$SPX off 87.58pts and 6.27% for the month with the monthly close just about 18pts off the low.
Fail: With several breadth indicators giving extreme oversold readings yesterday, the markets should have bounced today, even if it was just a little bounce, but there were no REAL buyers. IMHO, the move off the low of the day was just a short squeeze engineered by market makers. I don’t advocate shorting and today’s action is a perfect example of why. Shorts appeared to have the market on the run only to get pummeled into the close. Regardless, market dynamics flipped bearish in April and remain so.
Looks to me like this latest rising price channel is nothing more than a Bear Flag counter trend move. I think one more day with a close below the rising channel would confirm this, though some would say it is confirmed now.
I’ve been using these charts from TradingView for about two weeks and I think they are the best charts on the web. And they’re free and in real time.
P.S. I’m not sure, but you may be able to find my charts over at TradingView. Search for CurtisM or CurtisM. with a period after M.
Most breadth indicators went into extreme oversold mode today, but neither Zweig Breadth Thrust, 4wk New High/Low Ratio, $NYMO with Bollinger Bands, nor daily $NYSI are confirming. This is due in part or mostly to the tremendous volatility that we’ve been seeing lately. RSI’s on the 60min charts of SPY, IWM, DIA, and Q’s are sitting in the 40 area and in this market it is better, from a trading perspective, to wait for the RSI’s to drop to or below 30 as long as your time frame is short term.
Amazingly, no clear sell signal yet on the daily chart below. I can’t see the rising trend channel holding, but then what do I know?
Cash is king in markets such as these.
If markets were to close right now, then breadth indicators would give “Extremely Oversold” signals and then you would expect some kind of bounce starting sometime Thursday. However, we’ve seen breadth indicators give false signals recently and I posted that this was probably going to happen again and again over the next few months.
So, if something like $NYUPV should close below 80 today, then that would be an extreme oversold reading, and if markets don’t bounce tomorrow and resume the recent rally leg, then that’s a fail. Today is going to be important but Thursday will be more so, if you catch my drift.
On a day like today, watching the Intra-Day PC/Ratio will show you if market participants have gotten overly bearish with readings in the 1.40’s or higher. So far not really showing that.
Hope you’re enjoying Memorial Day.
Basically looking for some kind of ‘buy’ signal in the daily charts. It’s hard for me to believe that the bounce that began on Monday, May 21st is little more than a dead cat bounce, which I guess I’ve mentioned often enough before. However, if the daily charts continue to firm up, then this could lead to another rally leg. I don’t see this happening, but you have to go with the charts.
This chart below is a slightly altered chart of my 5/10 Method. The alterations include the addition of the 15 & 20 EMA’s and the Aroon. In the highlighted area on the chart, you can see where the 5EMA is skimming right across the tops of the candle bodies but that this EMA has not yet crossed up through the 10EMA, which it has to do to trigger the first part of a new ‘buy’ signal per this method. Next part of this signal would come with the 5EMA pushing on up through the next higher EMA and then the 20/20 Stochastic having a bullish cross. On the chart it does appear that if the 5EMA does cross up through the 10EMA then at about that same time the 20/20 Sto should also have a bullish cross. If any upward move is going to prove to be legitimate, then the +DI should rise up to and cross through the -DI line, but that might not happen until the end of the week.
And just remember this: Charts don’t make the market. The market makes the charts.
IOW’s, you can put trend lines, triangles, wedges, etc, criss crossing all over a chart but you cannot with certainty predict where the next candle will be formed. All you can do is make assumptions based on the recent behavior of the stock or index in question.
Be careful and good luck in the week ahead.
Q’s managed to drop to the lower rising trend line and then bounce right off. This could mean, though I’m doubtful, that Q’s could push to the upper rising trend line. That would be a hell of a move but with the daily charts still looking sickly I’ll have to see it to believe it. However, Bears had a chance today and failed to capitalize so this may embolden Bulls over next few sessions.
You really have to be careful here trying to pick a bottom, especially since the daily charts are still screaming “Avoid.” Everything I’m looking at suggests that the action this week is little more than a dead cat bounce/short squeeze, but if the daily charts begin to firm up, then I might change my tune. We’ll see about that.
Seasonality is all wrong. Markets should just swoon into the horse latitudes from now until the end of summer, or famous last words.
I think what we’re looking at in the 60min time frame is the early stage of a new Bear Flag formation. For the moment, though, this must be taken at face value and so this formation is a new rising price channel.
This morning, I had another trend line on this chart which was anchored on the most recent swing low and the low from yesterday’s last 60min candle so that is what I’m referencing in the chart text.
While Longs might be encouraged by what has happened the last couple of days, the daily charts are still shouting “Avoid.” Bears or Bear wanna be’s will need for Q’s, SPY, DIA, and IWM to bust out of the bottom of their respective rising price channels, which would confirm that this is actually a Bear Flag, before they attempt any new short positions. IMHO, it’s a stand off for now with neither camp having the edge in the short term. Mid and longer term, Bears have the edge and it’s theirs to lose.
Chart courtesy of FreeStockCharts.com
It’s 8:30pm ET and I have not had a chance to look at anything else, yet, but will do so a bit later. If I find something worth noting, I will add it below this post.
