Daily update 6/28

That was some last 15 minutes today.  Month/quarter end and index rebalancing.  Even though SPX was down on the day I don't think the bears are in control.  Here is the daily SPX chart.

The bears tried to take control this morning with an early sell off.  However, SPY hit the 60 minute 50 SMA and the dip buyers came out in force.  There were several dips during the day, but the bulls stepped in and rallied the market every time.  I don't think the last minute shenanigans are indicative of the future direction.  With the price bar now green SPX is trying to turn up in the short term.  It needs confirmation with a higher close.  Lets zoom in to the 60 minute SSO chart.

 
The red resistance line is from the circled 6/20 high.  That big gap down is providing resistance so far.  There is quite a bit of price action around that line.  I think that is the line that shorts will cover if we break out above it.  The normal way this markets work these days is to gap up and over resistance.  It also has the tendency to gap up on the first trading day of the month.  Will that happen again?  If we do break out I would think SPX will at least test the 1650 area.  It might end up retesting the May high.  In VIX
 I wrote about how a rejection of the VIX at its weekly 200 SMA has resulted in new highs in the market every time in this bull market.  It looks like it got rejected pretty good this week.  Will history repeat again or now that I pointed out the pattern will it fail?  I guess we will see.  In the mean time as long as we stay above the hourly 50 SMA, buy the dip.

Chart practice has been updated with AAPL the stock today.
http://traderbob58-chart-practice.blogspot.com/

The market and sector status pages have been updated.

Have a great weekend all,
Bob

Some market internals

This first chart is the Nova/Ursa ratio.

This chart would seem to back up my idea that shorts have not run for cover yet.  So far on this rally the ratio was only slightly positive one day.  Without some strong positive values it will take quite some time for the 14 DMA to get positive.  Until that happens it is probable the correction is ongoing.

Here is the NYSE bullish percent chart.

The last leg down in SPX did quite a bit of technical damage to this indicator.  So far the bounce has not helped.  This indicator has already taken out the April low and is at the lowest level since last Nov.

Here is another way of looking at the percent of bullish stocks.  This is the number of NYSE stocks above their 200 DMAs.

This indicator has also broken the April low.  Now there are only 62% of the stocks above their 200.  It has made a bit of a recovery on this bounce.  It is still considerably lower then when SPX was last at this level before the recent break down.

Here is the put/call ratio chart.

The put/call ratio is up above the highs reached on every pullback since last May/June.  It is high enough to make a bottom.  Just be aware that it can go higher still.

There has clearly been technical deterioration in the market.  I don't see anything that is saying the sell off is over yet.  That can change pretty fast if the shorts decide to cover.  Until that happens we may still be headed lower.

Bob

Daily update 6/27

Another big gap up, but still no sign shorts are scared.  Here is the daily SPX chart.

The 18 and 50 SMAs were in the same area today and they stopped the rally cold.  Another day of falling volume.  This chart looks like a textbook dead cat bounce.  Check out the daily SPY chart.

SPY has three doji bars in a row.  Today's bar came right at the down trend line.  Earlier this month we got above that down trend line, but turned right back down.  I think it may still be valid, but I am not real sure.  This is probably the strangest bounce I have ever seen off my over sold buy signal.  Today's bar is a gravestone doji which is somewhat bearish, but it needs downside follow through. 

Here is the current breadth chart.

The 10 DMA lines came together today while the McClellan oscillator has a slight positive cross.  This three day bounce has completely worked off the over sold condition.  The power is up for grabs here.  Another up day would greatly strengthen the bull case.  However, a downside reversal could easily tip the scales back in favor of the bears.

The futures got into the price gap of the big 6/20 gap down today.  However, they found resistance and could push no further.  Will they gap it up yet again?  If they do it might finally get the shorts to cover.  With the trend indicator down and breadth in a neutral condition a move down from here is likely to carry down to the April low. 

Bob

Daily update 6/26

Most over sold lows are made when the shorts cover.  There is usually some panic buying when that happens.  The last two days has SPX up considerably off the low, but I don't think we had the typical rush of buying.  I have seen times in the past where the over sold buy signal just bounces for 2-3 days and rolls over again.  I don't know if that is going to be the case here or whether the market will continue up and cause the short squeeze to happen from higher levels.  Here is the daily SPX chart.

