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Wednesday, September 19, 2012

Daily update 9/19

In case you did not notice, I added a market trend section just above the poll question.  I will keep that updated as I see trend changes.  Some times I talk about stuff that will affect market direction later on and I don't want to confuse people.  The trend section will be based on what the market is doing now.  The intermediate trend is most important to position traders.  Swing traders should only need the short and sub intermediate trends to profit.  Trading with those trends is much more profitable then fighting them.

The market tried to rally again several times today.  Despite positive breadth readings (unlike yesterday), the bulls kept getting thwarted.  Here is the daily SPX chart.

The candle under the upper trend line at the high was a shooting star.  We had another shooting star today.  Lets zoom in to the 30 minute SPY chart.

After another failed bounce off the lower trend line mid day, SPY finally broke below it going into the close.  That suggests down for tomorrow.  As I write this, the futures are down several points in after hours.  I have no idea what that is about.  It looks like we are starting some kind of pullback.  The last few days made it clear there were more profit takers then rally chasers at this level. 

I will be honest I am having trouble figuring out how this might play out.  Central banks around the world have fired their bazookas so the good news is out.  The bad news is that the economy really is slowing and so are earnings.  Will the market sit up and take notice now that the FED has fired its last bullet?  What have bears got to worry about now?  The threat of FED action has kept me from wanting to be short, but that does not exist now.  Did we have some type of volume climax top with the huge number of new highs and big volume the other day?  I have a lot of questions, but no clear cut answers yet.  We could have a normal pullback to the daily 18 SMA.  We could go down and test the green support line around 1420.  We could go down enough to hit the daily lower trend line or maybe even the 50 SMA.  Until we go down some and rally to either new highs or make a lower high it is a bit tricky here. 

There are a few things to keep in mind over the next few weeks.  There will likely be bad economic news coming along.  The market has been ignoring that because it made FED action more likely.  Now that the FED has acted will the market still react positively to it?  On the other hand, the FED action has made many people suddenly wildly bullish.  They will be buying dips along the way.  This could be a recipe for some nice swings up and down if one does not stay too long in either direction.  One last thing.  The bull market may have ended the other day, but we can't know that yet.  If we break the support at 1420 then we have a failed break out situation which will likely be very bearish given the poor fundamentals.

Chart practice has been updated with SIRI the stock of the day.


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