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Friday, May 30, 2014

Maybe this explains it

I was reading a piece on the latest GDP report and it mentioned a big drop in corporate profits.  So I went to see what I could find about that in FRED and found this chart.  Maybe it explains why the market looks like it is making a top to me.

Only one big drop in profits of this magnitude was not associated with a recession.  That was 1998.  However, SPX had a 20% sell off into Oct. of that year. This chart is based on actual profits, not earnings per share which are obviously manipulated by share buy backs.  I guess with Q1 GDP now reported to be -1% it is certainly possible we are going to have a recession.  That makes sense to me since earlier this year economists unanimously gave the U.S. a 0% chance of entering a recession this year, LOL.  That would also be consistent with the move down in interest rates we have been seeing this year.  With valuations very high continued earnings problems would be bad for stocks.

There was a lot of talk about how cap ex was supposed to pick up this year and drive the strength in the economy.  I posted a piece earlier this year about the tax changes making cap ex spending less attractive now.  While I was at IBM a drop in profits always caused reduction in cap ex and other things the company could do to lower costs.  Travel restrictions were one of the first things to be put in place.  Between the tax changes and the profits problems it seems very likely to me that cap ex will be lower this year.  That would certainly hurt growth if that turns out to be the case.


Daily update 5/30

The resistance areas I showed on the charts last night held the market in check today.  Here is the daily SPX chart.

SPX closed right on the upper trend line.  It still had a blue bar so it closed above the upper Bollinger band and is extended.  Today was a very narrow range bar.  After an extended run that shows a loss of momentum.  Since we are extended and at resistance with a loss of momentum odds are probably rising that a pullback is coming soon.  IWM and IBB were down .49% and .61% respectively.  The COMPX made a hanging man bar and IYT now has a shanghai duo.  We have a number of bearish looking chart patterns going here.  June is one of the worst months statistically.  Hmm.  Here is the weekly SPX chart.

The weekly chart also has a blue bar so it is extended as well as the day.  There was a noticeable drop off in volume on the last two bars.  We broke out of a multi month trading range on that light volume.  Not a lot of conviction there.  Lets have a look at the futures chart.

The main feature on this chart tonight is the - DI line.  It ended the day at 11 which is extremely low.  In my studies I noticed that getting a DI line down to a 13 handle is a good sign of an extended market.  For rallies we watch the -DI line and for sell offs we watch the +DI line.  It seems kind of odd, but it does work pretty well.  The last two times -DI got to a 13 handle were at the March and April highs.  When it turns back up it is usually a sign the rally is over or at least very close to it.  We are 55 points above the 100 SMA now.  That is pretty stretched.

So we are clearly very over bought in the short term.  There are a number of key indexes at potential resistance points with potentially bearish candle patterns.  On top of that we have June coming up which is one of the weaker months for the market.  I don't know who was buying today, but I have to say the odds are pretty high that they could have bought in at a better price next month.  I guess we will see what happens.

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


Thursday, May 29, 2014

Daily update 5/29

A little more up in SPX.  Here is the daily chart.

SPX is about two points short of the upper trend line connecting the last two peaks.  Probably hit that in the morning.  Whether that is resistance or not remains to be seen.  SPX had 46 new highs today.  That was only a little better then the last two days.  Still weak for all time highs.  I think we are at a critical juncture here.  There are a few interesting charts to look at tonight.  Lets start with IYT.

IYT followed up yesterday's possible volume climax top with a hanging man bar today.  That bar needs confirmation with a close below today's low.  Remember a close below yesterday's low should be confirmation of the volume climax top.  Here is a look at IWM.

This is where the bubble is at and is the weakest major index.  It reclaimed its 200 SMA, but has spent the last three days struggling with its 50 SMA.  Clearly this is important.  What happens here might determine what happens in other indexes.  Another important index is the NASDAQ COMPX.  Here is that daily chart.

The COMPX may be forming a head and shoulder pattern.  It stopped today right at the high of the left shoulder.  Clearly another chart at an important juncture and possible resistance.  But wait there is more.  Lets have a look at the biotech ETF IBB.  This was another sector leading this springs sell off.

While not at a key moving average IBB is at the 50% retrace level of its major sell off.  Another potential resistance area.  One more chart for tonight is the weekly chart of TLT.

