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.