This was the second day after the buy signal and a second day of declining volume.  Both days started with big gaps up and ended with the futures within a couple of points of the 9:30 open.  The big gap ups do not seem to be scaring the shorts.  Here is the chart with the last two buy signals (green arrows) from late last year.

After both buy signals there was a relatively big green volume bar which I circled.  Note the wide range day on the second day off the Nov. low and first day off the Dec. low.  That is normal for this oversold condition as shorts cover.  We have not had the wide range bar or the increase in volume yet.  Is it yet to come or is the market going to roll over and retest the low?  I don't have a clue.  If SPX gets to the 50 SMA in this same lazy manner without a panic short squeeze it may roll over.

Bob

Daily update 6/25

Buy signal kicking in?  Here is the daily SPX chart.

Both SPY and the futures closed above yesterday's high.  You can't see that from SPX because of the way they do the index.  The breadth was 77% positive.  People were obviously buying dips intraday all day.  That strong of a day after my extreme over sold buy signal usually means we have a bottom.  I have adjusted the horizontal red lines to the new low.  That marks the .618 and .786 retrace levels back to the May high.  It is a bit hard to say how far this rally might carry if it continues.  We have had a lot of new lows (over 500 on Monday) which is very unusual without SPX breaking its 200 SMA.  We also had a 90/90 down day.  On top of that the junk bond market tanked which has a high correlation to SPX.  These would all be signs that we could be in for a deep correction.  However, I can't say that any of those things mean we won't get back into the retrace zone or even test the May high.  Looking at the SPX daily chart there is a two step pullback into the 100 SMA.  It looks like an ordinary pullback really.  If the market continues up we may find people piling back in again.  On the flip side we have had a very big sell off in emerging markets and there is credit market problems in China.  The news flow has the potential to short circuit a rally.  I suspect SPX will at least try to fill the 6/20 gap down which could get price back to the 1628 area.  If the news flow permits we might even reach 1650.  That would form a common topping pattern of a double top slightly lower high.  Above the upper red horizontal line the odds should favor a full retest of the May high.

I have known about this over sold buy signal since 2004.  Once it kicks in there is usually a big relentless up day as shorts run for cover.  That did not happen today so it may be yet to come in the next couple of days.  As long as we don't break the hourly 18 SMA on the down side we should eventually get that big up move.

Bob

GLD support lines

I hear some talk of gold being near a major low.  I don't know about that, but it could be near a trading low.  The one thing I do know is that it is in a bear market.  Lets look at the monthly chart.

GLD has gotten really, really over sold.  This is a possible support area marked by the dashed green lines.  That is from the minor peaks in the circled price area back in 2009-10.   That does not look like particularly strong support, but as over sold as GLD is a bounce is always possible.  The solid green line down around 99 is the best looking support area.  That comes from the 2008 top and price action in 2009.

GLD is well below its downward sloping 18 SMA.  Clearly GLD is in a bear market.  However, it is in an extreme over sold condition and there is potential support in this area.  A significant bounce seems possible. 

In June of 2012 in GDX revisited I wrote "It seems to me there are two distinct possibilities here.  This is either the buy of a lifetime in gold mining stocks or the price of gold is going to come down drastically."  We now know GDX was forecasting a big drop in gold prices.   I don't know what is going to happen to this long term.  It would be unusual to V bottom and start a new uptrend from this condition, but anything can happen.  The only thing I know for sure is that the uptrend is broken.  I would expect GLD will need to do some repair work before a sustainable uptrend can be established.  Until that repair work is done we can't possibly know if we have hit bottom yet.  We could be close to a trading bottom, but be careful about extrapolating that long term.

Bob

Daily update 6/24

SPX gapped down below the key 1576 area.  However, the selling pressure seemed pretty minimal.  The market even staged a decent rally during the afternoon.  Here is the daily SPX chart.

SPX is in the area of the 100 SMA.  This is a place that the bulls could come out and support the market.  We closed only a little below the key 1576 area.  That could still be in play as support.  Lets zoom in to the SPY 60 minute chart.

SPY has a green price bar tonight.  If it opens up tomorrow it should continue up.  This is the first green bar since the selling began back on FED day. 

