Update December 29th, 2011

I put up a chart earlier in the day that showed a potential Bull Flag formation in the Q’s and said that a close at 55.90 would break Q’s out of formation. While this did happen, there is now a potential Bear Flag pattern in formation with the last 5-6 candles today. This could also be a new rising channel but the only way to find out is if the Q’s can manage to get back above and preferably close above 56.42 before they break down and out through the bottom of this new rising channel.

Chart courtesy of FreeStockCharts.com

Yesterday we had a 95% down day with a $TRIN close at 5.58. Today we had a 91% up day with a $TRIN close at .36. These kinds of swings just make this market very difficult to read. At least for me, anyway.

So nice snap back rally, blah, blah, blah. $SPX did not take back all its lost ground but is now about 2pts away from having a positive week. We got back into that little spinning top doji from Tuesday and that could mean that $SPX will run right up that candle to  1269.37 tomorrow,  which was the high from Tuesday. Low volume tomorrow so who really knows?

Chart of $SPX showing it holding its own, but not much more. Really need to see it start taking out swing points, as in 1266, 1277, and then 1292. Thought they’d short squeeze the market this week and take out several of those swing points, but no. Still, the chart doesn’t look that bad and as long as $SPX can manage to stay above the 200MA this week, then there remains a positive bias to the market.

Enjoy the three day break and GL in the New Year.

 

Update December 28th, 2011

I mentioned in my weekend update that there were three sectors that needed to be watched this week: $RUT/IWM, $SOX/SOXX, and $NDX/QQQ.  While I’m concerned about the $RUT & $SOX, I’m much more concerned with what’s going on in the Q’s.

There’s no question that the Q’s lead the market around by the nose. AAPL, MSFT, GOOG, ORCL, & INTC  are the big dogs within $NDX which makes $NDX the market’s big dog. And if the big dog is not the lead dog, then you have problems.

Today the Q’s weren’t down that much compared the majors but the fact that the Q’s did not lead out of this latest little pullback is, IMHO, troubling. On the chart below I’ve put in two trend lines, similar to the way I’ve been drawing them on the $SPX chart. The Q’s tagged the upper trend line today and if the Q’s should break and close below that upper trend line, then they’re sure to test the lower line.

The tag/test of the trend line may be sufficient and based on extreme oversold readings in things like $NYUPV closing at  24 and the $TRIN closing at 5.58 if the Q’s do break the trend line it probably won’t be tomorrow because markets will probably have one of those mind blowing snap-back rallies tomorrow, or famous last words.

Note on the chart the yellow line 9EMA has yet to cross up through the 20MA. I mentioned this over the weekend and it’s still the case. Also note how the 50 & 200MA’s are pointing south which is not something longs want to see.

With volume so light, this is probably not a good week for making investment decisions. However, yesterday’s spinning top doji was confirmed as a ‘sell’ signal today with a close below 1262 so it’s going to be important for the $SPX to somehow make a run for that area tomorrow or maybe Friday. If, on the other hand, the $SPX continues southward, then trend lines could get tested and perhaps broken.

Turn up your paranoia-meter to 11 and leave it there.

GL

Update December 27th, 2011

I’ve added back the lower trend line on this chart to include the outliers. My thinking is that if the upper trend line were to get pierced then that wouldn’t be so bad as long as the lower trend line doesn’t get whacked.

Spinning top doji today could be a reversal candle but needs confirmation with a close tomorrow below 1262.30. Other wise it’s just a candle.

I’m going skiing tomorrow.

GL

Weekend Update December 26th, 2011

On the 60min chart that I put up on Friday, I noted that the RSI on the chart was above 70 and that one can usually expect some kind of consolidation period or pull back when the RSI rises above 70. The RSI on the 60min charts of XLF and DIA also rose above 70 so these, too, are showing overboughtness and may need a little time to cool off and digest recent gains. Other than mutual fund managers and market makers working the market higher on Friday, I really have no idea why the Dow would have added 124pts and better than 1%. Even so, I have to expect some kind of Santa Claus rally/short squeeze next week. Next week should see light volume and one way to pull in more volume is to engineer a short squeeze, because it is all about turnover.

Market markers, brokerage firms, clearing houses, etc cannot stand the buy-n-hold crowd because they don’t make any money on transaction fees if people buy a little here and there but don’t intend to sell. So this group can steer the market where they think they can generate some turnover and transaction fees, and that would be higher for now.

