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Today's market activity can be best described as both the bulls and bears stepping back, neither side sure of what tomorrow will bring. The underlying bias is definitely toward the possibility that the powers that be are going to force an upside breakout of the summer's horizontal trading range shown in the upper chart cluster, row 1. The put /call ratio on the S&P 500 index dropped all the way down to .77, a quick shift to bullishness during the mid day today. No doubt giving worry to the new shorts that were obviously a big part of yesterday's strong volume.
In the upper chart cluster, row 3, the 20yr bond sold off strongly right from the open indicating some of the short term bond money players are having second thoughts and some are moving back over to the stock market in case a breakout to the upside may be coming. This earns the smallest buy signal on the stock market, noted with the #1 green line. Row 2, the vix/fear index rolled over and turned back down into the bell also earning the #1 green line buy signal on the stock market. In the top row, the S&P made its third attempt to break above the upper blue line of the summer's channel but stopped right at it.
In the lower chart cluster, row 1 chart 1, today's volume was substantially less than yesterday's which implies indecision in the masses considering where we are at. Chart 2 row 1, the price bars are still riding on the red 5 EMA line and today's move was a push up from being exactly on the red 5 line which typically means 1-3 days of up movement from the price/5 EMA bounce. Chart 3 row 1, today's candle is a modestly bullish one with this morning's low receiving support from the black 200 MA line. Chart 4 row 1, even though the brown mother channel is steeply inclined, we are still pretty much maintaining our distance above its lower line that we crossed last week.
Row 2 of the lower cluster, I added an additional chart at the number 1 position. This is a three year chart of the SPY showing monthly bars and it has the monthly 108 EMA in it to show how the upper line of this summer's trading band also coincides with the 108 EMA on the monthly bars chart which makes it a larger pivot point and no doubt, a very volatile area. Chart 2 row 2, shows the upper blue line band is still containing the past four months of trading. Chart 3 row 2, the S&P is still maintaining its bottle rocket trajectory with the super narrow, vertical ascension channel shown in gold. You can also see it took three tries at that blue line in the past two days if you look closely. Row 3, the 30yr chart /yearly bars, this 2 week rally has pulled the tip of the red 5 EMA line up really tight against the underside of the green 10 MA line. In the big picture, this is a very critical point, either the 5MA punches up through the green 10MA to begin a possible multi year run up in the stock market or the 5MA line gets pushed back down by the 10MA which would be a nightmare scenario that the S&P has not been exposed to before. Chart 2 row 3, the intraday 30 min bars chart, the red/green/blue (5/10/21 MAs) active MA lines compressed together in the early afternoon trading implying the path of least resistance (at least tomorrow morning) is to the upside. Chart 3 row 3, advance/decline action is not so bullish. Yesterday and today's green line buy area bounce both failed shortly after crossing the neutral center black line. This implies that the collective mass of all stocks is not participating as well as the mega caps which is what is being used to drive this market spike. We really need to see all the rest of the stocks participating more in line with the mega caps to give credibility to this short squeeze that they keep driving up.
Alan
