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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/19

? 2/28/20

Up 6/28/19

Intermediate

?- 3/20/20

Dn 3/20/20

?- 3/20/20

Sub-Intermediate

?- 3/26/20

?- 3/26/20

?- 3/25/20

Short term

? 3/26/20

? 4/1/20

? 3/24/20


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, February 28, 2014

Facebook poll resuts

Do you think Facebook is a good long term investment?

Yes
  8 (47%)
 
No
  9 (52%)
 

Wow, another split vote.  I am going to have to side with the no camp here for several reasons.  Zuckerberg stole the idea from the Winkelvoss twins.  Then he crapped all over his friend that put up the original money to start the company.  To me that shows very bad character is not somebody I would trust with my money.  All ad revenue based companies must keep growing their users.  Over time the users see the same old ads and click revenue declines.  That is why Google has expanded into other things like Android.  They basically got the majority of the search business and their revenue from ads flattened out.  The same thing is going to happen to Facebook if it has not already started.  The difference between the two companies is Google started looking for completely different sources of revenue and has not wildly over paid for new assets.  I believe Facebook's purchase of Whatsapp for $19 billion will one day be looked at as one of the stupidest things any CEO ever did. Most of the 450 million users either use Facebook already or at least know about it and choose not to use it.  My expectation is that Facebook will either fail or boot Zuckerberg out some day. 

Bob

Daily update 2/28

SPX closed slightly above the prior intraday high.  It was not without drama though, LOL.  After rallying strongly in the morning it sold off hard in the afternoon.  It dropped all the way back to 1849 before rallying into the close.  I commented yesterday on the new closing high that it was not a strong day.  It was an even weaker day today.  The strongest broad based ETFs on this rally have been QQQ, IWM, IBB (biotech) and SPY.  All but SPY closed red today.  High profile stocks TSLA, NFLX, GOOG, PCLN, and FB all closed in the red.  Here is the daily SPX chart.


That still looks like a short term top brewing to me.  There is clear resistance still.  Volume was up considerably today.  There were 229 new highs.  While better then yesterday that is still a low number.  There were only 3 days this entire month over 200 despite the big move up.  On the day of the intraday all time high in Oct. 2007 there were 351.  This still looks like a final blow off move to me.  I guess we will see how it ends.  Here is the SPY 60 minute chart.


Look at all that volume in the afternoon.  A lot of buying and selling there.  SPY touched the 50 SMA in the afternoon where the selling stopped and the buying began.  Bulls are clearly buying at that 50 SMA.  Bears are clearly selling strength above SPX 1850.  We are not going to go anywhere until one of those groups gives up.  The question that must be asked is who is doing what here.  At different points in time all groups buy dips.  There really isn't much we can infer from that.  However, there are not many people that sell into strength at bull market highs.  Hint.  It is not the retail investor AKA dumb money.  Persistent afternoon selling is the work of the pros.  Are they smart to sell here?

I don't know what is going to happen on Monday.  I am pretty sure the bulls are going to lose this battle soon and this market will do an about face.  I will be watching for a break of the SPY hourly 50 SMA to load up some shorts.  I believe when this market turns it is going to turn sharply.  I think March has more bull market/bear market turning points then any other month.  October is another very important month in that regard.  Stay tuned.

I have been reading about credit market problems in China since at least the middle of last year.  I know the central banks had to inject money into the financial system in June, Dec. and Jan.  Today I saw this blurb from Mike Larson at Money and Markets.  He was all over the U.S. credit problems in 2007 before they became obvious to everybody in 2008.

But one key market is sending out warning signs — the kind you should be paying attention to. That market is China.  A lot of the economic data and information coming out of the country is opaque, confusing, and in some instances, of questionable validity.  But you can observe market prices in the interest rate and interbank markets there, and get some clues on how things are going from them. With that in mind, we've seen a real blowout in something called the two-year swap spread over in China. Without getting too deep in the weeds, suffice it to say this is an indicator of financial industry stress. It started going haywire here in the U.S. before the great credit crisis, stock market collapse, and recession of 2007-2009 — servicing as an excellent early warning sign.  In China, that spread just surged to 121 basis points. That's the highest level for the seven years Bloomberg has been tracking.  Two other troubling indicators: Bad loans in the Chinese banking system just jumped to 592 billion yuan ($86.4 billion) — the highest in five years. Plus, the spread between yields on corporate bonds and on underlying government securities is widening steadily to levels we haven't seen in the past couple of years.  The question going forward is whether or not the weakness in select emerging markets — and the emerging credit market tremors I'm seeing in China — will be enough to upset all global markets.