I finally got my good buy signal tonight, but just barely.  So we are oversold in a possible support area and we have a slight sign of life from the bulls.  Will they pick the ball up tomorrow and run with it?  If they do I think we should have a reasonable chance of filling that 6/20 big gap down.  The market has been very meticulous about filling gap downs this year in short order.  We are also moving into the quarter end window dressing/mark up period.  If the bulls have the desire to buy we have a decent chart setup for a low.

Chart practice has been updated with MPC the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

VIX

The VIX touched its 200 week SMA this week.  Here is the weekly chart of the VIX showing the other times that happened in this bull market.

The green lines are instances where the VIX touched the 200 SMA, but did not end the week above it.  The red lines indicate the three times the VIX closed above its 200.  This week we touched it, but did not close above it.  The other three times that happened that was the week of the low and the market went on to new highs.  In early 2010 the VIX closed above its 200 and the market bottomed the next week and mounted a big rally.  The other two times the VIX closed above the 200 the correction in the market persisted for many weeks.

If history repeats for this bull market we should have made a weekly closing low last week.  If the VIX closes above the 200 this week then it will be different this time from any other correction in this bull market.  If we end higher this week, but break last weeks low before we make new highs that would also be different. It seems like every time I point out a pattern in this blog the market does something different.  Will that be the case again?

Bob

Daily update 6/21

The gap up this morning was right in the area of the 6/6 low.  SPX then sold down to 1577 one point above the key 1576 area and bounced.  When price got up to that 6/6 low the selling started up again.  For today the 1598 level was clear resistance.  That was probably longs that did not have stops in place getting out.  The question is how many are there and are there enough bargain hunters to overcome them.  Here is the SPX daily chart.

We still have a blue bar so SPX is still below the lower Bollinger band.  Until it gets back inside it can mean we are in an accelerated move down.  An up day today just relieved a bit of oversold pressure and delayed my good oversold buy signal should we continue down next week.  It looked like the bulls were going to make a low today, but they fumbled the ball in the last hour.  A break of 1576 could start another round of selling.  I am not exactly sure where the margin calls will start to come in.  If we get to that point it is going to drop like a rock if the bids disappear.

The key on the upside is that 6/6 low in the 1597-1600 area.  The bulls have to get SPX above there to get going.  The longer we stay below that level the less likely we will get above it.  We had a high volume sell off and VIX over 20.  If that does not get the bulls buying we are going lower.  I mentioned the other day the action off the 6/6 low looked like a bear flag.  Today acted like that might be the case.  After dropping 40 points yesterday a 4 point bounce is nothing.  The bears are still in control for the moment.  We will see who shows up on Monday.

Chart practice has been updated with APOL the stock for today.
http://traderbob58-chart-practice.blogspot.com/

When I updated the sector status page there were no green sectors on the weekly charts.  Most are now red.  If we don't make a low here soon the market is going to get very bearish.

Have a great weekend all,
Bob

Daily update 6/20

Wow.  I did not exactly expect that all in one day.  SPX did not quite get down to the 1576 support level, stopping at 1584.  This was a 90/90 down day.  That means 90% of stocks were down and 90% of the volume was in down stocks.  That is the first one of those we have had in a long time.  The volume was also very high today.  The only odd thing was the TRIN was only .90, not showing a lot of panic.  Usually these are short term selling capitulation days.  The market commonly will bounce for 2-7 days afterwards.  That could take us through the quarter end mark up period. This market has been meticulous in filling gap downs.  If we do get the bounce we are likely to fill that gap down from this morning at a minimum.  Here is the daily SPX chart.

SPX broke the 6/6 low.  It has a blue bar indicating it is below the lower Bollinger band.  This sets up a potential double bottom.  A move back above 1600 could spark a rally.  I still did not get my good oversold buy signal.  However, the VIX closed above 20 so that may spark some buying interest. 

This was a red day all around the planet in all asset classes.  It was clearly a move to cash.  Is that a short term move or something longer lasting?  The lack of panic today could mean it is longer lasting.  If we get a bounce attempt I am not sure how far it will carry.  Will it kiss the blue channel good bye,  fill the gap down, or test the May high?  Some kind of bounce seems likely unless we have gone far enough to cause margin calls.  If we get another 90/90 down day it should be considered a warning sign of further market weakness

Bob

GLD and GDX 6/20

Interesting day in the precious medal complex after the FED meeting.  Here is the daily GLD chart.

