If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Monday, March 31, 2014

Daily 3/31

Here we are again.  Lets take a look at the SPX daily chart.

Funny how that .786 retrace line keeps stopping the market.  Another light volume day.  There are still some glaring big red volume bars staring at us.  The intermediate trend flipped back to up today.  When it flips back and forth it usually means a big move is about to happen.  The price bar closed green for the first time since the last dip.  Both breadth indicators are also positive.  There were still only 134 new highs today.  Not many people willing to stick their necks out and buy stocks at the highs.  Lets zoom in to the 60 minute SSO chart.

Once again we gapped up near the highs and chopped around the rest of the day.  It looks a lot like other days in this same area.  Still plenty of supply to keep the market in check today.  What happens tomorrow?

I am pretty sure I have never seen anything like this before.  Six of the last seven days have started with big gaps to the upside.  However, in that seven days SPX is .33 points higher then when it started happening.  Not 33 points .33 points, LOL.  If the market wanted to go up we would be 40-50 points higher by now.  We have done just about that many points in the gaps.  That indicates there is supply in this area.  The highest close of the month occurred way back on 3/7.  It looks like a lot of churning to me.  At the highs that is usually a top.  I guess we will see.

For tomorrow it is put up or shut up time.  Every other close above 1870 since the 3/7 high has been followed by a down day.  However, this is the first time the daily chart has a green price bar and both breadth indicators positive.  There is no excuse now.  If the bulls don't show up tomorrow and break this market out to the upside I don't think it is going to.  My guess is that won't happen.  I think a close back below SPX's 18 DMA (1863) will initiate a pullback. 


Friday, March 28, 2014

Daily update 3/28

Don't just stand there, sell something.  Join the crowd.  It seems everybody else is doing it.  Here is the daily SPX chart.

Yesterday we confirmed the break below the 18 SMA.  Today SPX rallied up and over the 18 just a bit, but found its high early in the day and sold off all the way back to the open.  The dip buyers stepped in late in the day to hold the market up into the close.  As expected the trend indicator flipped back down today.  The action would seem to confirm the 18 SMA is now resistance.  This was an extremely strong open.  At the high 80% of stocks were up on the day.  Despite that strength the market folded.  There were only 70 new highs.  Nobody is sticking their neck out to buy stocks at their highs.  The volume declined considerably today.  The pump and dump operation continues.  Lets zoom in to the SSO 60 minute chart.

SSO popped its head above the 50 SMA early this morning.  However, the sellers came out in force and sent it back down.  We have support at the green line and resistance at the 50 SMA.  Watch for a break of one of those lines for the next move.  Obviously I am looking for the down side break.

Last year the NDX 100 and the Russell 2000 were major market leading indexes.  Check out these weekly charts.

Both these leading indexes are already down to their weekly 18 SMAs.  That would be 1828 on SPX.  Clear relative weakness.  Are they going to lead SPX lower just like they led it higher last year?

There were six more IPOs today.  The venture capitalists are selling like mad.  Corporate insiders are selling at the highest rate since 2007 and 2011.  The smartest people in the room are on the sell side.  I think the charts justify their actions.  What you choose to do with this information is up to you.  I suggest you do something.

Monday is the last day of the month.  Over the last few years I have noticed this day often has a negative bias.  If there is another overnight pump and dump we could end the day negative.  However, there has been a concerted effort by bulls to keep SPX positive on the year.  I think they showed up again this afternoon to stop the selling.  They may show up again on Monday to try and hold it into quarter end.  Tough to tell.  Come April I expect the sellers to win though.  There appears to be considerable supply here.  The morning buyers keep getting hit over the head.  You have to think they will stop buying soon.

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


Thursday, March 27, 2014

Daily update 3/27

A slightly lower close.  Here is the daily SPX chart.

SPX closed below yesterday's low making this a confirmed break of the 18 SMA.  Notice the intermediate trend indicator flipped back to up today.  This is a quirk of moving averages.  We closed a bit above the bar that dropped off causing the MA to turn fractionally higher and flipping the indicator.  However, the bar that is going to drop off tomorrow is much higher so unless we have a massive up day tomorrow the indicator will flip back to down.  Volume was quite heavy today.  Since we were only marginally lower there was a lot dip buyers out.  I think you can see this better on the SSO 60 minute chart.

There are a lot of lower tails on the price bars today.  This indicates bulls were out in force supporting the market.  The fact that we closed lower indicates the bears were out with slightly more force.  We ended the day a bit below the neck line, but there is no confirmed break yet.

