Is a miss as good as a mile? With today’s 1398.94 close, we came within a hare’s breadth of the requisite 1397.68. Because $SPX did not close below 1397.68, then Monday’s Hanging Man reversal candle is not confirmed. Until proven otherwise, yesterday’s candle is still just a candle.
If market bias and dynamic has truly flipped bullish, then there should be no problem with $SPX taking back all of its losses so far this week and it should do it tomorrow. As I said over the weekend, the markets reveal themselves on pull backs, and we are now in pull back mode. Is the market going to show strength and resume last week’s rally or is the market just going to keep heading south indicating that last week’s rally was just a big head fake and short squeeze? By Wednesday’s close we should have a much better idea about how this is all going to play out.
I’m just wondering if yesterday’s extremely low P/C Ratio is going to haunt the market for weeks to come or if we’re going to resume the uptrend lickity split?
By my definition, and yours will most certainly differ, today qualifies as a pause day. For me a pause day in a rally is a day where the Dow closes up or down by about 50pts. But…
Today’s action produced a red Hanging Man candle on the $SPX. I say red because these type of candles can come in red or green but the red candle is the more bearish of the two. Still, it’s just a candle until it gets confirmed. Should this candle get confirmed tomorrow, then it could lead to a reversal in this rally. Over the weekend I wrote about how markets reveal themselves in pull backs and we might just be setting up for a reversal now. However, I’m not really seeing it. Maybe that will change tomorrow but for now I think we get a bit more upside and maybe even a follow-through day before we pull back. But what do I know?
Edit about 10mins later: Okay, well I should have looked at everything before I began today’s post.
Anyway, today’s candle could have more meaning than I at first was willing to give it and that’s because of the P/C Ratio. I use the total P/C Ratio and it closed today at 0.63. That is the lowest reading this year. We had readings close to this at the March high and the September highs, but we have not had a reading this low in a long, long time. This means that no one was worried at all by today’s little give back and that everyone has moved onto the same side of the ship. This is never good and is a red flag. While I am normally skittish and paranoid, I’m more so right now. Let’s just see how it goes tomorrow.
Just watch that tomorrow $SPX does not close below today’s low because that is the tell.
GL and be careful.
So there is the bounce that the 5,3,3 Sto suggested we would get, though it needn’t necessarily have come on Monday. The last time the 5,3,3 Sto gave a signal that the market was short term oversold, we rallied for 7 sessions before giving it up. Because we have not yet had a climax bottoming event, my personal feeling is that we could now rally for a couple of more days before rolling over and resuming the downtrend, however; the market will determine the direction it wants to go and if it wants to go higher and higher from here then so be it because the market is always right.
Yesterdays mega rally came on some pretty good volume but after such a day one has to expect a pause in the markets today. My definition of a pause day is for the Dow to move somewhere around 50pts, +/-. Today’s action can be somewhat discounted so, IMHO, the next important market day will be Wednesday. For this oversold bounce/short squeeze to be more than just a bounce, then it will have to continue through the rest of the week and do so on good volume with AAPL rising each day without hesitation. And GOOG, too.
Daily chart of $SPX showing how it has climbed back inside the rising price channel, which is good for the bulls. But it’s earnings rodeo time so let’s just see how long $SPX can hang on.
Yesterday the $TRIN closed at 1.15 in an instance of Stealth Distribution. This is just one day and we need at least one more instance right away before this becomes a consideration.
The P/C Ratio closed at .77 yesterday indicating that most market participants are on the same side of the ship, but the market is all about disappointing the expectations of the masses.
Here’s the way I see it. We’re stuck in a range going back to the middle of May. Top of the range is around 1335 and the bottom of the range is 1266. The highest close in this range was 1332.42 from May 29th, and the lowest close, so far, was 1278.04 from June 1st. Since June 1st, $SPX pushed to a closing high of 1325.66 and since then put in a closing low of 1308.93 on Monday. So all of this is what we know, but what we don’t know is where we go from here. I don’t think we’re going to have to wait too much longer to find out.