Shorts probably have their stops set just above 1267, 1277, and 1292. If the mad men at the helm can push $SPX into these levels, then shorts will scramble to cover. And with the $SPX now up a whopping 0.6% on the year, a nicely engineered rally into the 1290’s would mean a yearly gain of around 3% and that might be enough to stem the tide of outflows from mutual funds that are draining equity based mutual funds.

I would love to see a nice Santa Claus rally next week and would love to see $SPX rise up close to or above 1300. It’s only 35pts so why not? The rally might even last a little bit longer into the first week of January.

Generally speaking, the best time to be in the market is from October through the March/April period as we all know that the Big Boyz sell in May and go away, or so the saying goes. This year could be different due to earnings that by some accounts are expected to be less than stellar. AA reports in the second week of January and if the chart of AA is any indication then it doesn’t look too good for them and if AA does in fact disappoint, then that could set the tone for the remainder of earning’s season.

In the meantime, we have two key sectors that are underperforming the major indexes, and one key sector that has been underperforming of late: $RUT, $SOX, & $NDX.

The $RUT is down about 4% on the year, the $SOX is down about 10% on the year, and while the $NDX is up around 3% on the year, chart wise it is in trouble, with the 9EMA still below the 20MA and with $NDX still below the 50 & 200MA’s. So watch these in the week ahead because any rally will need to include all of these and $RUT/IWM really does need to lead.

Last week’s $SPX weekly chart:

This week’s chart shows $SPX pushing through and closing above the symmetrical triangle pattern. Except for Wilder’s ADX, everything else is moving upward. I don’t know if the 13MA can cross up through the 26MA this week since it’s only going to be four sessions, but if it should then that would have to be seen as a positive for $SPX going forward.

To me, the chart looks neither bullish nor bearish because it’s so difficult to tell whether $SPX is moving up, down, or just sideways. I think we will have a clearer picture by this coming Friday.

I’m going to be following this daily chart next week and will be watching  the 200MA for a northerly turn and for previous swing points to fall by the way. If the market should pull back instead of moving higher, then, if the market is truly headed higher over the next couple months, the rising trend line should halt any such pull back, or famous last words.

GL in the week ahead.

Update December 23rd, 2011

6:30PM, ET

I’ve updated the earlier post with a daily chart of $SPX just below the 60min chart.

Quick chart of SPY in 60min time frame, which is showing very over bought at present. One would have to expect a pull back or consolidation in the next few sessions from such overboughtness, though with a three day break it would be anybody’s guess. And while guessing, I would imagine that Zweig Breadth Thrust and 4wk New High/Low Ratio will also show extreme overboughtness when they are updated later this afternoon.

Note the large volume spike in the last hour.

Chart courtesy of FreeStockCharts.com

So $SPX has now broken above the falling trend line and closed above it twice, and today $SPX closed above the 200MA for the first time in about 6 weeks. The authoritative down trending line was tagged more than a dozen times before it finally gave way yesterday. This should be bullish going forward. On the other hand, the rising trend line has not yet been tested and so it lacks any real authority. Because of that, I’ve added another trend line, the red line on the chart, that ignores the outliers. This trend line was hit twice and then tested a third time and so this may be the trend line to watch. Either way, both the lower trend lines are rising and for now that’s all that matters.

Enjoy you three-day break.

GL

Morning Update December 23rd, 2011

This is yesterday’s chart of $SPX, 12/22/2011, which shows that while $SPX did close above the falling trend line, it was not a decisive break. Based on the early action this morning, it appears $SPX will affirm yesterday’s move and could closed above the 200MA before the session ends.

In other news, $NYSI (bookmark that link) has turned up but has yet to give a fresh ‘buy’ signal; however, as long as $NYSI continues to tick up then a fresh ‘buy’ signal could come within the next few sessions.

Keep an eye on those 60min charts and $SPX’s relation to the 13/34EMA’s.

Also, after the bell, you are going to want to watch Zweig Breadth Thrust &  4wk New High/Low Ratio as they are getting overbought.

GL

 

Quick Update December 22nd, 2011

No time for a chart this evening but even if I had the time the chart would just show that $SPX closed above the down trending line. Now it will be important for $SPX to stay above the line.

Probably won’t be much action tomorrow as everyone will be headed home to enjoy the three day weekend. Hope you do the same.