There was a concerted effort by the bulls to keep SPX positive on the year.  They managed to do that even if only fractionally higher.  Tomorrow is quarter end mark up day so there is the possibility of a bounce.  However, a lot of momentum stocks have been crushed the last few weeks.  We could actually end up with a mark down as funds sell those stocks to get less of them on the books.  I don't see a strong indication either way for tomorrow in the price chart.   Whether the bulls are able to keep SPX positive on the year all the way to quarter end remains to be seen.  The market looks heavy to me and I expert early April will bring more downside if not before. 

TLT extended its break out above 109 today.  I know that a lot of people were expecting rates to go up this year.  There might still be quite a few bond shorts out there, but I don't really know.  If that is the case TLT could squeeze higher yet in the short term.

GLD still not giving us any indication of a low yet.  GDX ended the day positive though.  They both need to turn up for a good low.  Worth watching in this area I think, but it is possible the bigger picture down trend is reasserting itself. 


Wednesday, March 26, 2014

Daily update 3/26

Hmm.  We have had four big gaps to the upside in a row.  However, we ended down three of the four days.  Doesn't that strike you as odd?  I think there is a lot of supply here and not a lot of demand.  Here is the daily SPX chart.

SPX broke below the uptrend line two days ago.  I think we rallied back up yesterday to kiss it good bye as we turned down again today.  The retrace rally from the oversold buy signal got SPX to a new all time high, but a lot of indexes did not make it.  SPX never closed above the .786 retrace line either.  Today was yet another key reversal day.  We have had a bunch of bearish daily bars over the last few months that have not really played out.  Is it finally time?  The intermediate trend indicator flipped to down today.  It needs confirmation with a lower close.  Lets zoom in to the 60 minute SSO chart.

SSO may be forming a head and shoulders top pattern.  Watch that neck line in the days ahead to see if we break it.  With the daily chart's trend turning down today I suspect it will.

The sellers started right after the opening gap up.  SPX kept making a series of lower lows and highs all morning.  After1 PM things fell apart.  I noticed TLT all of a sudden spiking up followed shortly by SPY collapsing.  It turns out the 5 year treasury auction held at 1 PM today was very well received.  I think the demand for those bonds ended up sparking a rotation from stocks to bonds the rest of the day.  TLT closed at a new high for the year.  I have made mention a number of times of the bullish look to its chart.  Last year it went down all year as stocks went up.  This year may be the opposite.  At least for a while.  That would catch a lot of people off guard.  All I heard at year end was how interest rates were going to rise this year.  Hardly anybody was in the other camp.  Market surprises cause volatility.  Be prepared.

In March of 2009 as the market was making a final low Bloomberg TV had a round table on whether the market was making a major low.  There was some disagreement, but the consensus was that we were very close.  Once the market turned there were many people out saying we were in a new bull market and that we had just made a generational low.  At the time I found this rather odd.  Historically major bear market bottoms instil fear and very few people are out calling the bottom.  The normal divergences in the indexes were not present.  The number of new lows every day was well above the normal range for a major bear market low.  Technically it was very abnormal for a final low.  All this made me wonder if the market bounce would roll over to new lows and instil the proper fear into the market pundits.  What happened is that many people simultaneously recognized the low and were right.  The result was a massive move up the rest of the year.  We all know what happened Bob who cares.  I think this story is relevant.  In the 2000 bear market Jim Cramer was telling people to buy at every climax low only to see the market bounce and roll over to new lows.  I don't think he figured out we were in a bear market until it was almost over.  In the 2007 bear market he famously told people on Oct. 6, 2008 if they needed their money in less then five years they should get out of the stock market.  This call came after the market had already crashed, LOL.  Again there was no recognition of the severity of the situation until way late.  Market timing did not seem to be his forte.  I was listening to Jim Cramer on CNBC today talking about the froth in the IPO market and a few other relevant things.  He uttered the words this sure looks like a top.  All of a sudden I had a very scary thought.  I have talked much about how so many things look like a bull market top is forming.  At the other tops there was hardly anybody that recognized them.  I felt like I was standing on an island all alone.  I have seen quite a few people talking about it recently.  What is going to happen if this is really THE top and it is so obvious that even Jim Cramer can recognize it?  The margin debt is so high it will get ugly very fast if a lot of people rush to the exits at the same time.  We might get a 1929 or 1987 style crash instead of the much slower melt downs we saw in the last two bear markets.  I don't know how this will play out, but it seems like the ingredients for a rapid crash may be in place.


Tuesday, March 25, 2014

Daily update 3/25

Inside day, but another gap up sold into.  Here is the daily SPX chart.