GLD has been forming a descending triangle.  This is a commonly continuation pattern in a down trend.  GLD ended the day right near the lower line.  Is it going to break or bounce?  I can't really see anything that makes me think this pattern is a bottom.  It could bounce from here, but I would not get bullish on GLD longer term until we break the upper trend line.

Lets take a look at the GDX daily chart.

GDX is testing it recent low.  Will it hold or break down?  GDX had some big green volume bars like it was trying to bottom.  This looks like a better attempt at a bottom then GLD, but is it enough.

Both these charts are at key price levels.  Should they reverse here they would have triple bottoms.  However, I don't see any clear sign that is the higher odds play at the moment.  Gold broke down before the global government bond sell off picked up steam.  Another break down in gold could fan the deflation scare flames.  That could increase volatility across all markets.  Time to pay attention to see what happens.

Bob

Daily update 6/19

Thud.  The FED meeting was really market moving.  TLT, SPX, and GLD went down while the dollar index went up.  The breadth was 82% negative and the TRIN was 2.14.  There was a bit of panic selling today.  Will it continue or reverse tomorrow?  Here is the daily SPX chart.

SPX turned back from the .618 retrace level on volume.  It is back below the 18 SMA and the trend indicator turned back down after one up day.  This is the second time SPX turned the trend up but did not follow through on the upside.  Tomorrow is going to be an important day.  Yesterday's high is a crucial level for the bulls to conquer to regain control of the market.   If we close lower I think we are on the way to the 200 SMA.  We bounced off the 50 SMA twice so if we get there again it should break down.  The last couple of weeks look like a textbook bear flag.  It relieved over sold pressure, but never showed any true internal strength.  Below the 1597-1600 support level this rally attempt started from is 1576.  That is the intraday high from the 2007 top.  If that fails then the break out to new all time highs is at risk of being a failure.  Failed break outs are not good.  I will have more to say about what it might mean if it happens.

Sometimes the reaction to a FED day is reversed the next day.  I don't think that is going to happen this time.  However, we did have high TRIN at the close so a bounce tomorrow morning is not out of the question.  I am not sure it would last all day though.  The last few weeks they have been buying gap downs consistently.  Will they still do that?  This market has changed directions quite a few times over the last few weeks.  That makes it a bit hard to predict what happens tomorrow.  Today may have been a tipping point to the down side, but we need to see follow through.

Bob

A couple of interesting charts

A lot has been written about how consumer confidence is much lower then previous recoveries.  I think this chart does a pretty good job of explaining why.

Clearly real disposable income is not growing like it did after previous recessions.  We have had a number of recessions where the income grew at a faster rate then the last few years.   Is it any wonder many people wonder if the recession ever ended.  The Wall Street recovery did not trickle down to main street.

I thought this was an interesting chart.

This is another one of those charts that makes it look like we could be in a recession.  In the middle of 2012 companies started lowering their dividends at an elevated rate.  The pattern looks very much like it did going into the last recession.  Unfortunately the data series does not go back very far.  There is not really enough data here to conclude we are in a recession.  It is interesting that the spike occurred in mid 2012 which is the same time the ECRI claims the U.S. entered a recession.

Whether we are in a recession or not may be hard to determine.  However, it is clear this recovery has been very weak on main street and the economy is on shaky ground.

Bob

Daily update 6/18

SPX touched the .618 retrace line.  Here is the daily chart.

The zone between the two red horizontal lines (.618 - .786) is where a lot of retests fail.  If SPX closes above the top red line then odds favor a new all time high.  There were 152 new highs and 55 new lows today.  That is a lot of new lows for an up day that was never down.  Here is the current breadth chart.

The light blue lines mark the closing Nov. low and the low of the recent pullback.  The breadth indicators looked very similar at both lows.  The yellow line marks the same number of days off the Nov. low as we are today.  The breadth indicators look very different this time.  The McClellan is still slightly negative and the 10 DMA lines just got a positive cross today.   The market is displaying much less strength this time.  Between that and the new lows staying elevated I believe the rally will fail.  It does not look like the start of a new leg up to me.

Tomorrow is the FED announcement.  I don't know what Bernanke is going to do.  I think any talk of tapering the QE will cause a sell off.  I don't see any indication they would increase it.  There has been much more chatter of late of the taper.  I guess we will see what happens.


