Update December 18th, 2012

Just in time for Xmas.

I thought we’d get a huge one day rally on the fiscal cliff news and then we’d roll over for a bit. Not so. Two strong rally days with potentially more to come. I’m thinking that we’ll rally on the hope for a solution and then back off a bit once some solution is announced, but what do I know?

Per the RSI on the 60min charts of the Q’s, IWM, SPY, DIA, XLF, & IYT, these sectors are either overbought or very overbought. There are a couple of breadth indicators that I follow that are also overbought. This suggests that we’ll have a little pause in the action tomorrow, though news out of D.C. will definitely trump any and every other thing.

We are moving with conviction/volume. Today $SPX did 3.2billion shares, which is 500million more than its average volume of late, and blew by the important swing point of 1438 in the process. When you take out a swing point with this kind of volume action you just have to expect that the market wants to go higher yet.

On the chart I’ve put in a price channel and it is pointing right at 1460. Weeks ago I was pretty certain that the $SPX had put in its high for the year but with the way $SPX is moving now it does appear that the previous highs will fall before year end. Time, of course, will tell but that’s the way it looks from where I’m sitting.

GL & be careful because only the paranoid survive.

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Update September 25th, 2012

Expect a bounce tomorrow and, just as I posted earlier today on the Q’s 60min chart, it will be the quality of the bounce that is most important. Recently, when there has been a drop similar to today’s, the market has climbed all the way back within a session or two so it will be important that this same dynamic plays out tomorrow and Thursday.

Here’s what longs have going for themselves tomorrow:

RSI’s on the 60min charts of SPY, IWM, IYF, SMH, QQQ, & IYT have dropped below and closed below 30 today. RSI on DIA closed at 31, which is probably close enough.

$TRIN closed at 3.39 and is showing extreme oversold.

$NYUPV closed at 79 when anything at 80 or below indicates extreme oversold.

88% of volume went into declining issues and so this is too showing an oversold market.

All of the above should cause a positive reaction in the markets sometime tomorrow. Could be some residual selling early, which is often the case after a 100pt drop the previous day. If there is selling at the open, this will just push things deeper into oversold territory. However, if there is a bounce it may not amount to much so be careful if you decide to play the bounce, should it even materialize.

Daily chart of Q’s. Of all the MA’s and indicators on the chart, I am watching the ADX most carefully. With the Q’s now below the trend line and with the ADX rolling over, there is a possibility that the up trend that has been in place since the summer is coming to an end. If this does in fact turn out to be the case, then the Q’s are heading much lower.

I’m still looking for that big pull back. $SPX/w $VXO and $SPX/w $VIX charts that I’ve been following for several weeks put in new lows on Monday indicating that fear was completely absent in the markets. When this happened on August 20th, market went into a consolidation, but this time might be different.

GL

Update February 8th, 2012

Pee Wee Herman said, “First your mind plays tricks on you, and then you play tricks back.”

In the stock market that means that just when you think you’ve got something figured out, the market will do the exact opposite. (Liberal interpretation)

The $TRAN is starting to look like it is exhausted and may be on the brink of rolling over. It’s now back where it was around the 24th of January. It was only a couple of weeks ago when I said the same thing, and then the transports rallied. But the transports often warn of things to come and this time may be different and if it is then the markets will follow $TRAN south as this index is the leader.

Back around the 23rd of January, IYT/$TRAN gave a ‘sell’ signal in the 60min time frame when the 13EMA crossed down through the 34EMA. That ‘sell’ signal lasted one session.

At the close yesterday, the 13EMA crossed down through the 34EMA on IYT, though it wasn’t by much. Today the 13EMA pushed further away from the 34EMA and IYT broke the rising trend line, as well. For now this is a valid ‘sell’ signal but $TRAN can right itself tomorrow, as it did a short while back when it appeared to be topping, so it’s probably prudent to give $TRAN some leeway for the moment.

Chart courtesy of FreeStockCharts.com

Daily chart of IYT as a proxy for $TRAN. IYT tagged the 20MA today and maybe that’s all it’s going to do and then we’re off to the races again. On the other hand, if the transports don’t bounce tomorrow and instead continue to roll, then the negative influence coming from such an important sector will doubtless bleed over into the other indexes, IMHO, of course.

In other news, $VIX is just a hare’s breadth away from getting a ‘buy’ signal per the 13/34EMA method in the 60min time frame so this needs to be watched tomorrow.

Meanwhile and for the most part, breadth indicators are not backing off from overbought levels. RSI on $SPX daily chart is now close to 75 and is showing high levels of overboughtness. But no sector has yet blinked. Maybe $TRAN will tomorrow.

GL