SPX closed slightly above its 18 SMA again and right around the area of the uptrend line.  Volume declined on this up day.  Overall the market was mixed a bit as small caps and financials closed red.  The COMPX was showing relative weakness, but did close positive.  So the sellers showed up early to knock down the big gap up.  At the flat line dip buyers stepped in and buoyed the indexes the rest of the day.  Late last year and in Jan. when the market stalled at the highs I commented on how it looked more like a lack of buyers rather then sellers that stopped the market.  This is sellers stepping in here for sure.  The dip buyers rush in on the dips, but price is not just sitting around at the highs waiting to dip.  There are sellers here that have stopped the upward progress.  Three gap ups in a row did not convince them to hold on.  Until they stop selling we are not going significantly higher.  Lets zoom in to the SSO 60 minute chart.

SSO gapped up above its 50 SMA, but sold off right away back below it.  The dip buyers rushed back in and kept it above that MA all the way to the close.  However, it never confirmed the close above the MA.  It also seems to have found resistance at the 100 SMA.  The 18 has now crossed below the 50.  This chart is in a slightly more bearish configuration then it was yesterday.  Time will tell if that makes any difference or not.  So far the dip buyers have kept showing up.  I want to show the SPY 60 minute chart as well tonight.

SPY is below its 50 SMA, but only because of the ex dividend gap down.  That makes it irrelevant.  What I wanted to show was the volume pattern.  There are more big red volume bars then green ones at the moment so this time frame is showing some distribution.

There is money moving around.  Big cap stocks with lower valuation are seeing some buying while the big winners from last year are seeing the selling.  One thing that can cause this is nervous money managers.  Some of them have a mandate to stay invested and when they get nervous they tend to rotate into value plays to ride out corrections.  I think they have good reason to be nervous.  Despite SPX being up .44% and just a tad off of all time highs we only had 80 new highs.  SPX stocks saw only 22 new highs which is the lowest amount I have seen yet.  Unless we get a strong positive catalyst that energizes the bulls to push prices higher it is only a matter of time before we pullback.  The longer we sit here sucking up the dip buyer's dry powder the deeper the pullback is likely to be.


Monday, March 24, 2014

Daily update 3/24

Down side follow through from Friday's reversal from all time highs.  Here is the daily SPX chart.

The futures gapped up this morning, but sold off immediately.  The opening was strong once again as 67% of stocks were up on the day.  We ended the day 61% negative.  Clearly the resistance that has been a problem for bulls all month at these levels is still there.  SPX closed slightly below the uptrend line from the Feb. low.  Volume was elevated again today.  Lets zoom in to the SSO 60 minute chart.

SSO got a confirmed break of the 50 SMA this morning.  This afternoon we tested the FED day low and bounced.  The bounce fell a little short of the 50 before selling off into the close.  With the 50 already below the 100 SMA this looks like confirmation of a move down. 

The SPX daily chart looks like a textbook double top.  The key SPX level for that pattern is the last swing low at 1839.  That is below the key 1848-50 area we have been dealing with all year.  If we break 1839 then the next support is a trend line connecting the lows from June, Oct, and Feb.  That is a key trend line and if broken should usher in considerable selling.  On the upside the bulls have to get all key indexes into new high ground.  That is a feat they have not been able to do all year so far.


Friday, March 21, 2014

Gold bottom poll results

Do you think gold has made a long term bottom?
  8 (57%)
  6 (42%)

Well that clears things up, LOL.  You guys are pretty split.  I think it may take a while yet before we know.


Daily update 3/21

The plot thickens.  Here is the daily SPX chart.

SPX had a big gap up that ran up to a slight new all time high right out of the gate.  The selling started immediately after SPX made a fractional new high.  After a mid day rally the selling resumed the rest of the afternoon.  We ended the day with SPX red and back below the .786 retrace line.  The volume was very high, but that is normal for quarterly expiration day.  There have been some significant turning points on option expiration day like Nov. 2012.  Is this going to be another one?
While not technically a key reversal day this was quite a reversal from the high.  Since this was a retest of a prior high a rejection takes on more importance if there is any follow through.  This kind of looks like a textbook double top at the moment.  Will it play out?  Lets have a look at the SSO 60 minute chart.

SPY went ex dividend today which screws up the chart for a while.  So a switch to SSO for now.  The resistance we have seen all month around the highs showed up again today.  SSO ended the day above the 50 SMA.  However, notice that the 50 is already below the 100 and price closed below the 100.  This is obviously a more bearish configuration then when we made the high earlier in the month.  That is not the only thing more bearish this time.  Check out the current breadth chart.

Both breadth indicators are still negative.  That is pretty rare with a new high.  Most retests manage to get one of them positive at least.  The 10 DMA volume lines are also negatively crossed.  A retest with weak internals like this usually plays out with a sizable pullback.  Sometimes major.

In VIX I wrote "However, look at the VIX chart closely.  The 6 SMA is still above the 18.  This is the first time in this entire bull market that SPX made a new high with the VIX weekly chart crossed like that."  So the weekly chart is positioned to spike up.  Now take a look at the daily chart.

