Update November 19th, 2012

$NYADV closed at 2699 when readings at or above 2500 indicate an extremely overbought market.

$NYAD, the daily reading, closed at 2341 when 1800 indicates extreme overbought.

$NYDNV closed at 46 when a reading around 150 would be considered very overbought situation.

93% of volume went into advancing issues giving us a 90% up day.

Based on the above, the market is now short term extremely overbought and after a day like today one has to expect a pause in the action for tomorrow. Also, we got a 90% up day today, but the volume, 2.5billion shares, is on the light side. Still, price is the only thing that pays so for now let’s just put the light volume aside. What I don’t want to see this week on light volume is a follow-through type day. For such a day to be legitimate, it shouldn’t come until at least Wednesday or Thursday and Friday would be better but we’ve got the holiday so next week would be best of all. But it’s not a perfect world.

While I believe the market has just put in a short term bottom, the possibility that the market has put in a major bottom can’t be ruled out. Every major bottom comes with all kinds of bad news and the bad news doesn’t just evaporate but lingers making it tough on Bulls & Bears alike.  This capital gains tax increase could be trouble but for now the market seems to believe that Congress will come to the rescue of investors. While this is all getting sorted out, we have to see if the market can put in a series of higher lows and higher highs and establish a new uptrend. Shouldn’t take too long to figure out if today’s action has staying power or if it was just a mega short squeeze.

Daily chart of $SPX showing two congestion zones. These are places where $SPX stalled, had a chance to go higher, but headed south instead. These are areas where buyers failed to show up before so they’ll need to show up now or what happened today will end before it really has a chance to get started.

Also note on the chart the various ‘buy’ signals that were generated today. Still waiting for bullish crosses of MA’s but that will take several more days.

Be careful and GL

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Quick Update, April 12th, 2012

My opinion of the market is often different from what happens in the market. My belief now is that the market has topped out and that while it might thrash about it will not make any new significant highs, and by saying that I have to leave the door open to a double topping situation.

That’s my current belief based on internal weaknesses in things like $NYSY, which is now well below the important 500 level. However, and regardless of my own personal opinion/s and or beliefs about the market, Mr. Market makes the decisions and sets the course and Mr. Market must be respected. If Mr. Market has decided that the rally deserves another leg up, then that’s what will happen.

With two days of rally, the market has now pushed into a short term overbought situation.

Fer instance:

$TRIN closed at .46.

91% of today’s volume went into advancing issues.

$NYADV rose to 2484, when 2500 is the line in the sand for this indicator.

$NYDNV dropped to 63, when 150 generally indicates an overbought situation.

$NYAD, the daily, rose to 1946 when 1800 is the line in the sand.

Based on the above, we should have a more or less flat day tomorrow, but the cool reception GOOG is getting in the AH may be the key to tomorrow’s market action.

Good luck

 

Update March 8th, 2012

Hopefully a couple of you spotted the ‘buy’ signal that was generated on Tuesday. More on that in a minute.

As you know, I was expecting some kind of market top to get put in and the action that began last Friday, March 2nd, and ended on this past Tuesday is not what I had in mind. I was looking for a top and then a pull back lasting several weeks, if not longer. Even though my top call turned out to be a bad call, there was still too much weakness in the market, as far as I was concerned, for me to get back in. However, on February 21st I bought a few shares of TNA at $62.90 figuring that if the market was going to head higher then I might as well take part, even if it was only in a small way. My timing couldn’t have been worse. When the market started to break down last Friday, I was certain that I was in for a long ride into the abyss. That changed on Tuesday when the breadth indicators that I follow, and that you should be following and logging by now, gave ‘climax’ sell signals which indicated to me that most, if not all, of the selling was over. As a result, I added to my TNA position in the AH on Tuesday at 53.46 and now own TNA at an average price of $58.18. It wasn’t easy for me to add to an already losing position, but the System indicated a new ‘buy’ signal and so I just had to go with it. Now for the details.