Bob

Daily update 6/17

This is a quandary.  Here is the daily SPX chart.

SPX was above the lower red channel line this morning.  I thought maybe it had it conquered, but an afternoon sell off took it back below.  SPX closed above the 18 SMA, but the MA is starting to noticeably head lower.  This is a somewhat bearish looking chart in that it would not take much to send it back down.  Lets zoom in to the 60 minute SPY chart.

SPY gapped up and over the down trend line.  The afternoon sell off sent it back down to test that line from above.  SPY rallied off that line into the close.  This chart looks kind of bullish.

We have a two day FED meeting with the announcement on Wed.  There seems to be some differences in opinions on what might happen at that meeting.  Some thing a future tapering of QE might be announced.  Others think it is full steam ahead.  Could this have something to do with why the daily chart looks somewhat bearish while the 60 minute chart looks bullish?  I am not sure we will know much until after the meeting. 

Chart practice has been updated with AKAM the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

Bob

The global economy through the markets eyes 6/17

It has been a while since I checked in on what the markets were saying about the global economy.  Lets see what Dr. Copper has to say first.

JJC broke down from a triangle pattern and is just hanging there.  I don't see any indication of a sure bottom much less an actual uptrend.  Not good.

Here is the BRIC ETF.

EEB is slightly breaking key support.  Is it a break down or just another test of support?   I guess this is a little too early to tell for sure.  It could be a false break down.  However, stocks in these countries that are supposed to be the engine of growth for the global economy are not doing well.  If stocks lead the economy it is going to be a while before we start to see better global data.  If this ETF ends up breaking down it could be a sign the global recession is worsening.

Here is a look at the steel ETF.

SLX is also testing key support.  The chart really closely mimics the BRIC ETF.  Will they both break down or is this the bottom?

Here is a look at aluminum.

JJU broke key support.  It then tested that support line from below and appears to be turning back down.

With all these ETFs heading down and breaking or testing key support it is clear the global economy is not picking up steam at the present time.  It certainly does not look like the global bond sell off is being caused by better times just ahead.  If these charts break down it would be a clear sign the global economy is about to get worse.  All these charts are backing up the deflation event scenario that gold might be predicting.  If the global economy gets worse I think it is unlikely we will be unscathed.  If not for hurricane Sandy we might already be in a recession.

Bob

Daily update 6/14

A little push back from the trend lines and the SPX daily 18 SMA.  Here is the daily chart.

SPX has been ping ponging between the 18 and 50 SMAs.  It is pretty close to the middle of that range tonight.  There were 80 new highs and 29  new lows today.  The TRIN was 1.69.  That is the first time the market was down on a high TRIN in quite some time.  Breadth was only mildly negative at 53%.  Those stats all look a little bullish for early next week.  Maybe a test of 1650 is coming up.  Here is the SPY 60 minute chart.

SPY turned back from the downtrend line.  However, after some initial selling it spent the afternoon consolidating above its 18 SMA.  This is also in the area of the 50 SMA.  It would not take much to get this going on the upside on Monday.

The bears only showed up halfheartedly today.   Either they have been vanquished or they are waiting for higher prices.  Here is the current breadth chart.

Both the 10 DMA and the McClellan oscillator are very negative.  That can provide some upside fuel.  This is the highest the 10 DMA of decliners has gotten without SPX closing below its 50 DMA in this bull market.  Most of the time the breadth gets this negative price is usually approaching the 200 DMA.  The selling is broad based, but no sign of panic.  The intraday swings are surely getting bigger.  Here is a snippet from a piece written by Mohamed A. El-Erian from PIMCO. Story

FORTUNE -- Those trading in many market segments would have noticed a subtle change last week: Volatility is on the rise, liquidity is getting tougher in certain places, correlations are morphing, and anxiety has increased. Moreover, rather than impact all market segments simultaneously, such dislocations seem to be cascading gradually from the least liquid to the more liquid ones

 I don't know what all markets he is talking about.  However, there is a lot of volatility going on in bond and currency markets worldwide.  I am sure most people know about the super volatility in Japanese stocks.  In the global markets we have today it seems volatility in one heavily traded market tends to proliferate around the world.  It remains to be seen if the volatility in Japan spreads out or not.