The 6 SMA is also above the 18 on the daily chart as SPX made a new intraday all time high.  This chart is also in position to move up. 

TLT had a nice bounce today.  Here is its daily chart.

Nice volume today on the bounce.  This still looks bullish to me.  I think it is going to end up breaking out above the triple top that has formed this year. 

Lets sum up the technical evidence.  SPX has a potential double top.  TLT has what looks like a bullish daily chart.  The breadth data shows the market may be weaker then it appears.  The VIX chart looks poised to rally in both daily and weekly time frames.  When you put it all together the evidence seems pretty good for SPX to head south.  Is it finally time to hit the 200 SMA? 

As you know I have been looking for the bull market top for a long time.  There were some things in 2012 that were out of kilter that could have caused a top to form.  However, QE and hurricane Sandy cleared up those discrepancies.  If we had got a top that year I think we would have only  had a 20-30% pullback. Now that the indexes made new highs and sucked in hundreds of billions of new dollars we have a different picture.  The Russell2000 now has a bubble valuation with a P/E over 80.  The biotech index was up something like 65% last year showing rampant speculation.  Many of those stocks have no profits.  Sound familiar.  Can you say dot com.  The IPO market has been kicking out new tickers like crazy.  There were 6 IPOs to start trading today.  Is that venture capital money getting out while the getting is good?  I heard Jim Cramer on TV admitting there is froth in the IPO market.  I have mentioned many times about the low dollar low volume stocks rocketing up.  On top of all that we have soaring margin debt at record levels.  It is probably even higher now then the last report.  These are all signs of the stock market in the final mania stage.  This is different then 2007 when the manias were in the housing and commodities markets.  However, this is very much like 2000.  We are clearly in the end stage of a stock market bubble.  If you can't see that then join the crowd.  Most people won't get it until too late.  We are in for another big 50% or more crash.

I have noted the very low number of stocks making new highs lately.  We also have the Dow with an apparent three peaks and a domed house bull market topping pattern.  The transports have made a new all time high twice this year while the Dow has not.  We have a double Dow Theory non confirmation.  We now have the short term charts possibly forming a significant top.  This is March which has many bull/bear market turning points.  The Jan. barometer was down and widely publicized.  We have had two 90 percent down days which is often a sign of trouble.  Lots of warnings signs.

In markets everything matters.  Major turning points are created by a series of events in the market that add up to cause a trend change.  We have already had the series of events that have led to major bear markets in the past.  What really gets most market participants is the behavior of the market at the end of the trend.  In early 2009 we had the FED doing QE.  Congress had passed a stimulus package.  Earnings had started to improve.  Despite all that the market kept going down.  Every bounce sold.  This convinced most people the market could only go down.  Sound familiar.  Turn that upside down.  We have had signs the global economy is slowing.  Companies are only able to meet earnings numbers by buying back stock in large amounts and only after lowering guidance in the first place.  There are geopolitical situations that may have major impacts on the global economy and markets.  Even with all that going on the market takes it all in stride and rushes back to new highs after every little dip.  That is the sign of a mature trend.  People have so much faith in the trend they do not believe it can reverse.  Caution is thrown to the wind.  Just buy the dip.  Buy the dip.  It is the only thing that matters.  Then one day the trend reverses.  This repeating market action is what prompted the late Wall Street money manager Barton Biggs to say "A bull market is like sex. It feels best just before it ends."
Every trend reaches a price level where the balance of buyers and sellers changes.  That is really what causes the trend to reverse.  In 2009 we got low enough to change the balance where more people wanted in then out.  Now we have reached a price level that seems to have very few buyers.  It might be pretty easy to tip the scale where more people want out then in.  Next week will be very important.  The bulls need to get SPX to close in all time high ground and not look back.  Down side follow through next week will likely trigger considerable selling.


Thursday, March 20, 2014

Daily update 3/20

Strange day.  SPX closed up .6%, but breadth was negative.  You just don't see that very often.  Today was a reversal of the FED day.  I mentioned last night it does that sometimes.  Tomorrow might be the real clue as to future direction.  Here is the daily SPX chart.

That .786 line held as resistance again.  Will it continue to hold or will SPX break through tomorrow?
There were only 96 new highs.  Volume was high today on the exchange, but low in SPY itself.  Check out the SPY daily chart.

Over the last two weeks there are three high volume down days and no high volume up days.  This looks like outright distribution on this time frame.  In fact that is true since the start of the year.  There are quite a few more high volume down days.  Lets zoom in to the 60 minute chart.

Once SPY got up near yesterday's high the pattern of alternating up and down bars showed up again.  You can see the same kind of pattern earlier in the month in this same area.  People are willing to buy the dip, even a little dip, but are not anxious to chase price higher. 