First and foremost, the RSI’s on the 60min charts of all the majors dropped to or below 30 in early trading on Tuesday. Per the 60min trading strategy, this is the most important event in the generation of a new buy signal and this set the stage for a possible break of the down trend line and a bullish 13/34 EMA cross, both of which happened today for $SPX, among others.

The $TRIN closed at 2.38 indicating that the selling had most likely gotten out of hand.

96% of volume went into declining issues indicating panicked selling, which you normally don’t see after just a couple of down days.

$NYUPV dropped to 33 when 80 is usually all it takes to signal a climax selling event.

$NYADV dropped to 262 when the line in the sand is 500 so this was showing an extremely oversold market.

The daily $NYAD dropped to -2510, when -2000 is all it takes.

$NYUD:$NYUPV dropped to -24.41 when -12 is good enough.

$NYSI dropped by 87 pts and this is right in the range of a previous climax signals from this indicator.

Zweig Breadth Thrust dropped to 40.05. This is actually borderline oversold because it should have dropped below 40 but given everything else that was flashing oversold I figured it was close enough.

4wk New High/Low Ratio dropped to 7.57 when anything below 15 is showing extreme oversoldness.

And that’s that. The market went extreme oversold after just two days of selling generating a fresh ‘buy’ signal based on a climax selling event. I’m still very paranoid about what’s going on with things like $NYSI so I plan to just let my TNA ride for a while and see how things go.

I want to leave you with a chart that was given to me by a friend in Helsinki. I’ve been watching  this chart of $VIX:$VXV  and especially the MA’s, which have not been lower since the 09′ lows. Please take some time and back test the chart so you can see for yourselves. The only thing that is missing, IMHO, is for the $VIX:$VXV to close at 0.77, which won’t be easy. Back in the middle of February this ratio closed at 0.79, but that just wasn’t low enough. Perhaps this chart, like so many that I’ve put up over the past few weeks, does not have any predictive value but you won’t know that looking out the front windshield. You’ll only know for sure when you see the action in the rear view mirror.

GL

I won’t be back for a while. Too much work to do.

Update February 1st, 2012

Zweig Breadth Thrust has once again pushed above the overbought level of 60 and closed out the day at 60.87, so this is showing overboughtness.

4wk New High/Low Ratio closed out the day at 93.52, which is its highest close going back to late October just prior to the decline that lasted into late November.

$NYADV pushed to 2504 today, when 2500 is the line in the sand.

$NYAD, the daily, pushed to 1983 today when 1800 is the line in the sand.

$NYHILO (copy that link and follow the chart) has pushed to 87 and could push above 90 this week. You can see on the linked chart that pull backs of one degree or another happen after $NYHILO gets into the low 90’s.

Based on all of the above, I have to expect some kind of pause in the action tomorrow. However, if the markets should rally then breadth indicators are just going to push deeper into overbought territory. For instance, $NYSI is now at 1139 and just couple more rally days will push it to or above 1200, an important overbought benchmark. Also $USHL5 has pushed up to 1936. It should go higher but when it gets up to the 2400/2500, which could take 4-5 more days, it will be showing overbought.

When it comes to market turning points, timing is everything and I believe, as I have for the past couple of weeks, that we are approaching a turning point. Could start tomorrow or maybe next week, but breadth indicators can only get stretched so far before they start to show signs of stress which is marked in the markets with a pullback. Okay, and I’m just going to cry wolf until a damn wolf shows up. So there.

60min SPY chart showing that SPY managed to get back inside the  rising trend line and today the 13EMA crossed up through the 34EMA in a fresh ‘buy’ signal, though I’m not buying.

Chart courtesy of FreeStockCharts.com

Daily $SPX chart showing that the 5EMA, which had been rolling over for prior three sessions, righted itself today and pulled slightly away from the 10EMA so there is no ‘sell’ signal generated using this method, yet.

Just be careful until we see how all of this shakes out.

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

Weekend Update December 10th, 2011

I think the moral of this story is that at the time it becomes clear that the market is headed in one direction you should be prepared for the market to change course. Or as Joe Granville is credited with saying, “The obvious is obviously wrong.” And I guess that now that those Euro fellows have let the cat out of the bag and things in Euroville are only going to get better from here, then obviously we should all be prepared for a mega Santa Claus rally, right? Of course.

