The fact that the Q’s rallied hard today does not impress me. I have traded QLD for years and have been trading TQQQ since in came out, but I’m not messing around with the Q’s here. All that has to happen is for another AAPL bad hair day and any and all gains that may have been made will just evaporate. I still think AAPL has a long way to go before it bottoms and it’s very possible that I’m totally wrong about this but for now I’m just going to avoid Big Tech in favor of small caps and $SPX.
Next, I see nothing in breadth indicators that shows the market to be overbought here. Even the RSI 14 for QQQ, IWM, SPY, & DIA in the 60min time frame backed off from the 70 area going into the close so none of these ETF’s is really showing overbought. But that doesn’t change the fact that today’s candle on the $SPX is very similar to other topping candles that have formed over the last several months. I’ve highlighted all that appear in up moves and you can see that, with one exception, these candle types have marked turning points in the market of one type or another, either pull backs or consolidations.
This is a large chart and apparently it’s too large for WordPress. If you click on it, it will open in a new window but even then it’s not that easy to read.
I don’t know why the market rallied today. Not a clue. If it was because of the Fed meeting, then what’s newsworthy about that? Everyone already knows what the Fed is going to do: buy more bonds. What’s going to happen tomorrow when this is announced? Rally like it’s 1999? Well, I guess we’ll have to wait and see.
GL & be careful.
Back on August 8th & 9th I began to warn of a potential top getting put in in possibly 10 days. At the time, $SPX closed at around 1402. Now, more than 10 days later, with $SPX back to 1402, it does appear that we are witnessing a top in formation. The mad men at the helm can take it all back tomorrow, but if they don’t then I do believe that the decline that lies ahead will not be the garden variety we’ve seen since the June low. I expect this decline to be more like the decline off the March highs into the June lows, but this is pure speculation now, though there is some historical precedent in the $SPX w/$VXO & $SPX w/$VIX charts that I put up a while back.
For the moment, I have no ‘sell’ signals in the daily charts, though it’s close using the 5/10 Method. And, with the exception of those unstoppable QQQ’s, the hourly charts of IWM, SPY, DIA all got trashed today and produced sell signals in this time frame, with DIA looking worse than the others.
60min chart of IWM showing fresh sell signal.
A quick look at breadth indicators isn’t showing any that have dropped into extreme oversold territory, which is what you would expect given that we’ve only had one day of selling. There’s always tomorrow.
If you’re not paranoid, then you’re not paying attention.
Below is the chart I’m watching now. Today we have an indecision doji with perhaps a bottoming tail.I’ve redrawn the lower trend line, cloned it, and placed it along a couple of tops to create a revised rising price channel. I feel that this is valid because we do not have a lower low. Should $SPX drop below 1325 any time before it rises above 1380, then I will change the chart to reflect a down trend. We could also be looking at a Bull Flag pattern, just like the pattern that we had from the 3rd through the 12th.
$NYSI has started to roll over and may give the first part of a new sell signal by Friday’s close. The fact that $NYSI is rolling over is a negative for the market and so I’m expecting $SPX to drop below 1325 sooner rather than later. Also, while the market kinda’ rallied today, $TRIN closed at 1.19 and volume going into declining issues was slightly greater than volume going into advancing issues. So while the green day on the $INDU and $NYA looked good, it didn’t smell good. Also, transports, which have been struggling all year, are now back in the same place they were on December 19th 2011 so they’re negative for the year and then some.
Recent market action just does not inspire confidence, at least for me. Maybe the market will bounce, like it has after every recent and 4-5 day pull back, maybe not. Until the market gives a clear signal one way or the other then cash is king and market is best left to adept day traders, IMHO, of course.
Edit: Just wanted to point out that each time since early June that the 5,3,3 stochastic has tagged or dropped below 20 the market has bounced. Basically we’re there so if there’s going to be a bounce it should start tomorrow. I don’t know it the market will bounce and in fact I’m doubtful, but the opportunity is there.
Click on the chart for a larger view.