With negative breadth today both breadth indicators remain negative.  With new highs being so low the internals were much weaker then the indexes would suggest.  We clearly have strong resistance here.  It will likely take a positive catalyst to get the market higher.  Today's good economic data apparently was not enough.  Despite that good data the economically sensitive sectors like the tranpsorts, cyclicals and energy were weak.  The transports even closed in the red.

About now the bears are frustrated because every time the market starts down it reverses back to the highs.  The bulls seeing the resiliency in the market assume it will break out on the upside.  The single best indication of the strength of a bull market is new highs.  With the numbers this low the market is in a precarious position.  It is not a sure thing this market is going significantly higher.  Lets see what tomorrow brings.


Wednesday, March 19, 2014

FSLR 3/19

I highlighted FSLR on the night marked with the green arrow as it was testing its 200 SMA.  It has had a few ups and downs since then, but rocketed today on a big surge in volume. 

I think it is prudent to take at least some profits if not all here.  Let it sort itself out and see what  happens. 


GLD and GDX 3/19

I want to start with the monthly GLD chart.

The double bottom came in the area of the late 2009 monthly close.  That was a spike up price bar that preceded a pullback.  Old resistance became support.  The current rally has picked up a lot of believers that gold has bottomed.  Maybe it has, but it certainly has not done enough to prove that.  I would say GLD needs to get above the 8/2013 high of 137.55 before we can say it is likely reversing the down trend.  It had a whale of a crash.  The first bottom attempt is often not the final low.  There is a much better looking potential support area at the next green line.  I think it is still possible we get there eventually.  Lets zoom in to the daily chart.

I have tried to outline this move up with a trend channel.  Today's move down has gotten GLD down to the lower line.  I think this is a decision area whether to continue the rally or not.  Some kind of bounce seems likely here.  Whether that restarts the rally or ends up rolling over and breaking the line I do not know.  Getting back above the 18 SMA might get the rally restarted again.  I will be watching this for a long entry tomorrow.  A gap down that reverses might provide a good entry.  A gap up would be more difficult without a retest of the low.  While we are at it lets look at the GDX chart.

GDX is a little further below its channel line.  However, the same situation applies.  This is a decision area.  This one is a lot closer to the 200 SMA then GLD is.  Maybe that acts as a magnet I don't know.
They both have to reverse though before the rally can restart.

There is plenty more room overhead for both of these ETFs to bounce and still not decide about the long term.  However, they have worked off enough of the over sold condition that this may be all there is.  I view them as swing trades only.  I think the longer term picture needs to clear up before any long term holds are appropriate.  The risk of more down side is still pretty significant.


Daily update 3/19

Another negative reaction to more tapering by the FED.  The biggest reaction may have come from something Yellen said in her press conference.  However, the market bounced at the end of the day making back a lot of that move.  Here is the daily SPX chart.

SPX tested the .786 retrace line again early this morning, but failed to find buyers up there.  It drifted around until the FED announcement.  SPX closed right on the 18 SMA.  There were 121 new highs today.  The numbers remain very low.  FED day reactions are sometimes reversed the next day and sometimes follow through for days.  We will have to see what tomorrow brings.  At the moment this chart looks poised to continue down.  Lets zoom in to the SPY 60 minute chart.

SPY never went above the price it was at just before the FED announcement.  Often it trades up and down.  Not this time.  That leads me to believe we will follow through on the down side.  SPY ended the day below the 50 SMA, but we do not have a confirmed break yet.  Here is a look at the current breadth chart.

After briefly crossing positive on the over sold bounce both the 10 DMA lines and the McClellan oscillator had negative crossovers again.  Both of these indicators were weak on this retest of the high.  Downside follow through here should see more selling pressure then the last pullback.

Tomorrow is key for the bulls.  If we follow through on the downside I think we go much lower.  The internals have been weak for a while.  I think some people hesitated to sell in front of the FED meeting in case the bad weather and poor econ data caused the FED to pause the taper.  Since that did not happen there may be more willing sellers now.  A close below 1848 would be a third SPX break out failure this year.  I think that would be the charm for bears.

Here is an interesting article on China China's "Minsky Moment" Is Here, Morgan Stanley Finds.  I believe China has all the earmarks of a major financial crisis about to happen.  If that is the case it will slow the global economy considerably.  I suggest everybody keep abreast of this situation.  It could easily be the biggest driver of stock prices this year.


Tuesday, March 18, 2014

Daily update 3/18

Over sold condition resolved.  What happens now?  Here is the daily SPX chart.

