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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

?+ 7/10/20

?+ 7/24/20

Up 6/5/20

Sub-Intermediate

Up 7/31/20

Up 7/17/20

Up 8/1/20

Short term

Up 7/6/20

Up 7/21/20

Up 8/1/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Wednesday, August 5, 2020

Last downside gap closed 8/5

Mission accomplished!  SPX managed to close the 2/24 gap down today.  Now what?


SPX pulled back a little bit when it hit the edge of this downside gap back in July.  I don't know if it was enough to alleviate the usual selling when a gap of this magnitude is closed or not.  We will have to see what transpires in the days ahead.  The only remaining objective would be to forge a new high in SPX.  Time will tell if that happens.


Neither the red/green count nor the short term indicator is in an overbought condition yet.  There is more room to run if the market wants to. 

I don't think SPX would get much past the old high should it get there on this go around.  Overall, the market is pretty thin now and in need of a pullback.  I guess we continue to play along with the bulls until we get a reason not to.  We just have to watch to see if there is some kind of negative reaction after closing that big downside gap.

Bob

Friday, July 31, 2020

Weak breadth 7/31

The market finished strong today on the back of some well received tech earnings.  However, breadth was -57%.  The market rally has been thin lately.  IWM was down nearly 1% while QQQ was up nearly 2%.  Money keeps rotating back and forth between those two.  Some days when QQQ was down and IWM was up.  Very strange.


We still have one open gap up above.  Will we get up there and close it soon?


The green count is below 50 and slightly below the red line.  The short term indicator is also divergent.


The breadth chart shows the McClellan oscillator was below zero today and has not shown any real strength since early June.  I think I know why.  Look at the USA daily new virus cases chart.


Notice the new cases started increasing dramatically around the 3rd week of June.  I think this data may be weighing on the market at least somewhat.  However, a small handful of stocks like AMZN, FB and AAPL are holding up the entire market.  I also suspect the talk of another stimulus bill in congress is keeping sellers at bay.  Should they fail to pass another bill the market would probably head lower.

Under the covers speculation by individual investors is running rampant.  This is very similar to 2000.  I don't think there is any way to know how much longer that will last.  When the music stops grab a chair quick.  In the mean time, enjoy the rally.

Peace and good health to all.  Have a great weekend.

Bob


Friday, July 17, 2020

Extremely low put/call ratio 7/17

The test of the June high continued all week with no resolution.


Monday gapped up and tested above the June high, but reversed sharply in the afternoon.  SPX rallied back strongly on Tuesday.  However the last three days saw a tight range and no break out above the June high.  We will have to wait until next week to find out if this is a double top or a bullish cup and handle pattern.


The Monday reversal in QQQ was much more dramatic than SPX.  The high flying big cap stocks took a hit.  Notice QQQ has not made up the ground it lost in that sell off like SPX did.  If profit taking continues in the high flyers SPX will go lower. 


The green count jumped up to overbought levels on Wed. and SPX made no further progress.  The short term indicator in the bottom panel is still showing significant divergence from the June high.

The all company advance/decline line is showing a slight divergence.  Every internal I have looked at shows some negative divergence.


This chart shows the 10 DMA of the put/call ratio (blue line).  That line getting this low is usually associated with a sizable pullback.  All prior instances since 2009 have seen pullbacks.  The occurrence in late 2010 took a few months.  Most of the signals make a short term top within a few weeks.   This signal was at the June high so it has already been over a month.   Excessive optimism seems really odd in our current situation.  The fundamentals are not good, so why all the optimism?

There are technical reasons the market might turn down from here.  Divergences do not mean anything until price confirms them.  If the market breaks out above the June high on Monday all is probably well.  If the market turns down instead, I think we can expect a sizable pullback.  SPX would have a double top lower high pattern which sometimes leads to big declines (i.e. late 2018).  I think the resolution should happen early next week.


Peace and good health to all.  Have a great weekend.

Bob

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.