If the market continues higher next week it may just be some kind of retest of the high.  We will have to wait and see what kind of strength the internals show.  We could end up with a lot of negative divergences.  We have had an increase in volatility and a big increase in the number of new lows.  I just have a feeling we have not seen the end of this correction yet.

Chart practice has been updated with FSLR the stock tonight.
http://traderbob58-chart-practice.blogspot.com/

For those interested in the state of the economy here is a link with a bunch of interesting charts.
http://www.streettalklive.com/daily-x-change/1732-the-economy-in-pictures.html

Bob 

Bond secular bear market?

Both Bill Gross and Dennis Gartman are proclaiming the 30 year bond bull market is over.   Here is the long term monthly chart of the 30 year rate.

Since the grand bond bull market started in the early 80s the 30 year rate stayed below its 100 MA (white line).  Before I would be willing to say the bull market is over I would want to see it get above that 100 MA and stay there.  Lets zoom in some.

We can see a possible double bottom on the chart going back to 2009.  It also broke above the 18 SMA, went back and tested it from above and moved up again.  In the short term that would seem to be bearish for bonds.  Bonds made a slightly lower high double top over about a 4 year time span in the early 80s.  A lot has been written about the large amount of inflows bond funds have seen over the last few years.  That certainly is something that often happens at the end of secular bull market.  We saw huge inflows into equities in 2000 as that secular bull was ending.  Gross and Gartman have been around a long time and are proven to be pretty smart traders.  They really could be right.  However, the most startling end call came from the Federal Reserve Bank of Dallas President Richard Fisher.  He said "We've had a 30-year bull bond market...At some point secular markets change."  I can't recall any other FED official proclaiming the beginning or end of any secular move in anything.  He is noted to be a hawk, but still that is somewhat like Greenspan's "irrational exuberance" comment.  That is essentially somebody from the FED telling people to sell bonds.  Does that even make sense for him to do?  What is the motivation since everything the FED is doing is supposedly to keep rates down?

The current move up in government bond interest rates is global in scope.  It is actually more acute in emerging markets.  If it continues it will put a lot of pressure on all the governments with huge debt levels.  That happens to be most of the world outside of Africa.  Check out this map.

Source

With a break of the monthly 18 SMA it is clearly possible rates could continue higher.  Interest rates rising because of economic strength usually favors economically sensitive stocks.  If that really is the case then the stock market should end the current correction at some point and move higher.  When I look at the economic data as a whole and not cherry pick it is difficult to say the economy is truly getting better.  I just saw a story on TV today saying IBM was laying off again.  IBM hates to lay people off.  They only do that as a last resort when earnings manipulations no longer meet targets.  Believe me that company is very good at manipulating earnings.  On top of that the emerging market stocks are breaking down again.  Those economies are supposed to be the engine of global growth.  Why are the stocks breaking down?

The bond market has a history of being one of the first markets to know something.  Maybe it knows global growth is going to improve despite the lack of signs.  What if it is something else though?  The break down in gold makes me wonder if a deflation scare or event is coming.  In that case it could be bond investors are worried about the global economy getting weaker and making it more difficult for governments to make good on their bonds.  These two scenarios are very different.  The first would be good for stocks, the second very bad.  It is important to figure out which scenario the bond market is discounting.  At the moment it looks like scenario two to me.  The first clue that it is really scenario one should be new highs in the stock market or at least some signs the global sell off in stocks is over.

Bob

Daily update 6/13

That was interesting, but what does it mean.  Here is the daily SPX chart.

SPX bounced off the 50 SMA and lower blue channel line on strong breadth.  However, it closed just below the lower red channel line.  Will it rally further tomorrow or turn back?  If it turns back then this was probably a kiss the channel good bye move.  The trend bias is still down and the way price action is unfolding it is becoming a bit harder to turn it up.  Lets zoom in to the SPY 60 minute chart.

I put in a trend line connecting the top and the last major high.  Price poked through that line a bit today, but closed right on it.  Will price react negatively off that tomorrow or push through?  How do you predict what this market will do, LOL.

There were 342 new lows vs 66 new highs today.  That seems like an awful lot of new lows for an up day.  A lot of those happened early this morning, but the number kept climbing all day.  I see some people saying we made an important low.  I don't think it is safe to say that yet.  I would want to see the new lows drop under 50 first.  We also need to turn the daily trend bias back up and confirm it with a higher close.  It is also hard for me to consider a low without getting my extreme over sold buy signal.  I have known about that signal since 2004 and I have yet to see a correction end without getting it at least once.  With new lows so high we are definitely in a correction and not a simple pullback.  This bounce relieved over sold pressure.  If we head down again and break today's low I don't think the prior swing low will hold.  If we had tested down there instead of the bounce we might have created an oversold enough condition for it to hold.