SPX rallied back to the .786 retrace line.  If it is going to make a lower high this is usually the place where it stops.  Volume was light again.  Early this morning the futures were down until Putin said he did not want to split up Ukraine.  The futures popped and rallied all day.  Now we have been here before.  We made a new all time high on Putin saying he had no plans to invade Ukraine.  That rally failed.  Will this one stick?  There were 138 new highs today (only 33 SPX stocks).  While better then yesterday this is still awfully low this close to all time highs.  Here is a look at the SPY 60 minute chart.

After gapping up again today the market spurted a little further the first hour.  SPY ended the day right at the high of the first hour.  This is a problem chart.  It clearly closed above the 50 SMA, but is it clearly confirmed?  There was one bar that closed a few cents above the high of the break bar.  That is a confirmation, but the closing price for the daily bar was right on the high of that first bar.  Technically we have a confirmed break of the 50, but just barely.  The market struggled after the first hour just like yesterday.  The initial surge was probably short covering from people that didn't cover yesterday or shorted in the afternoon.  I think the market is still struggling for buyers up here.

The two day rally has taken care of the over sold condition.  Will buyers show up to push price higher?  One oddity today was that TLT was up.  Here is a look at it on the daily chart.

TLT pulled back the 6 SMA and rallied the rest of the day.  This chart looks bullish to me like it wants to break out above the recent highs.  It seems unlikely to me that both SPX and TLT are going to rally together.  I think SPX is going to be the one that turns around.  I guess we will see.

Tomorrow is the FED announcement.  It is widely expected they will continue with the taper action. The FED doing what is expected sometimes creates a stronger reaction then one would think.  I am not going to try and predict what happens tomorrow 

We still have a small matter of whether there are buyers up here willing to push price higher.  I don't really like how SPY rallied the first hour both days then traded mostly sideways in the afternoons.  Will it make a new high or reverse course from a lower high?  I am pretty sure it is going to fail from somewhere up here.  The number of new highs is just too low to sustain a rally.  I will be watching for a drop back below that SPY hourly 50 SMA to indicate the bounce is over.  If SPX closes back below 1850 again I am pretty sure it will spark more selling then the last time.  That would be the third failure.


Monday, March 17, 2014

GLD and GDX 3/17

Not sure if this is important or not.  Check out the daily charts of these ETFs.

Both these ETFs turned down today on a considerable increase in volume.  Since they are still technically in a bear market long positions should be monitored closely.  This may be nothing, but then again it could be something.  The crashes these ETFs had last year lend themselves to high volatility.  Although many people are coming out and saying gold has bottomed, nobody knows for sure.  The current pattern seems a bit too obvious to me for a major bottom.  I think there will be more ups and downs first.

I don't know what is going to happen here.  Neither of these ETFs have done enough to reverse the down trend.  This could be nothing more then an over sold bounce that ends up going even lower then they have been.  However, there is still room above to continue the rally.  If today started a pullback I would guess a trip to the 50 SMA might be in the cards.  That might provide a good place to buy.

Over the last few months gold has had sizable reactions to FED meetings.  There might be some volatility around the next announcement on Wed.  Be careful.


Daily update 3/17

I guess the over sold buy signal from Friday caused a bounce right away this time.  Unfortunately the gap up was pretty big.   IWM was a notable laggard today for some reason.  Here is the daily SPX chart.

SPX closed slightly above the 18 SMA.  However, there was a big drop in volume today.  Not much conviction evident there.  There were only 113 new highs today which is another sign of a lack of conviction.  Lets have a look at the SPY 60 minute chart.

The first hour started with a big gap up and ran up a bit after the open on big volume.  Given the over sold condition we had on Friday, that was mostly short covering.  SPY spent the rest of the day within the price range of the first hour.  Price also oscillated up and down with every bar in a different direction until the last two.  Volume during the middle of the day was extremely light.  SPY struggled with the 100 SMA all day.  There is still some room up to the 50 SMA so we could bounce a bit more tomorrow.

The low volume, the relative weakness of IWM and the low number of new highs would seem to suggest this is just a dead cat bounce.  I think we need to see a confirmed break of the SPY hourly 50 SMA on the upside to get comfortable the rally is resuming.  There is a two day FED meeting this week starting tomorrow.  Over the last few months the market has been up a little on the day before the announcement.  After the announcement the movement has been a mixed bag.  Sometimes up and sometimes down.  What will it be this time? 

The VIX looks in position to spike up and possibly take out its highs of last year.  Its weekly 200 SMA is at 18.97.  A weekly close above that would be first time that happened since 2011.  Many would say we are overdue for a spike in volatility.  Despite today's bounce the world situation does have some unknowns.  I think the bulls need to prove themselves here. 


Friday, March 14, 2014


Lets take a look at the weekly VIX chart.

