Starting in the 60min time frame, you can see on the chart below that SPY broke down out of a bear flag pattern. This could just be a big head fake but it will be important for SPY/$SPX to get back inside the rising pattern and then take out the most recent high or risk getting a sell signal when the 13 crosses down through the 34 EMA.
Back on the last trading day of 2009 I remember watching as one of the Big Boyz started to unload and this unloading triggered ‘sell’ programs from every corner and the market plunged into the close. This was a concern and I wondered if the selling would continue on the first day of trading for 2010. It didn’t, but about two weeks later the markets fell off a cliff and stayed down into the second week of February. Key to that particular decline was a very obvious pump in the first week of January that made no sense and then a couple of signs of stealth distribution. Will history repeat? Probably not, but there’s always a chance it will get close.
Chart courtesy of FreeStockCharts.com
The daily chart looks okay, though there are a couple red flags. Even so I don’t think it would be wise to read too much into the daily chart given last week’s low volume action. However, if weakness and indecision are not replaced by strength and direction next week, then trend lines run the risk of getting tested and/or broken.
$SPX did manage to make a new intra-day high on Tuesday and also managed to close at a new monthly high on the same day at 1265.43, exceeding the previous closing high of 1261.01 from 12/7.
$NYSI weekly chart showing a bullish Sto X. If you look back at other times when there was a bullish X on the Sto, you’ll notice that the markets and the $NYSI rose for more than a couple of weeks after such a X so it is possible that the markets could move higher into earnings, as I opined last week. ‘Course I was wrong about the possible short squeeze this past week so good chance I’m wrong about a rally into earnings, as well. $NYSI daily chart showing a fresh ‘buy’ signal as short term MA’s cross up through one another. It’s important now for $NYSI to rise to and above 500 in a show of broadening market participation. Longs would not want to see the daily $NYSI turn and give a ‘sell’ signal before it reaches 500.
Weekly $SPX chart showing it still dealing with the symmetrical triangle and crawling down the upper trend line. The fact that the 13MA has crossed up through the falling 26MA is bullish but is not nearly as bullish as the last time this happened back in October of 2010. Still, this has to be taken at face value for now until proven otherwise.
The markets continue to be difficult to read. While we have moved up off the October lows, we have not been able to rise back above either the early November or late October highs and this leaves market direction in question. At some point in the future the market will reveal itself but who can say when that will be. In the meantime, be careful.
GL in 2012