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Trend table status

Trend

SP-500

R2000

COMPX

Primary

? 3/31/20

?- 3/31/20

Up 5/29/20

Intermediate

?- 5/29/20

?- 5/29/20

?+ 5/29/20

Sub-Intermediate

Up 4/20/20

Up 4/22/20

Up 4/17/20

Short term

Up 5/20/20

Up 5/20/20

Up 5/20/20


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 (-)

Friday, January 31, 2014

COG 1/31

This is kind of an interesting chart.


This daily chart looks a lot like a bullish cup and handle pattern.  On the right side of the cup I like to see big green volume bars dominant.  This chart looks pretty good in that department.  I think this is pausing for an upside break out. 

Bob

Bear market plan poll result

Have you prepared a plan for handling the next bear market?

Yes
  12 (75%)
 
No
  4 (25%)

This is really good news.  The majority are getting prepared now.  The market rallied to bubble valuation again so I am absolutely positive the next bear market will be severe.  To the rest of you that have not prepared a plan I strongly suggest you do.  You will be glad you did it now and not when the market is crashing. 

Bob

Daily update 1/31

It is official.  The January barometer was negative.  I am sure most have heard the saying that as January goes so goes the year.  That is not 100% of course.  It works better on the upside then the down side, but definitely has some validity.  Even on up years when Jan. is down most of the time stocks are below the Jan. low sometime during the year.  Here is the daily SPX chart.


We gapped down to test the recent lows.  Despite extremely negative breadth the dip buyers were there to support 1775 again.  The market rallied right from the open until the afternoon.  I think the last hour sell off was end of month related.  That happens a lot, but rarely seems to follow through on the next trading day.  We now have a short term triple bottom at 1775.  I believe the dip buyers will just keep buying there until the market bounces.  The 100 SMA is right here and it caught every pullback last year.  If something works people tend to keep doing it until it stops working.  So my guess is we bounce next week.  Now if that bounce makes a lower high and we come back down to 1775 then that support may not be there.  Lets zoom in to the SPY 60 minute chart.


Quite the sloppy looking chart.  Plenty of big red volume bars.  Most of the price action is near the highs of the pattern not the lows.  It seems to bounce pretty quickly when it gets to the lower end of the range.  If it gets down to that lower area and does not bounce, then look out below.  Otherwise this looks destined to go up to me.  I have seen action like this around my over sold buy signal before.  If the buy signal is not going to make a low most of the time the market keeps going down right away.  The fact that we have a triple bottom combined with that buy signal I think we have really good odds of a bounce.  It seems likely to take really bearish news to break this down at this point.  That could always happen, but can't be predicted.

The market and sector status pages have been updated.  Have a great weekend all.

Bob

Thursday, January 30, 2014

Bull/bear market indicators

There are a number of ways to attempt to decide when the market is switching from bull to bear and back.  Nothing is perfect of course as they all have had false triggers.  I believe the commonly used 20% move up or down to be a completely stupid definitions of bull or bear markets.  If the move lasts a few months then reverses and old highs or lows are attained I would not call that a change of state myself.  History shows plenty of moves of that magnitude have been reversed. 

Here are a few methods that I know about.

1. 500 day SMA/100 week SMA.  These are approximately equivalent.  However, I prefer looking at the weekly chart using the weekly bars to confirm a break of the 100 SMA. 

2. Monthly 20 MA.   I don't know if the 20 SMA or EMA is preferred.  This is a popular method.  I like the 18 SMA and look for monthly price bars to confirm a break.

3. Monthly 13/34 EMA crosses.  This one is pretty simple to use.  Either the 13 EMA is above the 34 or not.  I have not studied this one very much as I had settled on numbers 1 and 2 before I ever heard of this method.  From what little I have looked at it though it does seem to be effective.

4. 50 day SMA/200 day SMA crosses.  This is more commonly known as the golden cross (50 crossing above 200) and death cross (50 crossing below 200).  This system has the most false crosses of any of the systems I have looked at.  The only way I would use this one to determine the bull/bear status of SPX would be if I had some reason to suspect the market is going to change states.

Deeper pullbacks in the market can cause these indicators to trigger bear markets falsely.  The false triggers have all happened when valuations were much lower then we have now.  With a bubble valuation on the Russell200 index we will likely be in a full blown bear market when any of the above methods trigger this time.  On the upside numbers 1-3 are extremely reliable signaling new bull markets.  There are very few instances where the market did not follow through at least somewhat.