The answer to the last question is absolutely yes.  The U.S. and Europe have been working together to survive their debt problems until somebody in the east blows up.  Europe wants to default on their massive debt, but they want somebody else to blame it on.  I am sure they will do whatever they can behind the scenes to ensure China or some other emerging market country blows up and destabilizes the global economy.  Now is the perfect time while both the U.S. and Europe have some economic growth.  I suspect this is exactly why the market is topping now. 

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

Bob

Thursday, February 27, 2014

Daily update 2/27

SPX closes at a new all time high.  It is now about  6 points above the Dec. 31 close.  Wow, quite the rally over the last two months.  Here is the daily chart.


Volume was lower today then yesterday.  There were only 134 new highs.  That is an embarrassing performance for bulls.  Price is still extended from the 18 SMA.  That means we still have a short term overbought condition.  I wonder how that is going to work out.  Lets take a look at the SPY 60 minute chart.


Volume has been dwindling the last two days.  Price held the 50 SMA and is retesting the high.  We will see what happens now.  Here is a look at the 195 minute chart.


I find it interesting that we spent the last 3.5 days inside the bar marked with the arrow.  The lack of volume the last two days is very clear on this chart.  Even the morning bars had light volume.  Today is the first day the last bar closed above the morning bar this week.  That almost didn't happen.  There was a mad buying panic the last few minutes to ensure the new high close. 

This was not a strong day despite the new high.  I once read some research that said when the Dow makes a bull market high there are usually about 6% of stocks making a new high.  I just looked at SPX and saw there were 32 new highs today.  The magic number of 6%.  The Dow, transports and financials are still well below their highs.  Can SPX stay above 1850 long enough for those indexes to reach the highs?  I seriously doubt it.  This is exactly what the final bull market high usually looks like.  A low number of new highs and diverges amongst the indexes.  SPX may creep a bit higher over the next few days, but I expect it will soon roll over and tank.

Bob

Wednesday, February 26, 2014

Inverse funds

Take a look at the inverse small cap and QQQ ETF weekly charts.



That is one really big volume surge in these inverse ETFs.  Apparently some people think the market is going down.  Are they smart or dumb?

Bob

Daily update 2/26

Another day another failure.  Here is the daily SPX chart.


In the last three days SPX has climbed above 1850 on seven different occasions, but could not stay there.  That is pretty stiff resistance I would say.  I wonder how many more tries it will take to get a decision.  Small caps were strong today.  I believe that was caused by an article in the USA Today money section talking about how well small cap stocks have done on this rebound.  I think that buoyed the entire market.  Will that kind of support be there again tomorrow?  Lets zoom in to the SPY 60 minute chart.


SPY dipped below its 50 SMA a couple of times today, but failed to stay there.  That MA is moving up into a position where it will be harder to stay above it and not break out.  That should help to force the market to make a decision here soon.  The volume pattern remains bullish with mostly big green bars, but the market has not made any upside progress.  Notice the pattern of afternoon selling the last four days in a row.  Every day we ended below the 18 SMA only to bounce again the next morning.  The afternoon crowd is supposed to be smarter money then the morning crowd.  They seem to be smart enough to stop selling before the market breaks down.  How many hits to the head in the afternoon will the morning dip buyers take and keep showing up?  How much more stock do the afternoon sellers want to sell?  I don't have the answer to either question, but those are the questions that will determine whether we go up or down from here. 

I would think that some day we will either close above SPX 1850 or below the SPY hourly 50 SMA.
Until one of those two things happen the moves are just market noise.

Bob

Tuesday, February 25, 2014

Daily update 2/25

SPX crossed above 1850 twice today, but failed to stay there.  Here is the daily chart.


Today was a doji candle and an inside day.  The market is showing indecision at major resistance.  How much longer is it going to take to resolve this?  We are still extended from the 18 SMA so we are still short term over bought.  The 18 MA is still below the 50.  Not much new here.  Lets zoom in to the SPY 60 minute chart.


Today SPY made a double bottom right at the 50 SMA.  Will this launch us to the upside tomorrow or will it end up breaking down through the MA?  I think we have done enough testing here that a downside break of the 50 SMA will initiate a pullback. 

The bears were unable to capitalize on yesterday's failed break out.  At the same time the bulls were unable to take advantage of the moves above 1850.  We might need a catalyst to break the stalemate.
The trouble with the upside break out is the market will still be short term overbought.  That may make people hesitant to buy in.  A new closing high that fails could provide a sell catalyst.  An upside break out needs to hold long enough for both the Dow and the transports to get to new highs.

TLT had a good day today and looks to be resuming its rally.  Will stocks be able to rally along with bonds?