What we need to find out is whether or not $SPX is capable of putting in a new closing high or whether it is going to put in a new closing low. If $SPX should push up to the 1335 area, which I showed on yesterday’s chart, and, more importantly, close above 1332.42 then this will show that there are enough buyers around to fuel some more topside action. If, on the other hand, $SPX should drop to the 1308 area and close below 1308.93, then we will know to expect more closing lows. Since $SPX has dropped down to the 1314 area, then one has to expect that a close below 1308 is coming soon to a market near you. The only thing that I see that might stall this is that the P/C Ratio closed at 1.28 today. This indicates that traders have moved to one side of the boat which could lead to a short squeeze. Maybe.
Well, I’m glad I unloaded TQQQ but I am still holding TNA. I could be forced to sell tomorrow and, in fact, I expect that to happen. The 60min chart of IWM shows why.
One of the cardinal rules of the 60min trading strategy is that when you have a break of a rising trend line and a bearish X of the 13/34 EMA’s then it means it’s time to sell. I didn’t do that today because the truth is I was preoccupied at the time and by the time I realized what was going on it was too late. Might as well wait until tomorrow and see if they can rally the markets at the open, though I have no idea if that will happen. Most likely I will sell sometime during tomorrow’s session.
$NYSI is now 1-2 days away from pushing above the 20MA, which, regardless of everything else, would have to be seen as bullish going forward, though not immediately. The DI lines on the chart I use won’t have a bullish cross for maybe another week or two and anything can happen between now and then. I am watching this closely because this means that, whether I believe it or not, weakness is being replaced by strength in the market. $NYSI can be very early. It gave a sell signal in February while the market didn’t top until nearly two months later, but if it doesn’t reverse course soon, then longs may finally get a break.
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.
$TRAN is back where it was on January 30th & 31st. In the 60min time frame, the 13EMA crossed down through the 34EMA today, though it’s only by one tick so I think it’s a little early to be calling this a sell signal. Still, this key and very important index will need to be watched closely tomorrow and the rest of the week because it may be trying to tell us something.
$TRIN closed at 1.31 with $NYA up nearly 22pts so someone was selling at the close and doing so in a stealthy kind of way. This is stealth distribution but we will need 2-3 more such instances over the next 5-6 days before this becomes a concern.
$NYSI added 29 issues today after adding 34 yesterday in what could be a sign of fatigue. It’s important to note that this same kind of thing was happening on January 30th and 31st when $SPX was 35pts lower but it’s also important to be aware of these kinds of readings with the $NYSI at 1299.
$BPSPX pushed to 83 today and could make it to 85% by Friday, unless, of course, the markets fall off a cliff in the meantime.
P/C Ratio at .72 so everyone has moved to one side of the ship, again. This may dampen tomorrow’s action, or famous last words.
Daily chart of $SPX and the biggest concern for me remains the RSI, which is now just below 74. IMHO, anyone entering the market now with an RSI this high is just asking for trouble. And, of course, the market is all about making fools of those who say things like that.
Have you been keeping track of the number of times the markets have rallied on Greek debt developments? At least 100 times, right?
Long legged or spinning top Doji today. Either way they reflect market indecision. We’ve seen a lot of these lately but this is the first time in a while that we’ve seen one on the first trading day of the week. The other indecision Doji’s we’ve seen lately haven’t meant anything to the market and so until proven otherwise today’s Doji goes in the same category, or famous last words.
P/C Ratio rose to 1.10 today and that favors the bulls for tomorrow.
Zweig Breadth Thrust and 4wk New High/Low Ratio still up in nosebleed territory with $BPSPX, etc, flashing warning lights. $VIX bounce today wasn’t enough to give it a ‘buy’ signal in the 60min time frame and its daily chart still says to stay away.
Chart of $SPX and it continues to look good. A few more green days will push the RSI above 70, which is bearish, IMHO. However, I have seen the RSI on $SPX climb well above 70 and stay there, like it did back in February of last year so just because the RSI does climb above 70 doesn’t mean imminent doom. That comes later.
And if you really want to see RSI’s that get completely out of hand, look at the charts of $TRAN and $SPX during March & April of 2010.