMA, but failed sharply on an increase in volume.  The 20 DMA is now resistance.  The bulls have to overcome that line to get control.  This pullback has generated three strong tick distribution signals so far.

The green count (middle panel) crossed above 50.  SPX has worked off the oversold condition.  If the bears show up tomorrow they are still in control.  A strong up day should put the bulls in control if they can close SPX above the 20 DMA.

I find the FED's action today really disturbing.  I have been somewhat worried about fallout from the virus and rioting.  I think there could be a lot of businesses going out, especially in the retail and hospitality sectors.  We could see considerable stress in commercial real estate.  Does the FED also believe there could be severe stress?  I wonder if money managers thought as I do about the FED move.  It is common for FED induced moves to be retraced.  Sometimes the retrace happens the next day.  It is rare, but sometimes there are prolonged moves started by the FED.  Downside follow through tomorrow is likely to send SPX below the recent low.  If the bulls come out fighting and can get SPX above the 20 DMA, it should set up a test of the high.

Peace and good health to all,

Bob