With SPX at the lower channel trend line and SPY at a possible down trend line the ball is in the bears court.  Will they show up again or have the bulls won?

Bob

Misc. charts

Here are a few tidbits I ran across lately.

Source

The ratio of negative to positive guidance numbers are worse for this quarter then the last one.  That one was really bad.  The weak global economy is still taking a toll.

Source

It is starting to look like earnings may be rolling over.  Given the weak guidance in the first chart it does not look like the second quarter is going to turn this chart around.  The move over the last year has been by valuation expansion, not increased earnings.  The trailing 12 month P/E over the last year on the major indexes has gone up.  The NASDAQ 100 went from 10 to 18.  The SPX went from 15 to 18.  The Russell 2000 went from 33 to 42.  The Russell 2000 is clearly in bubble territory.  The others are just on the high end, but not bubbly.  It is clear the fundamentals have not kept up with the move up in prices though.

Source

This is another one of those charts that makes it look like we are in a recession.  Whether we are in a recession or not the economy has to be pretty weak.  It certainly is not helping the global economy much now.  Things appear to be getting weaker, not stronger like the pundits would have us believe.

Bob

Daily update 6/12

Down she goes.  That was some gap fade this morning.  This was another very strong breadth reversal.  After the open we had 74% of stocks positive.  At the close we had 81% negative.  That was even more severe then the key reversal day at the top.  We also had 376 new lows.  The only time we had more new lows then that during this bull market was in the Aug.-Oct. panic mini crash in 2011.  By the time we had this many new lows SPX was well below the 200 SMA.  We are still above the 50 and nowhere near the 200.  The TRIN was low again at .91.  Since the key reversal day at the top every very negative breadth day has had low TRIN.  Before that day those kinds of days had a TRIN of 1.5 or higher.  We had panic selling then.  We do not have panic selling now.  The market is acting extremely bearish and yet everyone is calm and quiet. In Daily update 5/22 I wrote

"Since I have never seen a downside breadth reversal that strong I can't really say with any certainty what it means.  They say one day does not make trend.  However, one day can be a game changer.  That is what happened on 3/10/09.  We did not know at the time how much of a game changer it was.  We won't know for quite some time whether today was a game changer or not.  All I can say is that it could be.  I would not just dismiss it out of hand until we close above today's high on several important indexes.  Obviously we would need to close below today's low to have any meaning at all."


We did not close above that key reversal day high and now we have had a second extremely powerful breadth reversal.  In addition to the big increase in new lows I am seeing a lot of falling knife type stocks.  The market is quickly falling apart.  I believe that key reversal day was a game changer.  We should not be seeing this many new lows this close to the highs.  I think we made an important high.  We may still get a retest down the road, but I do not think we will significantly top it.  The market is acting more like a bear then a bull at the moment.  Here is the daily SPX chart.

We closed just above the 50 SMA and lower blue channel line.  On 6/5 I wrote "SPY consolidated the last few hours today.  Is that a consolidation to bounce or break down from?  We are really over sold in the short term.  I have some buy signals firing tonight.  However, these are not the most reliable signals.  My favorite over sold signal that fired on the day of the Nov. and Dec. lows has not fired yet.  With the weekly VIX chart showing the 6 MA above the 18 SMA it is highly likely that signal will trigger before the ultimate bottom is reached.  I can't recall the market ever bottoming in that condition without the buy signal triggering."


We had extended price and I had some over sold buy signals just not my best one.  We did indeed get a dead cat bounce, but here we are again.  This time we do not have a blue price bar or any over sold buy signals.  We also had a low TRIN reading today despite the very negative breadth.  I don't see anything to suggest we made an important low today.  I would expect any bounce to be short lived from here.  I still think a test of the last swing low is coming soon. 

Everybody that bought that big gap down yesterday just got clubbed in the head today.  Buying dips are obviously not working as well as they were.  Will people start to become a little less inclined to rush in now?