That’s a fail. Breadth indicators had pushed deep into oversold territory yesterday and this should have produced a bounce. But it didn’t. I warned that the bounce might not materialize and that it could blow up in your face. It simply did not materialize. And I’m talking about the close not the rally that lasted until about noon.
What happened today is a much more ominous event than many will realize. Here’s why:
During the 2011 decline that began about this time last year and that lasted until October 3rd, breadth indicators went extremely oversold on 17 occasions, including October 3rd. Clearly the signal that was generated on October 3rd turned out to be a bona fide ‘buy’ signal, and just as clearly many of the other signals failed. Fer instance, on August 4th $SPX closed down 60pts on 5.5billion shares and breadth indicators dropped deep into oversold territory. The bounce that should have come just did not materialize and on August 8th $SPX dropped 79pts and closed at 1119.46. This last instance produced a tradeable bottom but the rally that followed only lasted a few days before sellers got the upper hand once again.
The bottom line is that when breadth indicators fail to give legitimate signals, then you need to expect this very same thing is going to happen in the future. This further confirms the change in market dynamics and that markets are in a down trend and this down trend is most likely just getting under way.
Watching from the cheap seats is better than being in the front row.
I’ll be traveling for the next several days and perhaps through the end of next week so it’s doubtful I’ll be psoting in the interim.
Be careful and never forget that money in the market is always at risk.
Please check out this post from May 5th and compare your findings to the readings for those indicators today and the readings from of April 1oth. You’ve got to own all these indicators and to do that you’ve got to track them and log them. If you haven’t started doing that by now, then it’s time you started. Some of those indicators won’t be updated until 6:00pm.
Zweig Breadth Thrust is T2103 at FreeStockCharts.com
4wk New High/Low Ratio is t2122, also at Free Stock Charts.
To those, add $SPXA50R, which will be updated later, as well. It hit 35 on Friday and may have dropped to or below 25 today, which would be oversold.
All I’m going to say at this point about breadth indicators is that, for the most part, they’ve gone into extreme oversold territory. This suggests a bounce could happen tomorrow. If a bounce does start tomorrow, maybe on some good news out of Europe overnight, then you just have to be on guard because bounces are going to get sold and probably won’t last long. And it might not happen at all.
Chart of SPY in 60min time frame showing how it broke down out of the price channel.
Market is damaged goods and any trades on the long side could blow up in your face.
I see no reason to do anything other than watch from the cheap seats.
All I know is that $SPX lost 10.56 pts and 0.75% in May and that in the last two weeks it is down nearly 50pts and about 3.6%. We’ve been mired in a huge sideways consolidation pattern for nearly three months that has lately shown a darker side. The daily charts are screaming “avoid” and now the weekly charts are starting to show signs of stress.
In the daily time frame, the markets were moving within the confines of what could have been a new rising price channel that formed starting with the April 10th sell-off. On May 4th we broke down out of that price channel confirming that it was a Bear Flag pattern. Bear Flag patterns appear in down trends.
The 60min chart of SPY below shows that SPY was not able to stay above the rising trend line that was formed mid-week. The Stochastic is in the process of tracing out an M pattern. To complete the pattern, SPY will need to drop even further before it can rebound. But that’s only part of the story. The rest of the story is on the next chart.
On this 60min chart I’ve traced out a sideways channel within which SPY moved most of last week. SPY is most likely going to break out of this pattern early next week, but the problem is that the first break may be a false break. Still, this channel needs to be watched for clues. Also note on the chart that the green 13EMA remains above the red 34EMA and that both of these key EMA’s are rolling over. Further, this chart says ‘avoid’ for both longs and shorts and this won’t change until SPY breaks decisively one way or the other, IMHO, of course.
We’ve been in an extended period of market uncertainty going back nearly three months. This is likely to continue for some time and in times such as these cash is king.
Be careful and good luck in the week ahead.
Meat grinder. That’s what it feels like.
Every market move starts first in the 60min time frame. Once a move is established in the 60min time frame, then it will soon be reflected in the daily time frame, etc. The daily charts are all in sell/avoid mode now so it’s the 60min charts that will help in spotting the start of the next move, whether that is up or down. For the moment, the 60min charts are not offering up very many clues but even so they provide the best view of the market right now. The 60min charts are my “go to” charts and I’ll continue to focus primarily on them until the daily charts take the baton.
Chart of SPY showing it failed to break above the falling trend line that has been exerting authority lately. Unless the market should fall off a cliff tomorrow, then time alone will push SPY through the falling trend line.
The other part of the story is the new but very weak rising trend line visible in the 60min time frame. Over and over again in the last several weeks, we’ve seen these rising trend lines morph into Bear Flags with failures and I just have to think that the current rising trend line will do the same. I just don’t know when. The only thing that would convince me otherwise would be a break and close above the intra-day high of 141.16 from Tuesday, May 1st. In order to climb back up there, we would need a dynamic market and right now we’ve got a meat grinder. One of these is not like the other.
IWM, Q’s, DIA all look about the same as each is perched precariously above their respective rising trend lines in the 60min time frame. If this trend line fails to hold tomorrow or any other day in the future, then you just have to expect the indexes will drop below Wednesday’s lows and then search for another lower level where they will consolidate for a few days before they do the same thing again. Wash, rinse, repeat.
On February 16th, $SPX closed at 1358.04. At the time, this was the highest closing level for the year to date, if you catch my drift.