Bob

Daily update 1/30

Congratulations to all the AAPL poll responders that voted for it to hit 500 before 600.  Great call and it did not take long.

Over sold bounce started.  Here is the daily SPX chart.


SPX closed above the high of the last two days.  Volume was pretty good.  It was considerably higher then the first bounce attempt the other day.  Breadth was 74% positive which is not particularly strong coming from this over sold condition.  Lets zoom in to the SPY 60 minute chart.


SPY had a confirmed break of the 18 SMA this morning.  However, the volume was not particularly strong.  So far I would have to say this looks like a dead cat bounce.  We will have to see what happens if the market continues higher from here.  I will be watching for a break of that 18 SMA for a sign the market is rolling over.  That would be unusual to happen this fast as we have not alleviated the over sold condition yet.

This pullback created a very over sold short term condition.  This condition will commonly cause SPX to bounce back to its 18 DMA.  I set the 50 DMA as the target for this bounce because the 18 DMA is still above the 50.  It may get to the 18 or fall short of the 50.  We will have to see if some upside momentum kicks in.  Sometimes the second day of the bounce is bigger then the first as shorts really start to scramble.

So far this month we have had 5 down days with volume that was higher then the highest volume on an up day.  That is clearly distribution going on.  Unless volume kicks in on the upside we are likely going lower when this bounce completes.

Bob

Wednesday, January 29, 2014

BHI 1/29

This is kind of an interesting chart pattern.  Check out the daily chart of BHI.


It jumped above its 50 SMA on a surge in volume.  While the market has been busy plunging this stock has been consolidating that move.  If this stock can get going on the upside again it could test the highs from last fall and possibly break out above them. 

Bob

Daily update 1/29

Bent, but not broken.  Here is the daily SPX chart.


SPX closed fractionally below the key 1775 support level.  However, it closed a bit above the 1/27 low.  SPX tested that low a bunch of times today, but could not break it.  Volume was heavy.  There was a lot of trading that took place after the FED announcement that was exactly as everybody expected, LOL.  However, the net movement was rather muted.  Apparently there were a lot of both buyers and sellers.  Lets zoom in to the SPY 60 minute chart.


Plenty of volume in SPY today.  There is a potential double bottom.  Despite the heavy volume and extreme negative breadth readings all day the futures ended the day just 2.5 points below the open.  The bears tried, but failed to break the bull's will.  As over sold as we are in the short term it should not take too much to get a bounce going now.  If we break down here instead it is likely to cascade down.  Breaking the 18 SMA on the upside should be a good indication the bounce scenario is on.

We are over sold on support the ball is in the bull's court.  Should they show up and get a bounce going it could be fast and furious for a couple of hours as the shorts get squeezed.  My expectation is that a bounce is likely to run into stiff resistance around SPX's 50 DMA.  Jan. has not been kind to the bulls.  I have a feeling they may try to make it look less bad in the remaining two trading days.

Bob

 

Tuesday, January 28, 2014

Daily update 1/28

Over sold bounce started?  Here is the daily SPX chart.


Breadth was a reasonably strong 72% positive.  I don't think that is strong enough to rule out this is going to be a dead cat bounce.  We will have to see what happens tomorrow.  There is still plenty of room to continue the bounce.  Lets zoom in to the 60 minute SPY chart.


SPY ended the day on the upper side of the 18 SMA.  It is not quite a confirmed break, but it was enough I decided to hold some calls over night.  The futures are up in after hours.  If they are still there in the morning the bounce is likely to continue all day.  This over sold buy signal usually means there are quite a few shorts out there.  A gap up will likely force some short covering especially early in the day. 

I think the market was churning at the highs and that SPY has been showing distribution since Nov.  That leads me to believe this will be a dead cat bounce that will roll over to new lows.  If that is the case then the 50 DMA at 1813 could be significant resistance.  With the intermediate trend down SPX must clear the 18 DMA (1828) before we can conclude the bulls are back in control.  Another indication would be breadth over 80% positive tomorrow.  A day less then 70% positive would increase the odds it is a dead cat bounce.  If SPY ends up breaking back below the hourly 18 SMA tomorrow then look out below.  I think selling will pick up considerably. 

Bob

Monday, January 27, 2014

Daily update 1/27

Downside follow through.  Here is the daily SPX chart.


