Wednesday, May 15, 2013

S&P 500 Cash Index Hits Channel Top to the Tick

ShadowTrader's Commentary:

Really not much to say regarding the picture above.  It hit the top perfectly.  The question now is will it back off or blaze right through?  I believe it needs to back off for a number of reasons.  They are below:
1. While rallying most of the morning, the high on the NYSE tick was +681 and later was +631 when the market actually made a higher high.  These absolute levels are anemic.  There was a +1,000 tick spike later into the close when the market closed at a new high, but it was the only one.  Stronger buying on a day when the SPX was up almost 17 should be accompanied by stronger tick readings.
2. I’ve been talking about the overextension from the 20ma on the SPX cash daily for some time now.  If you recall, 40 points above the 20ma is my first line in the sand that alerts me to a market that is ripe for a pullback.  Yesterday’s close is 53.91 points away from the 20ma.  This is extreme and rare.  I have not been able to find an instance historically where this has not lead to some corrective action.