Tough to be bearish now.
With the exception of the metals sectors, the $CRB index, TAN, LIT, and IYR, every other major index or key sector ETF that I track is now above its respective 50MA. In some cases, like the unstoppable QQQ’s, the 50MA has turned up.
There a couple of different methods for trading using Wilder’s ADX. In the case of a market that is moving up, you watch for a bullish cross of the +DI line above the -DI line. You then mark the high of that day and when the stock, index, or ETF that you’re following closes above that high, then that’s your ‘buy’ signal. The second, more conservative method, is to watch for the bullish DI cross and then wait for the ADX line to cross up through the falling -DI line. When this happens, a new wave of buyers will enter the market
The ADX line is already turning up for the Q’s, $COMPQ, $SOX, and RTH and will most likely turn up for many others next week.
Zweig Breadth Thrust:
Accoring to Martin Zweig, when ZBT falls below 40 and then rises above 61.5 within 10 sessions, it marks the beginning of a new bull market phase.
On Monday, October 3rd, ZBT dropped to 38.81. On Friday, October 14th, the ninth session following the 38.81 reading, ZBT rose to 62.13.
BTW, ZBT did not meet this requirement after the August/September lows of 2010.
$VIX closed below 30 and very close to the low of the day on Friday, as did $VXN, $RVX, $VXO, and $VXD. $VIX also closed right above its lower Bollinger Band but did not tag the BB. Because the lower BB has turned south, $VIX is probably just going to crawl down it for a few days rather than bounce off of it, or famous last words. Regardless, volatility should back off for now and maybe until $VIX drops into the mid-teens.
Ceridian Pulse of Commerce & BDI:
Ceridian’s latest report isn’t too rosy and it suggests that we’re on the brink of a negative GDP reading, but we’re not there yet. Meanwhile, $BDI has been moving up since late July and has gone positive for the year. This disconnect continues to puzzle me.
Friday $SPX chart with mystery BB’s:
I put up a chart Friday of the $SPX using Fib-based Bollinger Bands and a 250 EMA. You can see it by clicking on the Twitter box to your upper right. And if you’re a bear, you really need to take a look at it.
Weekly Chart of $SPX:
$SPX rose 69 pts on the week and is now up 93pts and 8% for the month. Something like that has to get your attention. I don’t know if it’s expecting to much or if I’m sounding like a froth-mouthed bull, but it is possible for the $SPX to rise to the 1260 area next week, which would put it right there where the tie up between the 26 & 52 MA’s is. That’s not a target. Just sayin’.
In late August of 2010, the RSI on the weekly chart of the $SPX rose back above 50 and the market rallied for eight months. Hmm.
Chart courtesy of StockCharts.com
As a paranoid trader, I never take anything for granted but right now, and for the past two weeks, the market is indicating that it wants to go higher. SPX 1230 shouldn’t be too hard to overcome and the 1260 area is only about 3% away.
I’m quite happy with the performance of the TNA that I bought on the 10th and I plan to begin scaling in with a little more of that and TQQQ. I will also be looking to add to my UPRO positions, which I’m underwater on now in two separate accounts.
I’ve started a Lion fantasy portfolio and I’ll put up the link to it sometime later today or this weekend.
Stay on your toes and keep looking over your shoulder.
GL in the week ahead.