 

Update December 21st, 2011

The 60min SPY chart below shows that the 13EMA remains above the 34EMA so SPY, and therefore $SPX, remains a ‘buy’ or a ‘hold’ for now. I feel it’s legitimate to redraw the trend line as long as the 13EMA stays above the 34EMA for SPY or any other stock, ETF, etc. The uncertainty early in the session caused the 10,7,7 Sto to have a bearish cross and so this was a warning but by the end of the day SPY pushed up and closed green, and that’s all that matters for now.

Chart courtesy of FreeStockCharts.com 

The daily chart of $SPX showing that it is now just a few points away from tagging or breaking the falling trend line. Should be a piece of cake, right? Yeah, well maybe. But since $SPX has banged into that falling trend line about 14 times over the past few months and failed to break above it then you just have to wonder if this is the time.

Interesting that today’s candle is a Hanging Man and that could be a reversal candle. Confirmation that the candle is truly a reversal candle would come tomorrow or Friday with a close below today’s low of 1229.51, otherwise it’s just a candle.

The bottom line is that if the $SPX is ready to rumble then some imaginary line on a chart isn’t going to stop it from going higher and breaking above this imaginary barrier and this should easily happen this week  and really should happen tomorrow, IMHO. If $SPX takes too long then the enthusiasm will wane and selling will take over again.

While the two lines drawn on the chart clearly outline a symmetrical triangle, I still consider the top line to exert all the authority to date so that is why I am kinda’ ignoring this pattern in the daily, though the weekly is another story.

GL

 

Update December 20th, 2011

Another example of why I will never suggest shorting this market. I prefer cash over shorting every time.

Market has gone into extreme overbought mode, again.

90% up day with about 97% of volume going into advancing issues.

$TRIN closed at 0.21, which is the lowest since the close at 0.14 on 11/28. Two days later $SPX rose by 51.77pts and closed at 1246.96.

$NYAD, the daily, closed at 2312, so this is overbought.

$NYADV closed at 2680, so this is showing overbought.

$NYDNV closed at 21.56, so this is showing oversold.

Based on the above, and based on the massive gains today, I think it’s safe to expect a ‘pause’ day for tomorrow. But what do I know?

Chart of $SPX showing the down trend line about to get tagged or broken. We have had a series of higher lows, marked with the green line, and a series of lower highs, marked with the black line. But we have managed to stay above 1158.66 for almost a month and now, if the market is truly going to get up and go, we should take out 1267.06 soon and then 1277 and 1292 should fall in due course. But today’s action could have been little more than a massive short squeeze and if that is the case then we should have a pretty good idea by the end of the week.

Things are not always what they seem.

Be careful

Update December 19th, 2011

Waiting is sometimes the toughest of all the trading strategies.

Per $NYUPV close at 70.41, $TRIN close at 2.85, and the fact that today was a 90% down day, I would be looking for a bounce of one degree or another for tomorrow. Could just be a pause day before resuming the down trend so I’d be careful getting sucked into to a convincing move to the upside. If for some reason today turns out to be the bottom, which I doubt, then it will take several days for technicals to confirm any upside bias shift. Until then, we just have to look at any move to the upside as being just a counter trend move/short squeeze, blah, blah, blah.

I don’t believe in support or resistance but I will sometimes mention these for lack of a better substitute. My reason is that when the market turns, it turns for a reason and that reason is time specific and unique. Two weeks later when the market approaches that previous turning point, there will be a whole new set of unique circumstances driving the market and so the previous turning point is likely to be ignored as the market moves on.

We are approaching a key voodoo psycho round number support level at 1200 and, based upon what I’ve written above, you can see that I don’t expect this number to hold. But we shall see.

The 5,3,3 Sto on the chart below remains in oversold territory and this should push the market higher for a bit. It seemed to work last Thursday and Friday but the move was not very credible. More important to me on the chart is the fact that the %K line on the 20/20 Sto is about to cross down through the signal line. If nothing else, this indicates market weakness and presents another red flag. Also the ADX ticked up today and so this needs to be watched and logged now to check the move. Should this upward movement go on for a week or a little more, then the ADX could cross up through the falling +DI line which would be bearish going forward.

Be careful.

The pros sold the close today. You can see the huge volume spikes at the end of the day in the intra-day charts starting just after 3:00pm. That is usually not a good thing because if THEY’RE selling then  why are you buying?

GL