Bob

Monday, February 24, 2014

TLT 2/24

Lets have a look at the daily TLT chart.


TLT had a nice rally to start the year.  It has pulled back some, but appears to be trying to form a short term double bottom in this area.  If it can hang in here it should bounce to new rally highs.  A move above yesterday's high might be enough to get the bounce going.

Bob

Daily update 2/24

SPX broke out to a new all time high, but failed to stay there.  Here is the daily chart.


I mentioned Friday I thought it would take some really good news to break out and move higher.  Today the bulls tried to break the market out without the really good news.  The end result was a failed break out.  That is not much of a surprise.  Just look how far price is above the 18 SMA.  You have to be pretty brave to buy a breakout of two month resistance when price is stretched that far in the short term.  If we had some really positive news it might have made a difference.  Without that people just were not willing to do it.  Lets take a look at the SPY 60 minute chart.


There was a burst of buying this morning that drove SPX to a new high.  That caused some short covering and sucked in some new long break out players.  After that initial buying dried up mid day the market started drifting lower in the afternoon.  The sell off gained some momentum going into the close.  SPY is still above the 18 SMA, but that is not a very pretty price pattern for bulls. 

SPX getting to a new high fulfills the objective set when the VIX got rejected at its 200 week SMA.  I was not real sure it would get there, but it did.  Now we have a down Jan. barometer and a failed break out to new highs.  We also have the Dow and the transports lagging SPX and are still significantly below their highs.  If this market heads down now I think it could turn with a vengeance.
The last four bars already looked like a top forming on SPX.  Today only made it look even more like a top.  I think tomorrow is decision day.  If the bulls do not get SPX to close above 1850 (preferably more cushion then that) I think we will head down.

Bob

Friday, February 21, 2014

Dow comparison chart poll response

Have you seen the chart that compares the current Dow to the 1929 crash pattern?

Yes
  14 (60%)
 
No
  9 (39%)

Most of you have seen it.  That is really wide coverage for something like that.  I did not show it on the blog because I don't believe in comparison charts.  I have seen many over the years and outside of the three peaks and a domed house pattern I can't think of one that actually played out as the pattern suggested.  The recent rally has messed up the pattern anyway.  However, I think there is still considerable risk of a sizable down move here.  Stay tuned.

Bob

WDC 2/21

Lets take another look at the daily chart of WDC.


The green arrow marks the day I mentioned this stock here.  As you can see it has rallied off the 50 DMA.  It has now made it back to the .786 retrace level.  This is the last area of resistance between here and the high.  I don't really like this price pattern much.  It may stop in this area.  In addition STX is not doing well.  It is in the same business so if you are long WDC watch closely.  If it gets through the red line odds favor a test of the high.  At this point I don't believe it will get much further up then that.  This looks like a top forming to me.

Bob

Daily update 2/21

It looks like 1840 resistance is just plain tough to crack.  Here is the daily SPX chart.


The market tried to rally today, but kept getting whacked back down a bit.  Early in the day the dip buyers dutifully bought the whacks and sent SPX to a new high for the day.  The bears struck again and it was rinse and repeat until the afternoon.  The bears started whacking before SPX got back to a new high for the day.  The market sold off going into the close as the dip buyers put their hands in their pockets.  SPX has been trying to conquer 1840 for almost two months now.  At this point I think it will take some really good news.  Bad economic news in the hopes of more QE is not going to cut it.  That only seems to work up to 1840.  Look at those daily bars.  If that chart was upside down I would say there was about an 80% chance of making a low.  All that is needed to complete the pattern is downside follow through.  Lets have a look at the SPY 60 minute chart.


On this time frame most of the big volume bars are green.  There is no shift to distribution here.  However, price looks like a possible double top.  SPY closed below the 18 SMA, but it does not have a confirmed break.  This chart looks in position to turn down.  The power is up for grabs.  Lets have a look at the 195 minute chart.


There is a couple of big red volume bars on this time frame.  The pattern is mixed and not clearly bullish like the 60 minute chart.  We ended the day with the first red price bar since this rally began.  This chart is also in position to turn down.  Lets have a look at the SPX weekly chart.


We had a doji bar this week.  The last time we had a doji bar at this level we sold off hard the next week.  Will it be different this time or not?

We still have clear resistance at 1840.  The intraday charts are starting to turn down.  If rally chasers don't show up soon we are likely to turn down again.  Any lower daily close is likely to set it off.

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

Bob

Thursday, February 20, 2014

Daily update 2/20

We got the bounce as expected.  What now?  Here is the daily SPX chart.


