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Thursday, November 15, 2012

Daily update 11/15

“The Only Thing We Have to Fear Is Fear Itself” FDR 1933.

That was a fine saying for those times I am sure.  However, when it comes to the market it does not apply does it.  How about this.  "The only thing we have to fear in the markets is when there is no fear and there should be".  Bob 2012

We had a break away gap to the downside on volume, we broke the daily 200 SMA on volume, and we have no fear.  This is how a bear market acts people.  All I heard on TV today was people talking about buying.  Some admitted it could go lower first, but there was no fear.  Everything was about buying, the only question was where at.  My call for a major top is looking better and better to me.

I got my buy signal today.  I got the same buy signal on July 29, 2011.  Here is the chart of what happened.

That was one hell of a crash now wasn't it.  I learned this buy signal back in 2004 and that was the first time anything like that had ever occurred.  Sometimes it takes another 2-3 days before it kicks in.  Most of the other times the market went down less then 5% before the bounce happened.  A lot of the time it happens immediately.  Normally the VIX is above 25 by the time this signal hits.  Since 2004 this is the first time this signal has occurred with the VIX below 20.  I have no idea what is going to happen with it this time.

It looks like we hit the .618 Fib retrace area and bounced.  Here is the daily SPX chart.

That is a pretty steep decline.  The action today did not really look like a bottom was forming to me.  I guess we will see.  I don't use Fib levels by themselves.  If I can't find something to support that level I ignore it.  I do not have any support that I can clearly see in this area.  Lets zoom in to the 130 minute SPY chart.

No blue bars in this move down.  The volume bars are still bearish.  I don't see anything for the bulls to write home about in this chart yet.  Lets zoom in to the 60 minute chart.

There is a nice consolidation at the lows.  Price struggled with the 6 SMA today.  I am scared not to be short here.  Until we break the 18 SMA I want to have some short exposure.  A break means an hourly close above the 18 SMA plus another bar that closes above the first bar's high.  The failure to get that confirmation on Tuesday was why I went short for this swing down.  This chart has a lot of work to do to get bullish.

Here is the current breadth chart.

When the breadth gets this negative the market almost always will retest the low a week or so later.  Any bounce from here has very high odds of being a dead cat bounce.  I am not convinced that bounce is imminent yet.  I cannot ever remember the Thursday of option expiration ever being any kind of significant turning point.  I guess there is always a first time though.


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