SPX bounced off 1775 support line after a brief penetration this morning.  At that point price was stretched in the very short term.  After a mid day bounce that got SPX back into positive territory the sellers returned going into the close.  I got an oversold buy signal today (green arrow).  That is the first one since last Aug.  You can see that green arrow on the chart.  Notice that price did not bounce right away.  After it finally bounced SPX went on to new lows.  The last three signals before that marked the day of the closing low before multi week bounces.  What will it be this time a dead cat bounce or a lasting low?   Since the 2009 low every buy signal that was followed by a strong up day the next day was a multi week low.  That was not the case earlier in the decade.  Lets have a look at the 60 minute SPY chart.


That is some straight down move the last two days.  There is plenty of room for a bounce, but there is no law that says the bounce must start right away.   Every once in a while the market will continue down significantly after one of these over sold buy signals before any bounce.  One way to play them is to wait for a break of the hourly 18 SMA before holding long overnight. 

After the close AAPL was down significantly on earnings.  Once upon a time that would likely cause a gap down in tech stocks and possibly the entire market the next day.  However, AAPL is not as important a leader as it once was so that may not be the case this time.  It is enough of a wild card to make it hard to predict what happens tomorrow though.  I will be watching for a break of the SPY hourly 18 SMA for a sign the buy signal is kicking in.

Bob

Friday, January 24, 2014

Really bullish sentiment and an overvalued market

No bull market top would be complete without very bullish sentiment.  Check out the latest NAIIM survey.



This survey has been above 90 for nine weeks in a row.  The survey started back in 2006 and in all that time the most I could find was 2 weeks in a row.  No respondent was net short during that time. There is quite a bit of downside fuel here.  Check out this chart of the II survey.

The bull/bear ratio has not been this high since 1987.  That is really, really extreme.  Here is a look at the margin debt as of Nov. adjusted for inflation.



As you can see we are very near the 2007 peak in real terms.  The raw number is about $45 billion higher.  Notice how similar the spike up is to the peaks in 2000 and 2007.  Here is another interesting way to look at the data.


This chart is really an attempt to measure the buying power in actual brokerage accounts.  As you can see we now have the lowest amount of buying power left since the 2000 tech bubble top.  Margin debt is really the best sentiment indicator there is.  It is based on what people are actually doing with their money not what they say.  People are clearly extremely bullish now.

Combined with the very bullish sentiment we have weak market internals.  Lets look at the number of stocks above their 200 SMAs.


This chart shows quite a decline from the May peak.  That pullback really clobbered the number of stocks above their 200.  Even though the market has climbed quite a bit higher this indicator never recovered.  That is why I believe the top formation started in May.  Here is a look at the McClellan summation index.


This indicator also took a dive after the May peak.  It also has not recovered.  This indicator is based on breadth and getting above 1000 is not really all that difficult normally.  However, it has gotten nowhere near that level since the May sell off.

What about market valuation?  I have commented a number of times about the Russell2000 in bubble territory.  Goldman Sachs recently commented that the market might be over valued a bit you can read it here Goldman Sounds The Alarm On Stocks.  Here are a few more articles on the topic if you want to dive in further.
Bubble Valuation Blues: GMO 7-Year Outlook for U.S. Stocks is Negative
Market Cap to GDP: The Buffett Valuation Indicator
Market Valuation Overview: Yet More Expensive
The Q Ratio and Market Valuation: Monthly Update

If you add all this up we have a possible topping chart pattern, very bullish sentiment, weak market internals and an over valued market.  Maybe all this is nothing.  Maybe the market is just going to keep motoring higher.  But what if it doesn't.  Can it hurt to develop a plan to handle another major decline?   Here is what really worries me.  Check out this chart of global growth.


The last two large declines were in 2007-8 and 2011.  At those market tops the global growth indicator was showing a lot of strength.  It is clearly not showing that same kind of strength now and has not for two years.  If the U.S. market goes down the rest of the world will also.  We saw what the debt problem in the U.S. did to the global economy in 2008.  Now there are debt problems in many places around the world besides Europe.  Some of the places I have seen articles on include China, Indonesia, Singapore, Canada, Australia, Brazil, and Turkey to name few.  Combine those together and they really dwarf the 2008 situation.  Another big drop in global stocks could easily send the global economy into recession again and make these debt problems really acute.