SPX made back most of the loss from yesterday, but not all.  Until we close outside yesterday's range I don't think we will know much.  Lets zoom in to the SPY 60 minute chart.


Dip buyers rushed in to buy the much worse then expected Philly FED data.  I guess the old theory that bad economic data is good for QE still exists in some people's minds.  Once price reached the prior resistance level the market just sat around.  This area has been resistance all year.  It is not clear to me that all of a sudden we are now ready to break out above it.  The bulls need to show us they are willing to push price higher.  We ended the day above the 18 SMA, but we spent several hours above it in the afternoon and could not move higher.  Falling back below it is likely to bring on some fresh selling pressure.

The Dow climbed back above its 50 DMA today, but the transports did not.  No clear picture there yet.  The dip buyers showed up today, but what has been missing all year is rally chasers above 1840. Will they show up now or not?  My guess is not.  I think if we start down again tomorrow it is likely to keep going.  However, SPX must close below yesterday's low to confirm that downside reversal.  I want to see a true thrust up and over resistance to get any confidence we are going higher.

Check out this chart of the Nova/Ursa ratio.

I have been watching this chart for nearly two years now and I have never seen anything like this.  The normal range is +-25-30 on extremes.  We just had a swing of -50 to +50.  Are people's emotions running higher or what.  We went from extreme fear to extreme greed in a very short time.  This may be nothing, but it could also be a sign of instability amongst investors.  Are they feeling some uncertainty now that QE is being tapered?

Bob

Wednesday, February 19, 2014

Daily update 2/19

The test of the all time high in SPX ended with a key reversal day.  Here is the daily chart.


We started with a gap down which the bulls came out to buy and drove SPX up to within 1 point of its all time high close.  Sellers took over and won the rest of the day.  That action means there was people just waiting for that high to be hit to sell.  You might recall at the low I mentioned how the futures retested a low by 1 tick and reversed sharply.  That meant there were buyers just waiting for that retest and that was very bullish.  The sharp rally back to the highs was the result.  We just had a very similar reaction in the opposite direction.  People did not wait to see if others were going to buy the market at the highs.  They just sold.  There were only 154 new highs which is extremely low when at all time highs.  Lets take a peek at the SPY 60 minute chart.


Look at the volume that came in today.  There were several large red bars.  SPY has a confirmed break of the 18 SMA, but is still above the 50.  This is the first distribution pattern we have seen since the low.  We ended the day with blue bars indicating price was below the lower Bollinger band.  It would not be surprising to see a bounce in the morning.  I also want to show the 195 minute chart tonight.


The two big red bars today confirm the shift to distribution the 60 minute chart shows.  That is not what bulls want to see when testing the high.

SPX testing the high before a pullback changes things considerably.  If this market turns down for real it just might keep going.  The Dow closed back below its 50 DMA without ever confirming the break above it.  The transports were already below their 50 and took another hit today.  The financials and small caps were also hit pretty hard.  Follow through is key.  I believe we will get that even if it is not tomorrow morning.  I suspect there will be plenty of people looking for strength to sell into. 

With both the Dow and the transports below their 50 DMAs the retest rally could be over.  If the Dow follows the script from the three peaks and a domed house pattern I showed last night we could be in for a rather significant move down.  Over the last two years none of the lows formed when the VIX crossed its weekly 200 SMA have been broken.  I think when that does happen it will unleash some significant selling.  If we head back down watch that early Feb. low as it was formed that way.  If we break that a cascade lower seems likely to happen. 

Everything seems to be consistent with a bull market top.  The over valuation and high margin debt make the risk of a major down move very high.  I think this is a good time to make portfolio adjustments to lower risk. 

Bob

Tuesday, February 18, 2014

IR 2/18

Lets have a look at the daily chart of IR.


IR had a rather large gap down late last year.  It filled some of that gapm but has pulled back again.  It is currently testing its 50 DMA from below for the second time in the last few days.  This looks like an important decision point.  A break above the 50 DMA could send IR up to the 100 SMA or maybe further up into the gap.  A failure here at the 50 could send IR back down to test that Dec. low.

Bob

Daily update 2/18

Very mixed day.  The Russell2000 was up over 1% while the transports were down over 1%.  Here is the daily SPX chart.


SPX traded in a narrow range today.  Breadth was strong and there were over 200 new highs.  Despite strong internals SPX could not stay above Friday's high.  The intraday price action suggests there was simply a lack of people willing to push price higher.  That usually gets resolved with a news event or a pullback deep enough to entice buyers again.  Lets zoom in to the SPY 60 minute chart.