Since 2012 the VIX has been rejected at the weekly 200 SMA.  Never once making a weekly close above that line.  SPX went to new bull market highs from each of those lows.  The VIX was once again rejected at the 200 in early Feb. and SPX did indeed make new highs.  However, look at the VIX chart closely.  The 6 SMA is still above the 18.  This is the first time in this entire bull market that SPX made a new high with the VIX weekly chart crossed like that.  The closest to that was in July 2011 when SPX was making the right shoulder of the head and shoulders top it made that year. SPX made a lower high then crashed.  We can clearly see the VIX did not get down into the 12 range like it did on rallies over the last two years.  We have not had a very big VIX spike since 2011.  It may be time for another one.


Bull market top poll

How many calls for a bull market top have you seen lately (I don't count)?

  3 (16%)
  1 (5%)
  2 (11%)
  3 (16%)
more then 5
  9 (50%)

Quite a few calls for a top there.  Will they be right or not?


Daily update 3/14

A mixed day.  Despite positive breadth all day SPX closed slightly lower.  Here is the daily chart.

I got the short term over sold buy signal today.  That signal is marked by green arrows.  It is extremely rare to get that signal and not be either below the 50 SMA or have a blue bar (close below lower Bollinger band).  Back in Jan. the market did not bounce significantly until the second signal. I don't think we are far enough down to make any kind of meaningful low here.  We might bounce on Mon. though.  To fire this signal it takes broad based selling.  They rarely happen in this close proximity.  We have had three already this year.  We only had two last year and the first one did not occur until June.  They happen much more frequently in bear markets of course.  Is this yet another sign of trouble?  SPX got a confirmed break of the 18 SMA today.  That means we need a confirmed break of the 18 on the upside to get bullish not just a close above it.  Lets zoom in to the SPY 60 minute chart.

There were a couple of big green volume bars today indicating some dip buyers swooping in.  It sure looks like it is trying to hold that support line.  The market actually bounced twice today and each time sellers drove prices back to yesterday's low.  The sellers did not break the market down though.   Will SPY bounce off that line?

This is a bit of a quandary in the short term.  We are a little over sold and could bounce, but there is no guarantee of that. In the past I have seen some large moves down after the over sold buy signal fired.  The worst one was in July 2011 right at the start of the meltdown.  Longer term this market is in trouble.  We have had two 90 percent down days and three over sold buy signals in just the first 2.5 months of the year.  That kind of selling pressure usually only happens in a bear market.  This just keeps looking more and more like a bull market top to me.   I think it is time to sell rallies again.

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


Thursday, March 13, 2014

Daily udate 3/13

Was that a flight to safety?  I think it was.  Check out the TLT daily chart.

That was quite the move up in TLT today and on heavy volume.  Considering that TLT gapped down and SPY gapped up it was not on over night news.  Some people suggested it was caused by Germany taking a hard line with Russia over Ukraine.  There are quite a few big green volume bars in this chart going back to last fall.  It looks pretty bullish to me.  I mentioned this on 3/7 on the last swing low.  I hope some of you got in on the action.  On to the usual look at SPX.

SPX closed slightly below the key 1848 level.  This is the second time SPX broke out above the Jan. high and failed to stay there.  How many more chances is it going to get?  Volume was slightly elevated today, but nothing extreme.  Breadth was 67% neg. and trin was 2.4.  That suggests that the selling was heavy, but not a panic.  Lets zoom in to the SPY 60 minute chart.

SPY held my former resistance line as support today.  It gapped up over the 50 SMA this morning, but failed to hold it.  The selling into strength was persistent right from the opening bell.  The same with buying in TLT as it started up right after the bell.  Last night I said "All afternoon the bulls defended yesterday's low (186.8).  If we break below that level I would expect an increase in selling pressure."  I hope some of you took advantage of that.  We have a few big red volume bars now so the pattern has shifted back to distribution. 

The 10 DMA breadth chart had a negative crossover today.  That makes both breadth indicators negative.  We are a bit over sold in the short term on the 60 minute chart.  That may get a bounce in the morning, but this is kind of tough.  We effectively have a double failed break out on SPX which could give people a reason to sell.  We are not oversold on any longer term measure so another down day tomorrow is certainly possible. 

We closed under the key 1848 level, but not by much.  The bulls may make an attempt to save the day tomorrow.  Or not.  I don't have a clue.  Regardless of what happens tomorrow I think there is plenty more selling to come.


Wednesday, March 12, 2014

Daily update 3/12

Another mixed day.  SPX closed fractionally higher at the key 1868 level.  I just love this totally random market, LOL.  Here is the daily SPX chart.

We had a little gap down this morning and SPX traded down to the 18 SMA.  The bulls showed up and rallied SPX back to even.  The rest of the day was a back and forth motion with another bounce into the close to get SPX positive again.  New highs dropped down to 53 today.  With just making a new all time high and price still above the 18 SMA that is extremely weak.  Its a bit hard to have confidence we are going to rip higher.  Lets take a look at the SPY 60 minute chart.