Bob


George Lindsay
George Lindsa
George LindsayG
George Lindsay
George Lindsay
George Lindsay

AAPL poll result

AAPL is trading in the mid 500s, which price will it hit first?
600
  11 (52%)
 
500
  10 (47%)

Pretty even split on that question.  I don't have any idea which is why I asked the question, LOL.  Unfortunately you guys did not help to clarify that situation.  I guess we will see.

Bob

Daily update 1/24

Last night I wrote "We have all heard how resilient this market is.  The funny thing about resilient markets is that the resiliency always ends at some point with a big sell off.  Those pesky humans pile into a market slowly, but always want to cash out at the same time."  Today was a good example of that.  Here is the daily SPX chart.



The volume increased considerably and the selling persisted into the close.  Every little tiny intra day bounce was sold aggressively.  It sliced through the 1808 potential support level like it wasn't there.  Same with the round 1800 level.  The dip buyers put their hands in their pockets.  I think it is safe to say we broke the lower trend line.  SPX has a blue bar so it closed below the lower Bollinger band.  Normally this means price is extended, but we just had a low volatility Bollinger band squeeze so the normal rules do not apply.  I would say we have a slight over sold condition is all.  Here is a peak at the weekly chart.


Last week we had an outside bar.  The book on that type of bar says that a close outside the range is supposed to kick off the next short term move.  This week we closed well below the low which should indicate we kicked off a down move.  If my reading of the SPY 195 minute volume is correct that we have been under distribution since back in Nov. it is likely to be a considerable down move.  The first bounce is not likely to be the bottom this time.

Since the selling persisted into the close it did not show any sign of being exhausted.  That usually means a gap up will end up retesting the low before the day is over.  Some very big down Mondays have followed big down Fridays.  I don't know if that will be the case or not this time.  Just don't be surprised if it happens. 

I am sure there will be a lot of don't worry it is just a little pullback from the market pundits.  If you are heavily long this market I think you should be extremely worried.  I mentioned several times last year that I believe the market started forming a bull market top in May 2012.  Yesterday I posted the Dow with what looks like a completed top formation.  This month the transports made a new all time high while the Dow did not.  That is commonly called a non confirmation by Dow Theory pundits which is often a meaningful sign.  I posted a link to an article by Hussman showing a bubble pattern on SPX.  If you did not look at it I suggest you do http://www.hussmanfunds.com/wmc/wmc131209.htm.  He posted a chart in that article he published on Dec. 9,2013 that showed SPX with the idealized bubble pattern and a completion date of 1/14/2014.  SPX made its closing high on 1/15/2014.  Pretty close if you ask me.  So both the Dow and SPX have patterns that indicate they may have made a major top.  I think today kicked off a bear market.  If you still have not prepared a plan for how you will deal with another major crash I suggest you get busy.  You do not want to be making major financial decisions under duress.  We won't know for sure on the bear market for a while and price will be considerably lower by then.  That is just the way it works.  I have talked about a major top since the summer of 2012.  It has taken a lot longer then I thought.  I had hoped we would not get to the bubble stage, but we did.  I am going to say something I have never said on this blog.  I think it is a good time to raise cash levels.  The market is not an all in or out thing.  You can change your exposure over time.  I am firmly convinced we have made the high of the year. 

The market and sector status pages have been updated.
Have a great weekend all,
Bob

Thursday, January 23, 2014

Did the Dow top?

A very long time ago George Lindsay documented a now famous topping pattern called three peaks and a domed house.  Here is the idealized pattern that he published.


Here is a look at the Dow daily chart.


One could argue that the three peaks part of the pattern is a bit sloppy.  The time between the three peaks and the domed house is longer then normal also.  That is likely because of QE and hurricane Sandy.  However, the domed house part is textbook.  It looks like we might have made point 23 (the top) back in Dec.  The Dow has not made a new high for the year yet.  Lindsay says that price always returns to point 10.  That would be a pretty significant decline.  What is interesting is that I did a search on the internet for articles on this pattern.  There were quite a few articles back in late 2012 and early 2013.  Many people recognized the three peaks part of the pattern.  However, I could not find a single article written this year on how the domed house part of the pattern may have completed. I guess everybody stopped looking when the market kept going up.  A lot of times obvious patterns are widely recognized and don't play out as expected.  Obvious patterns that are not widely recognized often do play out.  There is very little talk of this pattern today, but it looks pretty obvious.  I guess we will see what happens.  Stay tuned.

Bob

Daily update 1/23

Back down through 1838 again.  What a tussle this market is having.  Here is the daily SPX chart.