Volume has clearly contracted on this rally.  Sometimes people get tentative on buying when you get close to the high so the market stalls.  I always hate this situation.  It could stall for a few days then blast off.  It could pullback a bit for a few days then lift off again.  It could also just top here short of the high and roll over.  What will it be this time?

I have no idea how this will play out.  We have a bunch of warning flags that we could have started a new bear market or at least a serious correction.  On this retrace rally we have both the Dow and the transports lagging along with a few other indexes.  The Jan. barometer was negative and widely publicized.  Sometimes that can turn out to be a self fulfilling prophecy.  The transports dropped back below their 50 DMA today.  The Dow is barely above its.  One down day and it could be back below it.  If that happens will anybody notice or not.  That could put a damper on buying.  Lets take a closer look at the Dow and the three peaks and a domed house idealized pattern.


Now the current Dow chart.


So far it still looks like it could be following the idealized pattern.  If that is the case it should be headed for a break of last June's low when this bounce ends.

So where does that leave us?  The only thing I know for sure is that until all the major indexes make new highs and stay there this looks like a bull market top.   In the short term we had a very strong rally.  However, final blow off moves and the start of a new leg up can look very similar.  Because of all the warning signs on the way down and the way the Dow and transports are lagging on the way up I believe this to be a final blow off move.  Detecting the end of that kind of move is tricky.  A close below today's low could start a pullback.  However, until SPX gets below its 50 DMA the bulls may rush in to buy the dip.  A pullback here does not rule out SPX still doing a full test of the all time high.  Like I said it can be tricky.  I think we need to take it one day at a time and see what happens.

Bob

Friday, February 14, 2014

Twiter use poll

Do you use twitter?

Yes
  0 (0%)
No
  30 (100%)

I am a bit surprised that nobody fessed up to using it.  I wonder how many closet users there are, LOL.  I don't use it myself, but I did expect to get a few yeses.  I guess Twitter still has a big untapped market out there.

Bob

Daily update 2/14

Bounce continues.  Here is the daily SPX chart.


That is one heck of a V bottom.  SPX closed 11 points from its all time high.  That close to the high you have to think it will act as a magnet and we will get there next week.  However, breadth indicators are getting very over bought and price is getting extended from the 18 SMA.  I am not too sure there will be a lot of buyers lining up to buy the highs.  Some short covering could push price higher for a bit.  The lagging indexes continued to lag today.  There were 150  new highs which is the best yet.  However, that is still low with price this close to the high.  It was barely better then yesterday.  If we break out to a new high we could see a surge that day.  However, we need to see days over 200 regularly if the market is going to continue higher in a sustained fashion.  Lets have a peak at the SPY 60 minute chart.


SPY closed the last remaining gap today.  It remains very extended from the 50 SMA.  At the moment nothing matters.  The market seems to have an agenda to get to the highs.  There is no significant resistance between here and there that I can see.

I don't know how this is going to work out.  SPX is within spitting distance of its high, but the market is in an extreme short term over bought condition.  We clearly have lots of momentum at the moment.  I want to ride it as long as I can, but I don't want to overstay.  This looks like a final blow off move to me.  I definitely do not want to step in front of it and try to fade it.  You never know how far it will carry.  Will we make new highs before SPY breaks the hourly 18 SMA?  Whichever happens first pay very close attention to how the market reacts.  If this is a blow off move it could reverse pretty strongly. 

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

Bob 

Thursday, February 13, 2014

Daily update 2/13

Bulls bought the opening gap down.  Here is the daily SPX chart.


SPX closed above yesterday's high and the .786 retrace level.  In theory that means it should test the all time high.  The higher close confirms the upside break of the 50 SMA.  Breadth ended the day strong and new highs were 140.  That is still a low number, but is improving.  This is a very aggressive retest.  If we keep going at this pace we will be very over bought when we get to the highs.  That will increase the odds the retest will fail.  Yesterday was a doji bar and today was a bullish engulfing bar.  That should be a bullish combination.  Lets look at the SPY 60 minute chart.


The big gap down this morning was bought right out of the gate.  There is one more gap above I marked with a red line.  It looks like it wants to close that gap to me.  There might be some resistance at the line, but there has been no resistance insurmountable so far.  It only seems to slow the market down for a few minutes.
 
SPX is only 20 points from the highs now.  At the rate this market has been moving it could do that in one day, LOL.  I can believe that everybody that wants to put money to work wants to get it done before we get to the highs.  At the moment I think we need a close below the 50 DMA to get bearish again. 

The Russell2000 caught a pretty good bid today.  The Dow and the transports are still lagging.  The financials were lagging a bit also.  After two 90 percent down days I think it is important all major indexes get into new high ground to be able to say the market is out of danger.  I suspect that won't happen, but we will see.