A lot of alternating bars up and down today.  SPY is below both the 18 and 50 SMAs.  All afternoon the bulls defended yesterday's low (186.8).  If we break below that level I would expect an increase in selling pressure. 

The bulls showed up today, but I can't say they rescued the market.  Without an increase in new highs we are not going very far on the upside.  I want to see a confirmed break of the SPY hourly 50 on the upside before considering new long positions.  Will the bulls show up with some force tomorrow or will the bears strike again?  The new high data suggests the bulls are losing control.  I guess we will see what happens.

I thought this was an interesting chart.  I have been talking recently about how things remind me of the 2000 top.  Check this one out.

Nearly 75% of IPOs over the last six months have negative earnings.  Kind of looks familiar doesn't it.  Can you say dot com bust.  Why are the venture capital firms rushing out non-profitable IPOs?  Could it be cashing in while the getting is good?


Tuesday, March 11, 2014

Daily update 3/11

SPX followed the script again.  From last night " SPX closed fractionally lower, but pretty much as expected.  If SPX follows the script tomorrow should be down a little more significantly."

Here is the daily SPX chart.

Here is where the script changes.  The last two outside days marked by the yellow arrows had the second day close below the 18 SMA.  We did the closedown, but SPX is still well above the 18.  In the prior two cases the third day was different.  One was a big up day and the other was a big down day.  The only common denominator was a big day.  Will we see that this time?  SPX broke below 1868 during the day, but bounced some at the end of the day to close just marginally below it.  Despite SPX being only one point below the all time intraday high we only had 110 new highs.  That is abysmal.  This market lacks buying enthusiasm.  That is the kind of new high numbers often seen at bull market tops.  Lets zoom in to the SPY 60 minute chart.

SPY ended the day below the 50 SMA, but does not have a confirmed break.  It was just a few cents above the 3/4 big gap up opening price (186.75) before bouncing.  I would expect a bunch of stops somewhere below that 186.75 from the people that bought the break out over the last few days.  If we get much below that we should accelerate down.

The bears fired a shot and we closed slightly below the key 1868 level.  However, the bulls could still save the day tomorrow if they show up.  If not I think we head down to the more important 1848-50 area.  Since we spent so many days at the highs it has less odds of holding then if we would have tested it right after the break out.  The market soaked up a good bit of buying fuel that will be under water if we pullback now.  That is a recipe for a break out failure.  Especially since the Dow still has not made a new high. 

Copper prices have crashed over the last few days.  This is related to problems in China.  Here is an article on that situation China's credit markets under pressure .  I started reading about problems there last summer.  It has only gotten worse.  Here is another article on their debt problem Fitch says China credit bubble unprecedented in modern world history . It seems their debt problem dwarfs our little subprime debacle from 2008.  I think you will hear a lot more about this as the year goes on.  It could be real trouble for the global economy.


Monday, March 10, 2014

Daily update 3/10

True to form so far.  From Friday's update "SPX had an outside day.  We had two of those back in Jan. marked with yellow arrows.  In both of those instances SPX closed slightly higher the next day then sold off. "

SPX closed fractionally lower, but pretty much as expected.  If SPX follows the script tomorrow should be down a little more significantly.  Here is the daily SPX chart.

Breadth was negative again today.  That is 3 out of the last 4 days that happened.  New highs dropped down to 106.  That is very poor when SPX was down only .87 from its all time high close.  We have a couple of hanging man candle sticks.  That may indicate a short term top is near, but they need downside confirmation.  I don't see any stocks in the Dow that made a new 52 week high today.  There were only 22 in SPX.  This market is doing a very good job of impersonating a bull market top.  We are not going higher without another shot in the arm of new highs.  Lets take a look at the SPY 60 minute chart.

SPY volume continues to dry up.  In fact the volume on the NYSE was the lightest since this rally from the Feb. low began.  We have a lot of alternating bars on this chart since the big gap up.  Some people are buying dips and others are selling rallies.  The question as always is which group has the most ammo.  Until one side runs out we are stuck.  With volume drying up we are likely to find out soon. 

The market is weakening internally despite the major indexes holding in there.  The McClellan breadth oscillator closed fractionally negative today.  Without a shot in the arm of bullish energy very soon we will head down.  The Dow still has not made a new all time high.  Is it going to give us another Dow Theory non-confirmation with the transports?

SPX found support today at the 1868 level mentioned several times.  That level might not survive another test.  If that breaks I think we will test the key 1848-50 area.   Closing below that should be a major negative.  Sellers are likely to come out of the woodwork.



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