Friday was another 90% up day with a $TRIN close at .66.  $NYDNV went into extreme oversold territory while the daily $NYAD and $NYADV went into extreme overbought territory. If this happened on any day other than a Friday, I would probably say that we could expect a pause day in the following session. But, since we did this on a Friday then news is probably going to be more important come Monday.

Weekly Index Change:

$SPX   +10.91pts and 0.88%

$INDU +164.84pts and 1.37%

$COMPQ  + 19.92pts and 0.76%

$SOX   +1.10 and 0.21%

QQQ    + 0.40cents and .71%

IWM  + $1.04 and 1.41%

$OEX   +6.32pts and 1.12%

XLF   + 0.19 cents and 1.47%

The following indexes produced very obvious spinning top candles on their respective charts.  The biggest problem with the following is the Transportation Index because of its underperformance.

$TRAN   +10.35pts and 0.21%

RTH   + 0.82cents and 0.74%

$CYC   +2.92pts and 0.32%

$NYA  +49.33pts and 0.66%

Spinning tops after a long white candle just mean indecision and that’s nothing new, but the fact that $TRAN underperformed and then produced a spinning top in the weekly time frame is note worthy and so the Transportation Index needs to be watched closely next week. One thing about $TRAN is that at turning points it often produces several small doji’s in the daily time frame, and then rolls over.

Weekly chart of $SPX is showing what looks like a spinning top doji, while SPY in the weekly time frame is showing what looks like a hanging man candle.  So obviously there is some indecision in the weekly time frame for the $SPX and even more obviously there is certain to be trouble brewing for the SPY, but then the obvious is so obviously wrong, or so they say. We’re just going to have to see how this goes next week.

I’ve drawn in a symmetrical triangle on this chart and that upper line should be in about the same place as the upper line I’ve drawn on the daily charts the last couple of days. The $SPX could break out of this pattern any time it wants but it could also meander along for about 3-4 more weeks until it reaches the apex.

The 26MA, which has been dropping since July, looks to have stalled this last week and so it finally might turn in the week ahead. The 13MA, which rose by about 8pts last week, is about two weeks away from a Bullish X of the 26MA.

The 200MA on the daily charts, which is almost in the same place as the 52MA on the weekly chart, has proven to be a barrier in the last week. A break above this area would have to be seen as bullish and an indication that the $SPX wants to go higher. If $SPX can break above these MA’s, then 1277 can’t be too far behind. The $SPX crawled along the bottom side of the 200MA  for the past five sessions and that has to be seen as weakness so in the week ahead $SPX is not likely to crawl along but instead is either going to break through or get repulsed and pull back.

GL in the week ahead.

 

Update November 29th, 2011

We have negative divergence in a couple of key breadth indicators,  the Advance/Decline line and the Cumulative Volume Index. Neither really looks like a problem except that this is the first time in a long time that these two have not moved in sync with the market. The real problem is that negative divergences in breadth indicators often appear at market turning points. In this case, that would be to the south.  Because of what’s been going on over the past few weeks, this bothers me quite a bit, but then it’s probably just my ole’  paranoia taking over again.

And then there’s the Q’s. As I went on about a week or more ago, the Q’s and Big Tech have been leading this market around by the nose. After yesterday’s big gap up, the Q’s flat lined, and then they dropped today. This is not good and unless or until the Q’s begin to move up with gusto, then the whole market is at risk.

In using the 13/34 EMA method to trigger buy and sell signals, it’s important for these MA’s to cross through one another. Q’s were not able to coax the 13EMA up through the 34EMA today and so by this method Q’s remain an ‘Avoid’ per my strategy. If you are long the Q’s you are really going to want to see the 13 cross up through the 34 and pronto.

Chart courtesy of FreeStockCharts.com

$DAX closed above the 50MA today. That’s good. Let’s see what this important index does over the course of the rest of the week.

I have to tell you that I’m getting a little nervous here. More so than usual.

GL