Bob

Wednesday, February 12, 2014

Daily update 2/12

Pause day or top?  The last time I asked that question it was a pause day.  We are in a different position this time.  Here is the SPX daily chart.


SPX poked its head above the .786 retrace line, but failed to stay there.  That left us with a doji bar indicating indecision.  Notice all that trading activity in Jan. that occurred above that line.  That is quite a bit of overhead resistance.  As extended as we were in the short term a pause here had high odds.  We will have to wait and see if it turns into a top or not.  Lets have a look at the SPY 60 minute chart.


SPY hit its high early this morning then traded sideways the rest of the day.  This is typical of price action on a topping bar.  It needs more confirmation though.  SPY is still pretty far away from the 50 SMA.  I am not too sure people will be willing to push price just yet.  The red line that marked the 1/24 big gap down held as support today.  I don't know if that was coincidence or not.  If it continues to hold that line I would think the rally would continue at some point.

If something is going to make a lower high the .786 retrace level is a common place to do it.  This is an important juncture.  A close above today's high should set SPX up for a test of the all time high.  A close below today's low may be a sign that resistance is holding and a pullback is likely.  Even though SPX closed above the 50 DMA yesterday it needs confirmation with a higher close.  It did not get that today.  If it drops back to test the 50 before getting that higher close the odds favor it will drop through.  We still have several key indexes below their 50 DMAs like the Dow, transports, and the Russell2000.  I would expect a lot of selling to be unleashed if SPX drops back below its 50.  There were 112 new highs today which is the best day yet.  However, that is a very low number this close to the highs.  The market is in a fragile position here.  The power is up for grabs.  Do the bears pounce or do the bulls keep on buying?

Bob

Tuesday, February 11, 2014

Daily update 2/11

That was interesting.  Here is the daily SPX chart.


That was one sharp rally.  The new red line is the .786 retrace level.  Above that line and SPX should test the all time high.  It almost touched it today before pulling back a bit into the close.  That line happens to fall at the bottom of most of the trading activity in early Jan.  That should be pretty strong resistance.  Lets zoom in to the SPY 60 minute chart.


That is an equal and opposite reaction if you look at price and the 50 SMA.  We went from very over sold to very over bought on this time frame.  I would say the odds are pretty high it goes sideways to down from here for a bit.

There were only 92 new highs today.  For a big move this close to the highs that is pretty pitiful.  The lack of new highs combined with some important indexes lagging suggests this is just a retest rally destined to fail.  SPX has made it up to the .786 retrace line which is a very common place to form a lower high.  This rally is completely untested as there was no serious selling pressure at any time during market hours.  We will have to see what happens when true selling pressure shows up.

This is not a very convenient price pattern to say exactly what means the bears are back in control.  The short term price is very extended into resistance which means a pullback is likely.  However, the bulls could rush in to buy a dip.  On the flip side price could really collapse.  We had two 90 percent down days which suggests a deep correction or bear market has started.  The Jan. barometer was down and well publicized.  It is possible that as soon as the market starts down on profit taking that some serious selling pressure comes in.  My best guess at the moment is that a close back below 1800 would be a sign the bears are in control.

I think this bounce is the last opportunity to take defensive portfolio actions.  Tthe risk of some serious down side looks high to me.  Very fast moves like this rally are most often counter trend moves.  They get people all excited only to be completely retraced.  We will see what happens this time.

Bob

Monday, February 10, 2014

Daily update 2/10

Light volume day.  Was it the pause that refreshes or is the rally running out of gas?  Here is the daily SPX chart.


SPX closed fractionally above the 18 SMA today.  Notice the intermediate trend indicator flipped to up today.  It needs confirmation with a higher close tomorrow.  Lets have a look at the SPY 60 minute chart.


You can see that SPY volume was really light today.  At the close it was a bit above the red resistance line, but it is not enough to say it is conquered though.  There were only 66 new highs today and Friday saw 71.  Those are very weak numbers.

SPX closed just below 1800 and at the 18 DMA.  The SPY is showing resistance in this area.  What happens now?  I have no idea.  This is an area where the market could roll over now that the over sold condition is worked off.  If sellers don't show up we will continue to drift higher.  This is a weak rally in that not all indexes are rallying strongly.  The transports and the Russell2000 are lagging.  The COMPX is leading the charge.  Most other indexes are somewhere in the middle.  Nobody can predict when, where, or if sellers will return before SPX makes it back to the highs.  This bounce has not seen any real selling pressure during market hours so it has not been tested in any real fashion.  I am in watch and see mode.  A close below today's low of 1791 could be a sign the bears are back in control.  If the market continues up tomorrow we are likely to see SPX reach the 50 DMA at 1809 soon. 