SPX closed below the 18 SMA, but above the lower trend line.  There was a minor penetration of the trend line during the day.  We had an outside day then an inside day then a close below the outside day low.  We had that exact combination starting on 1/9.  In that case the market rallied strongly the next day.  Will it be different this time?  Volume was heavy again today.  We have had high volume up days and high volume down days this year.  The market seems to be churning in a trading range. 
This kind of action can be indicative of a turning point.  It is certainly likely to lead to a big move when the final direction is decided.  Lets zoom in to the SPY 60 minute chart.


We have the possibility of a triple top going back to Dec.  However, price held the 200 SMA at the close.  Will this embolden bulls for tomorrow?  This is certainly an ugly chart if you like trends.  How do you predict what happens next on a chart like that?

SPX is at a key lower trend on the daily chart. but we do not have any kind of short term over sold condition.  Will the bulls try to get a bounce going anyway?  They have been trying to get SPX to go up for two weeks now.  Do they still have the desire to push it?  It is all about how people feel about things.  I don't know how to quantify that or predict it.  The down side is a different story.  If we break below that lower trend line on the daily chart I am pretty sure people will feel less bullish and will be inclined to take some profits.  We have lots of potential support levels below, but they may not amount to much if the selling gets going.  We have all heard how resilient this market is.  The funny thing about resilient markets is that the resiliency always ends at some point with a big sell off.  Those pesky humans pile into a market slowly, but always want to cash out at the same time. 

I have talked about how the volume in the SPY 195 minute chart looks like it has been largely in distribution mode since last Nov.  I saw this interesting comment from Bespoke's article Futures vs Cash: The Disconnect Is Night And Day

While it feels as though the weakness during the regular session is a new trend this year, the reality is that ever since mid-November, the regular session has been flat to negatively biased, while the gains have been coming outside of the regular trading session.  Selling during the regular session would be considered by some to be a bearish indicator from a technical perspective as it signals that investors are selling into strength.

As the trading range has progressed this month the volume is picking up.  That means emotions are picking and the release of those emotions is going to cause a big move.  This is no time to fall asleep at the wheel.  I don't think a bounce tomorrow means it safe for the bulls.  They really need to see that SPX can climb above 1850 and stay there.

Bob

Wednesday, January 22, 2014

Stock for 1/22 PHM

Lets have a look at the PHM daily chart.


PHM has been in a choppy uptrend for a few months.  It has pulled back from resistance, but is trying to find support at the Nov. peak.  If it can mount a rally from here it should test the recent high and possibly break out above it.   If that happens it could accelerate the up move.  If it breaks down here the 50 and 200 SMAs are just a bit below and should catch it.

Bob

Daily update 1/22

ZZZZZZZZZZZZZZZZZZ.  Peter Worden wrote this in his update for TC2000, "I'm as bored writing about the mixed performance of the equity markets everyday as I am trading them."  I know that feeling, LOL.  This was an inside day.  Here is the daily SPX chart.


The market sold off a bit in the morning before the buy the dip crowd rushed in.  However, the afternoon was a sideways affair into the close.  Lets zoom in to the 60 minute SPY chart.


SPY did not make it up to the resistance line today.  Breadth has been over 60% positive the last two days, but SPY was unable to break out.  Transports and the SOX were strong today and there was modest strength in small caps.  Big cap stocks notably lagged with the Dow down a bit on the day.  Lets take a peak at the current breadth chart.


Both breadth indicators have been positive since the Dec. FED meeting.  The last two years I have seen SPX climb higher on negative breadth for weeks unlike any other time in history.  So I find it rather odd that it is struggling to go up with pretty strong breadth.  Something is holding people back from bidding up the big caps.  Could it be earnings?  As of last Friday 53 SPX companies had reported.  Only 57% beat expectations even though those expectations have been lowered considerably.  The average has been 73% the last four years according to FactSet.  Past earnings seasons have started very well because many of the financial stocks report early and they have provided most of the earnings growth.  With the season off to a slow start the question becomes will it get better or worse as we go along.  I think that will ultimately determine whether we go up or down from here.

I will be watching for a break of the 1820-1850 range for the next directional move.  In the mean time
price action is likely to be sloppy.

Bob

Tuesday, January 21, 2014

Daily update 1/21

Another outside day.  This is the second outside day and last week was an outside week.  This type of price bar is pretty rare.  This market is definitely having a hard time deciding what to do.  Here is the daily SPX chart.