Chart practice has been updated with MOS the stock today.
http://traderbob58-chart-practice.blogspot.com/


Bob

Daily update 6/11

Down it is I guess.  This market is amazing at closing downside gaps.  We have had quite a few over the last few weeks, but they keep closing them.  Here is the daily SPX chart.

SPX followed through on yesterday's trend flip to down.  It also closed back below the lower red channel line.  There were 257 new lows vs 37 new highs.  That is the most new lows so far in this correction.  The breadth was 85% negative while the trin was .84.  Up until the key reversal day every time the breadth was 70% or more negative the trin was 1.5 or higher.  The low trin with breadth that bad is showing a lack of panic selling.  That usually prolongs a move down.  That looks like a pretty clear rejection from the 18 SMA.  I would think we will end up testing the last swing low from this position. 

I thought this was interesting.

Global government bonds have just absorbed their seventh-worst month in 28 years, while bond funds suffered their biggest weekly redemption since the financial crisis.
 Source

Something is clearly bothering bond markets around the world.  Whatever it happens to be is not driving people to gold or equities so far.  The bond market has historically been pretty smart so when it is disturbed it is a good idea to pay attention.

Bob

Bond sell off

I have previously talked about TLT and its troubles.  There seems to be trouble in general in bond markets everywhere.  Here is a monthly chart of an ETF that is an aggregate U.S. bond fund.

AGG is breaking down below its monthly 18 SMA for the first time since late 2008.  There was a bit of sell off in late 2010 and early 2011, but that was short lived as the 18 SMA was reclaimed.  This looks like bonds are entering a bear market.  Here is a chart of EMB an ETF for emerging market bonds.

EMB also appears to be breaking down below its monthly 18 SMA.  The only other time it has traded below that MA since 2009 was in the recession scare during 2011.  That was short lived as it bounced right back. So far it appears it might be different this time.  Here is an international government inflation protected bond ETF WIP.

WIP is showing a very similar chart pattern.  It closed below its monthly 18 SMA in May and so far is continuing down.

There is definitely something going on in bond markets world wide.  Is it worries about the FED tapering QE?  Is it emanating out of the volatility in Japan?  I don't really know.  However, if it continues it will be a problem.  The global economy is already weak.  Rising interest rates will certainly not be good.  I wonder if it is the action in global bond markets that started the taper talk from the FED in the first place.  I could see how this would worry them.  The bond market is showing some fear.  Is this connected to the sell off in gold and big movements in the currency markets I have noted in past blog entries?  Will the increase in volatility in these markets spread into stocks?  There are some signs that could be happening.  Stay tuned.

Bob

Daily update 6/10

Odd day.  There were more new highs and lows then Friday.  Here is the daily SPX chart.

The 1647-48 resistance mentioned Friday night held today.  SPX touched its 18 SMA, but never made a serious attempt to climb above it.  The trend bias indicator flipped back to down today.  Therefore it did not confirm yesterday's upside flip.  I mentioned it would not take much to turn it down again.  Will it follow through on the downside tomorrow or not?  If it does then the two day bounce was of the dead cat variety and the market will likely head lower again.  A lot of traders will view that as a sell signal.  If it goes up we still have the red lines marking the Fibonacci resistance area mentioned Friday night to deal with.

Here is the latest Nova/Ursa ratio chart.

Source

The 14 SMA is now clearly negative.  This time is different then the other pullbacks this year.  This would seem to indicate we are likely in a correction now. 

Tomorrow could be an important day.  If the bulls are going to do something with the two day bounce they need to show up with cash.  A down day tomorrow will likely send us on a retest of the recent low.

Chart practice has been updated with LTD the stock today.
http://traderbob58-chart-practice.blogspot.com/

Bob

HYG vs SPX

There is a development in the high yield (aka junk bond) area.  Lets look at how the high yield ETF HYG and SPX look together.  Here is the first historical chart.

They actually track pretty well together.  The risk on trade include stocks and high yield bonds.  They both tend to cross their respective 200 MAs in close proximity in time.  Lets move up to the current picture.

They continued with that same price relationship up until now.  HYG has already dropped below its 200 SMA while SPX is still well above it.  Is SPX going to follow HYG down?  I have stated by the way the new high/low data was acting that we are likely headed to the 200 SMA for SPX.  I think the action in HYG is suggesting that might be possible.

Bob