Bob

Friday, February 7, 2014

FSLR 2/7

Check out this daily chart of FSLR.


FSLR has been pulling back for a few months now.  It is now trying to find support around the 200 SMA.  If succeeds it might be ready to resume the uptrend.  It rallied strongly off the 200 the last time it touched it.

Bob

SPX poll result 2/7

With the Jan. barometer down, do you think SPX ends the year

up more then 10%
  1 (3%)
 
up less then 10%
  8 (27%)
 
down less then 10%
  4 (13%)
 
down more then 10%
  16 (55%)
 

That is significantly different then when I asked the question last Dec.  Here is the result from that poll.

Be up 10% or more
  3 (20%)
 
Be up less then 10%
  8 (53%)
 
Be down less then 10%
  0 (0%)
Be down more then 10%
  4 (26%)

We went from 73% in the positive category down to 30%.   I guess we will see how things work out.  

Bob

Daily update 2/7

Now that is an oversold bounce!  Here is the daily SPX chart.


SPX has a green bar and it closed just below the 18 SMA.  Both breadth indicators have positive crossovers today.  The oversold condition has been alleviated and the market is now neutral.  Volume was higher then yesterday and the breadth was slightly stronger also.  I think this should have pretty much flushed out the weak hand shorts now.  Lets take a look at the SPY 60 minute chart.


We ended the day in the area of the late Jan. high.  There was clearly resistance there back then.  Is it still there now?  Beats me.  SPY volume was higher then yesterday so some people were piling in.  The 18 SMA has crossed above the 50.  I think the 50 SMA is a good bull/bear line for now.  After the explosion the last two days any dip that stays above the 50 should be a buying op.    Check out the weekly chart.


That upper trend line is a line connecting the earlier tops since 2009.  It was resistance for months last year before SPX broke out to the upside.  This pullback has come back to test that line.  SPX responded with a bullish looking high volume hammer candle.  If we close above this weeks high next week that would be technically bullish.

We got the oversold bounce that put the market back into a neutral state.  What happens now?   This is quite the dilemma to me.  We got two 90 percent down days that indicate investors are very much on edge.  The Jan. barometer was down and everybody knows that.  We had a Dow theory non confirmation in Jan. as the transports made a new high while the Dow did not.  The Dow has formed what looks like a three peaks and a domed house topping pattern.  All that should be bearish.  On the flip side we have the VIX spike that has led to new highs every time it has happened over the last two years.  That spike resulted in a potentially bullish weekly chart.  I think there are enough signs of trouble that I don't think SPX will go significantly above the Jan. high.  However, I can't rule out that VIX spike being enough to do a retest of the high.  I guess we buy dips as long as we stay above the SPY hourly 50 SMA.  Just watch for a bearish change of character again as sellers could come back.

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

Bob

Thursday, February 6, 2014

GLD and GDX 2/6

It has been a long time since I looked at gold.  When something has as severe a break as this they can be difficult to trade.  Lets start with the GLD daily chart.


It looks like GLD has come up to the down trend channel upper line.  Will it break above or be turned back again?  It seems like most of the time when something pushes on a trend line like this instead of being repelled quickly it ends up breaking through.  Maybe that will happen here.  How about a look at the GDX daily chart.


The mining stocks have already broken their down trend line.  Sometimes they lead gold, sometimes they don't.  They are currently consolidating like GLD.  I suspect they are waiting to see if GLD breaks out or not before deciding whether to continue up or not.

I don't know what is going to happen next.  However, it looks like something is about to happen.  These ETFs look like they are waiting for a catalyst to get them moving.  Whichever way that catalyst pushes them there is likely to be some follow through. 

Bob

90 percent days

In IDENTIFYING BEAR MARKET BOTTOMS AND NEW BULL MARKETS  Paul Desmond describes how 90 percent up and down days can be important signals of trend changes.  It is an interesting paper and I have found these days useful over the years.  Here is how he defined such days.

In reviewing these numbers, we found that almost all periods of significant market decline in the past 69 years have contained at least one,and usually more than one, day of panic selling in which Downside Volume equaled 90.0% or more of the total of Upside Volume plus Downside Volume, and Points Lost equaled 90.0% or more of the total of Points Gained plus Points Lost.