The 18 SMA has now risen up to 1838.  A launch off that MA or a break below it should happen fairly soon now.  Today's gap up open was very strong with 78% of stocks up in the beginning.  However, sellers took control fairly quickly and sent price below Friday's low.  The dip buyers are doing their part, but the rally chasers are being overrun by rally sellers.  Until one side gives up we will be stuck in this range.  The volume has been above the 50 day average for the last two weeks.  It is not a lack of participation that is keeping the market range bound.  There is clearly a sizable group of people selling strength and a sizable group of people buying the dip.  The question of course is which group is the smartest.  The strong open failing to break out indicates the resistance at the 1850 level is still strong.  Until we break out above 1850 or down below 1820 expect price action to be sloppy. 

Bob

Friday, January 17, 2014

Gold poll result

Do you think gold

is making a major bottom in this area and will make new highs
  11 (40%)
 
is likely to have more downside, but should find a bottom make new highs
  9 (33%)
 
has ended its secular bull market and it may be many years before making new highs
  7 (25%)

That was interesting.  Nearly equal splits there.  I think there is a case to be made for any of the three answers.  The current bear market may be over or not.  The threat of global deflation is real.  Christine Lagarde from the IMF just warned about that recently.  What will gold do in that situation? I actually have no idea what is going to happen to it from here.  I was hoping you guys would be able to help me out, but I guess not, LOL.

Bob

Joy 1/17

Lets take a look at the daily chart of JOY.


JOY recently had a golden cross where the 50 SMA crossed above the 200 SMA.  It has done some jerking around trying to decide if it likes life on the upper side of the 200 or not.  It crossed above the 50 SMA again the other day and is now deciding whether it likes it there or not.  Should JOY start up again from above the 50 it should test the recent high.  If it can break out above the highs from late last year it should complete a change of character into a primary uptrend.

Bob

Daily update 1/17

When I updated the sector status page this week there were three sectors with red bars.  Those are the first red weekly charts I have seen in many months.  the market may be losing some momentum. Lets start with the SPX daily chart.



Hmm, imagine that.  SPX closed at 1838.  Yep, markets are definitely totally random, LOL.  The 18 SMA has moved up to 1837 now so the close was just above it.  No sign of any desire to push price higher.  There are still dip buyers that rush in on any price weakness though.  They rushed in again at the end of the day when when SPX had dropped below 1838.  Lets zoom in to the SPY 60 minute chart.


SPY ended the day slightly below the red resistance line and slightly below the 50 SMA.  We are clearly having trouble establishing even a short term trend this year.  That late afternoon dip was a bit excessive for the potential bullish cup and handle pattern that appeared to be forming.  Maybe the bulls will save it next week.  They are living on the edge here now.  How about a look at the weekly SPX chart.


This was an outside week.  We had an outside day last week that was supposed to produce a trend when we closed outside that day's range.  However, all we got was a reversal after closing below it.  Then SPX closed above the outside day high and failed to follow through in that direction also.  Clearly the bulls and bears are in a struggle for control of the market.  Will a close outside this week's range set the trend or lead to another reversal?  I am hoping I am still around when it decides what to do.

The market and sector status pages have been updated.  Have a great weekend all.

Bob

Thursday, January 16, 2014

Daily update 1/16

Inside day.  Here is the SPX daily chart.


Volume declined today, but was still above the 50 day average.  Today was a very mixed day with some indexes up and some down.  The financials and transports were dinged a good bit while utilities were strong.  That is a little like risk off.  We will have to see if that continues.  Lets zoom in to the SPY 60 minute chart.


Going back to Dec. this pattern looks like a possible bullish cup and handle forming.  Will it break out or end up as a double top instead?  The answer lies in how people feel about pushing price into new high ground.  I did not really see anything today that answers that question.  Last year nothing mattered but QE.  With taper a reality I believe further upside may rely on earnings.  That may also mean that we need to get further into the earnings season for people to make up their mind whether to push price higher or not.

TLT continues to rebound.  The prognostications for 2014 that I read the most were for interest rates to go up along with stocks.  So far SPX has traded positive on the year for a few hours while rates have fallen right from the beginning.  After QE1 and QE2 ended rates fell and so did stocks.  Maybe it will be different this time and maybe it won't.  Stocks certainly are not getting off to a rip roaring start like they did the last two years.