As always, be careful. If you decide to play, keep position sizes small and don’t turn your back on the market because only the paranoid survive.
I really didn’t want to be in this trade. Prefer cash right now. Huge move in $SOX index was the juice behind the move so far, but that’s probably not going to repeat tomorrow.
Added a bunch of shares at 45.99 then sold at $46.72. Don’t care what the market does now because I consider this to be counter trend and even though I initially only had a few shares, it could have been a huge down day and then I’d be holding those shares for quite some time. Don’t like to short so cash will have to do.
For the record, I did not get in the market on Monday when the RSI on the 60min charts dropped below 30. I’ve been lucky the last two times I’ve gone long per the 60min trading strategy so I just figured I’d sit it out this time. Besides that, I have ‘sell/avoid’ signals in the daily charts of just about everything so why take the risk?
However, I did roll the dice with some TQQQ late in today’s session, for obvious reasons. AAPL’s earnings and forecast didn’t go my way, so now I’m seriously under water with those shares. My only saving grace is that I bought fewer than 20 shares as a possible entry position. If things had worked out, I would have added more and scaled in. Not the first time I’ve been upside down and worked my way out over time. I wouldn’t be surprised if I get out of these close to break even sometime tomorrow.
Breadth indicators are close to giving extreme oversold signals and if the market does what I expect it to do tomorrow, then things like Zweig Breadth Thrust will drop into extreme oversold territory and a bounce of one degree or another will follow so no reason for me to sell until I see if the bounce does materialize on Thursday/Friday.
Do not try this at home.
60 minute trading strategy in action, or, wash, rinse, repeat.
Q’s remain strong in PM action mainly because they have little exposure to financials. Same cannot be said of $RUT/IWM & $SPX/SPY. At 8:56 A.M., ES is off 9.25pts but this is most likely going to be bought back up so that it can be sold into, at least that’s what I think.
As anyone who’s been following this blog for any length of time knows, I’ve been using the 60min trading strategy exclusively lately to time entries and exits. That’s not 100% accurate because per the 60min trading strategy I should have gone long last Thursday, the 12th, but I was expecting more down side so I held off. The break of the falling trend line at last Friday’s open forced me to go long. As far as I’m concerned, when the RSI 14 gets above 70 on the 60min charts you are playing with fire. I figured that the mad men at the helm could hold the Q’s up for 2-3 days, which is what they did in the last cycle, so I didn’t sell Wednesday when the RSI first pushed above 70. Yesterday I placed my ‘sell’ order for TQQQ when the Q’s were trading right around $65. I gambled that THEY would spike the Q’s up sometime during the session and had calculated a 10% gain based on my entry. I put the order in and left on my bike ride. My gamble paid off and my order was filled within pennies of the daily high on TQQQ with the RSI on the Q’s having spiked to 77, an unsustainably high reading.
60min chart of Q’s showing entry points and exit points per the RSI 14.
I’ll just be watching from the cheap seats for a while.
Well, I couldn’t do it, couldn’t hang on to TQQQ any longer. Based on AH action with GOOG and others, looks like I’ll miss out on some more gains, but a 10% gain, less commissions, is good enough for me.
Placed my order then went for a bike ride. When I got back 2 1/2hrs later, the order had been filled. I’m in no hurry to get back into anything.
Note that today $TRIN closed at 1.08 so another instance of Stealth Distribution. Will this work it’s magic again? Just have to see.
I don’t know if you’ve noticed, but market internals have not been very strong the last two days. On Wednesday, with $NYA up almost 1/2%, volume going into advancing issues was not quite 2:1 the volume going into declining issues. That kind of ratio isn’t really showing much strength, but it was enough. Then today the same ratio would be 3.8:3.5 and that is not enough to keep the markets moving higher. Also, $NYSI rose by 29pts on Wednesday but only rose by 24pts today, which indicates market strength is being replaced by market weakness. If this pattern of weakness continues, the market cannot help but feel its effects and roll over.
Shrimp that dozes is shrimp on the platter.