I don't have a data source for determining the points gained and points lost of all  NYSE stocks.  However, the up and down volume statistics are available in many places.  In practice I believe that nearly every time the volume is 90 percent up or down of the total volume the points gain will be very close as well.  Therefore I only look at the volume.  On 1/24 and on 2/3 we had 90 percent down days.  I should have noticed that at the time, but I didn't.  I usually don't look at the volume total unless the percent of stocks up or down on the day is in the upper 80% range.  On both those days the percent of stocks down was in the low 80s.  I had to read about the 90 percent down days somewhere else.  I guess I am slipping a bit in my analysis.  Sorry about that.  Here are a couple of snippets of what Desmond says about multiple down days.

Thus, our 69-year record shows that declines containing two or more 90% Downside Days usually persist, on a trend basis, until investors eventually come rushing back in to snap up what they
perceive to be the bargains of the decade and, in the process, produce a 90% Upside Day

Market declines containing two or more 90% Downside Days often generate a series of additional 90% Downside Days, often spread apart by as much as 30 trading days. Therefore, it should not be assumed that an
investor can successfully ride out such a decline without taking defensive measures.

This is the first decline in this bull market to have two 90 percent down days.  It is time to pay attention.  Also remember we had one of those back in June that I noted on the blog at the time.  We have had three of them in less then a year.  Here is another snippet about the down days.

A single, isolated 90% Downside Day does not, by itself, have any long term trend implications, since they often occur at the end of short term corrections. But, because they show that investors are in a mood to
panic, even an isolated 90% Downside Day should be viewed as an important warning that more could follow.

This sell off has definitely raised some angst among investors.  I have seen a number of articles by market pundits telling me that there is no sign of a bear market because of some technical or fundamental reason.  The problem is that none of these people saw either of the last two bear markets coming.  Why should we believe them now.  Every top and bottom look somewhat different.  If there was a standard definition it would be easy to spot them.  When the market goes into a bubble it will be followed by a nasty bear market.  This market has gone into bubble valuation on small caps and over valuation on everything else.  There is another bad bear market coming.  Our job is to recognize it and get out of the way before everybody else does.  In Did the Dow top? I noted the three peaks and domed house pattern on the Dow. SPX has been forming what looks like a Sornette pre-crash bubble pattern that should have completed in Jan.  The first 90 percent down day came the day after I published that article (did somebody read the blog, LOL).  We now have had a second one.  The evidence that this bull market is over is mounting.  It is time for action.  Do not just sit there and watch the market crash.  The over valuation and huge margin debt guarantee a large decline is coming.  At the last two tops I told my friends and family to expect a 30-40% decline.  I was not bearish enough if you can believe that, LOL.  All I have told them so far is to expect another very large drop.  I hate to put a number on it.  I think there is a real possibility this one is worse then the last two.

I am sure a number of people are going to read this and think that is crazy talk.  If you think that is the case I ask only one question.  Did you recognize either of the other tops?

Bob


Daily update 2/6

It looks like the over sold buy signals finally kicked in.  Here is the daily SPX chart.


I hope anybody that was short heeded my advice from last night not to be the last one out the door.  SPX closed slightly above the 100 SMA.  Even though price dropped well below that MA on 2/3 there was never a lower close to confirm the break of the MA.  Now we are back above it.  That should be bullish in the short term.  We are still well below the 18 and 50 SMAs so there is considerable room to rally.  Lets zoom in to the SPY 60 minute chart.


SPY confirmed an upside break above the 50 SMA today.  There is an open gap up in the 182 area that the market might want to fill.  So far this looks bullish.  Here is the VIX daily chart.


The VIX rolled over today for the first time since the decline started.  This looks like a VIX peak to me.  That should mean a short term SPX low is in.  The VIX crossed above the weekly 200 SMA and every other time that  happened in the last two years SPX went on to new highs and never broke below the low associated with the VIX spike.  Breaking the recent low before making a new high would be a change to that pattern.  I suspect that event would usher in a flood of selling.

A break back below the SPY hourly 50 SMA would be a warning sign the bounce may be faltering.  I think I would want to see a break of the hourly 18 SMA which is currently below the 50 before getting bearish again.  I think the bulls have taken control of the market for now.  We will have to see how strong a bounce we get before looking longer term.  I suspect we might get to the SPX 50 DMA area.

Bob

Wednesday, February 5, 2014

COG 2/5

I featured COG on 1/31 as a stock that looked like it was ready for an upside break out.  Here is the daily chart.


COG did in fact break out yesterday on good, but not great volume.  However, it reversed course today.  That is a very poor response to a stock with a nice looking chart.  The break out hasn't quite failed yet, but sure is on the edge.  Failed cup and handle break outs usually lead to a sizable move down.  A close below yesterday's low is likely to send this stock down to at least the 50 SMA.  It may even mean this is making a very important top.

Bob

Important

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