If we break out on the upside there is no overhead resistance.   The upper trend line on the daily chart above might make a useful target.  That is above 1900 now.  On the downside SPX's 18 DMA has risen up to 1836 which is below the magical 1838 level.  A close below that MA after a test of the Dec. high is likely to bring out some sellers.  The last swing low at 1815 would be the next potential support level.  Below that is 1808, 1800, and 1775.

Bob

Wednesday, January 15, 2014

Daily update 1/15

Did you notice what happened on the close of SPX.  You had to look real close to see it.  SPX closed at a new all time high by .02 points.  It also made a slight new intra day all time high as well.  Here is the daily SPX chart.


Volume increased quite a bit today so people were piling in.  The question now is are we starting a new leg up or are we going to make a double top.  The answer depends on whether there are more rally chasers at these levels then profit takers.  Here is a look at the SPY 60 minute chart.



We reached the high today shortly after 11:00 and traded sideways the rest of the day.  For the afternoon profit takers equaled rally chasers.  In the short term the market is not over bought.  There is not much technical excuse if rally chasers do not show up and push price higher.  It would likely be a confidence issue about putting money to work in new high ground.  How do people feel?  That is not a question that can be answered technically.  We will just have to wait and see what happens.  I would say a close below the magical 1838 level would likely be an early sign of a double top and could bring on some selling.

Bob


Tuesday, January 14, 2014

Daily update 1/14

About face (again).  Would you looky there.  SPX closed at 1838.  There goes that totally random market stopping right at a key level again.  Just amazing isn't it, LOL.   Here is the daily SPX chart.


SPX closed back above the 18 SMA, but right at the key 1838 resistance level.  You might notice how similar the recent price bars look to the circled area from Nov.  Will we shoot up to new highs like we did then?  Who knows.  If it was that easy they never would have invented the saying about past performance not necessarily being indicative of future results.  There is a difference this time.  We had a bit of an over sold condition back in Nov.  Check out the stocks vs their MAs chart.


Back at the Nov. 7 key reversal down day the 10 and 20 DMA sections of the chart were around their green over sold lines.  We don't have that today.  Lets also take a look at the current breadth chart.


Back in Nov. the McClellan oscillator was down at the over sold -100 line.  This time it was only down around the neutral zero line.  Lets take a peak at the SPY 60 minute chart.


SPY ended the day right in the area of resistance that has been in place all year.  The volume pattern is showing some big red bars now indicating some distribution.  That is starting to match what we have been seeing in the 130 and 195 minute charts.  Here is the SPY 60 minute chart from Nov. for comparison.


As you can see the rally on Nov. 8 had much higher SPY volume then the sell off on Nov. 7.  That is not the same picture we have today is it.

Where does all that leave us.  We have a similar looking daily chart to Nov. that led to new highs.  However, we do not have the same oversold type condition that might entice buyers to push price.  The SPY volume pattern is not really bullish either.  Will the bulls show up and push price through resistance tomorrow?  It seems a bit doubtful given the technical evidence at hand.  I guess we will see.

The daily SPX chart is clearly showing two distribution bars this year and no accumulation bars.  The SPY 130 and 195 minute charts suggest there has been distribution since early Nov.  It seems like there might be significant down side risk if this market rolls over here.  Be aware.

Bob

Monday, January 13, 2014

Daily update 1/13

About face.  That was not exactly what I thought would happen today when the market closed on Friday.  Here is the daily SPX chart.


This was a key reversal day somewhat similar to 11/7.  There was no follow through that time.  Will that be the case again?  I don't think so.  Now with taper a reality and a new tax year I suspect there will be some more widespread profit taking this time.  In Daily update 1/9 I wrote:

"However, since the beginning of Nov. the 130 and 195 minute charts are different.  There are quite a few big red volume bars in both charts.  Even after the last FED meeting and break out to new highs there were still big red bars.  Both of these charts look a bit like distribution to me.  At the very least they are not wildly bullish at the moment."

Today was clearly a distribution day.  In that same update I wrote:

"This morning we gapped up and over resistance and above the neck line of an inverse head and shoulders pattern that had developed over several days.  That should have been a bullish development, but only the sellers showed up to the party.  Remember back in Nov. when the market was struggling with 1808.  I said that the intraday action looked like it was a lack of desire to push price more then selling resistance.  This pattern looks more like selling resistance to me.  The difference matters if resistance is not overcome and sellers swamp the dip buyers.  We did not have that problem to worry about late last year.  If the market turns down here it could result in a bigger pullback then we have been seeing over the last few months."

Today the sellers swamped the dip buyers.  SPX tried for several days to clear 1838 and failed.  Even the old gap up and over resistance trick failed twice.  I think it is probable we will see more downside.  First things first though SPX closed below the 18 SMA, but needs to close below today's low to confirm the break.  That would also confirm the reversal day.

The bears fired a shot today.  How will the bulls respond?  A bounce tomorrow morning would not be surprising given the move down today.  It will be important to get back above the 18 SMA to get back in bull mode. Option expiration week has a strong upside bias statistically.  However, when it is down it can be down big.  Something to keep in mind if we keep going down this week.  Prior support levels are 1808, possible round number 1800 and the major level of 1775. We obviously have 1838 above as resistance.  There may some at 1830 now, but I can't be sure of that.  Despite how bullish the market has been for the last two years things may have changed.  Given the action since this year started the bulls need to prove themselves.  SPX has not traded positive on the year yet.



Bob

Friday, January 10, 2014

Bubble poll

Do you believe the stock market is in a bubble?
Yes
  15 (65%)
 
No
  8 (34%)
 

I did not expect the result to show so many thinking we are in a bubble.  I don't think there is any doubt about it.  I guess we will see how things work out.

Bob

HOT 1/10

Here is the daily chart of HOT.


HOT had a surge on volume and has pulled back to the 18 SMA.  It appears to be finding support here which could set up a test of the highs and possibly beyond.

Bob

Daily update 1/10

Resuming the uptrend?  Here is the daily SPX chart.


The daily chart has a green bar so the short term trend should be up once again. It did not close above yesterday's high yet.  We need to see that happen for confirmation.   Next week is option expiration which has a strong upward bias.  Yesterday's low of 1830 is the downside pivot in case it reverses next week.  Check out the TLT chart.


TLT really liked the employment report miss.  It broke the upper trend line on a volume surge.  There are probably enough bond shorts to cause a significant move up.  The utilities surged along with other rate sensitive things like home builders and REITs.  We will have to see exactly what affect this might have on stocks longer term.  When QE1 and QE2 ended bonds went up and SPX went down.  I don't know if it will be different this time or not. 

The market and sector status pages have been updated.
Have a great weekend all,
Bob

Thursday, January 9, 2014

Daily update 1/9

Are we getting somewhere?  Today was an outside day.   That can mean the emotions are picking up and a directional move may come soon.   Here is the daily SPX chart.


This is day five of 1838 holding as resistance.  SPX ended the day right there.  I have commented numerous times in this blog about the market gapping up and over resistance when it can't get through it during the day.  I can't even remember the last time the trick did not work.  Sellers emerged on the open and took price below yesterday's low before the bulls stepped in.  This leaves us with something we can work with.  Closing outside today's range 1830-1843 should kick off the next short term trend.  Check out the SPY 60 minute chart.


I have added another trend line across the recent lows.  SPY broke the older lower trend line and rallied back to it late in the day.  It then turned down just a bit into the close.  Notice the big red volume bar from this morning.  It is odd in that the highest volume of the morning usually occurs in the first hour.  That red bar was the second hour when SPY was probing below yesterday's low.  I want to show you the 130 and 195 minutes charts also tonight.



When looking at volume it can be helpful to look at multiple time frames.  The picture can change.  I commented on how the 60 minute chart has been clearly big green bar dominant which is bullish.  However, since the beginning of Nov. the 130 and 195 minute charts are different.  There are quite a few big red volume bars in both charts.  Even after the last FED meeting and break out to new highs there were still big red bars.  Both of these charts look a bit like distribution to me.  At the very least they are not wildly bullish at the moment.  Lets take a look at the TLT chart.


I redrew the upper trend line based on the recent peaks (tnx Herm for showing your chart).  TLT is at the upper line again.  Will it break out or be turned back? 

This morning we gapped up and over resistance and above the neck line of an inverse head and shoulders pattern that had developed over several days.  That should have been a bullish development, but only the sellers showed up to the party.  Remember back in Nov. when the market was struggling with 1808.  I said that the intraday action looked like it was a lack of desire to push price more then selling resistance.  This pattern looks more like selling resistance to me.  The difference matters if resistance is not overcome and sellers swamp the dip buyers.  We did not have that problem to worry about late last year.  If the market turns down here it could result in a bigger pullback then we have been seeing over the last few months.

Bob

Important

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