TLT hit the bottom of a major low from early last year.  This is possible resistance and a negative reaction or at least a pause seems pretty likely.  There are a lot of bond bears still out there.  This would be a good place to attack.  Last year rates had one of the biggest percent moves up in history.  Is this just a partial retrace and there is more upside for rates yet to come?  Was the move up too much too fast and is over with?  Beats me.

Doesn't this look like an important moment in time for the market?  SPX could be very near resistance and is overbought short term.  The COMPX, IWM and IBB are clearly at potential major resistance points.  If that is not enough IYT has a possible important topping pattern in the last two bars.  Volume climaxes both upside and downside can lead to sizable moves in the other direction. IYT needs to be watched.  Since it is one of the strongest indexes this year that is doubly true.  In case you don't know this IYT did not top in the last bull market until May 2008.  Well after all the other major indexes.  We were already 6 months into the last recession by then.  The move up this year does not necessarily reflect that the economy is getting better.  It does clearly reflect the high expectations people have that the economy is going to get better.  Sometimes expectations are not met.  With the Dow lagging behind this might be one of those times.

The current break out to new highs by SPX has not been tested with any selling pressure yet.  It has moved up enough it could find support in the previously mentioned 1897-1902 area if it does pullback.  However, keep in mind that prior highs have not provided support in the last year.  Each time we have pulled back to the 50 or 100 DMAs.  Time to play very close attention to what happens now.


Wednesday, May 28, 2014

Daily update 5/28

Out of buyers.  SPX got above yesterday's high five different times today, but failed to stay there.  I guess buyers found the air a little thin up there today.  We will have to wait and see if that condition persists or not.  Hard to blame bulls for not wanting to buy today after the four day run up to new highs.  Here is the daily SPX chart.

Volume was nearly as heavy today as yesterday.  The NYSE volume was actually 6% higher today then yesterday.  Bulls would have much rather seen a good drop in volume.  The elevated volume indicates willing sellers.  Even though the bulls soaked up that volume today they might not be able to keep doing that if there are many sellers out there.  I want to show the IYT chart (tnx CF for pointing this out) tonight.  It had an interesting day.

This is the transports ETF and look at that volume  It was the heaviest volume day in more then a year.  This index has been one of the strongest this year.  This has the look of a volume climax top.  Some people might call it a blow off top.  Really high volume after a long run is a warning sign.  A close below today's low would give pretty good odds this is an important top for this ETF.  Since it is one of the few strong stock indexes this year there could be ramifications if this turns around.  Something we need to watch and see what happens.  Here is a look at the futures chart.

This morning we had a bearish engulfing bar.  The last bar made a lower high and lower low.  Since the bars went green on this rally this is the first potential reversal pattern to develop.  Another thing to keep an eye on.

Elevated volume on a narrow range bar with price extended can portend a reversal.  The possible volume climax top in IYT is also something to watch.  We have a couple of caution signs now.  The fact that this market keeps making slight new highs then selling off makes me wonder if that won't happen again here.  The 1897-1902 area should be support.  Below 1897 we have another failed new high and selling could pick up.

SPX broke out over a triple top on this run.  That makes this an important juncture.  Most of the time this makes a sizable move.  Either the market moves up nicely or the break out fails and the selling picks up dramatically.  Some book I read many years ago called it the rule of 4 break out.  I have seen many of these patterns in individual stocks.  They really do tend to make for a big move.  I think we are at the decision point and SPX should be ready to make the next big move one way or the other now.


Tuesday, May 27, 2014

Daily update 5/27

Yet another upside gap today.  Here is the daily SPX chart.

SPX has a blue bar indicating it closed above the upper Bollinger band and is extended short term.  This is the first time it has done that all year.  It seems to me this last move up is like the move up in early April that got a lot of people bullish.  We keep making slightly higher highs then selling off.  Will this time be different?  Volume picked up a good bit today.  So did new highs.  There were 48 SPX stocks making new highs today.  While much better then Friday, this is still low at all time highs.  The prior closing high before the current rally was 1897.  A close back below that probably indicates another break out failure.  The failure at point 2 sparked a bigger pullback then at point 3.  It seems likely we would get a bigger downside reaction if it fails again then it did at 3.  What are the odds that happens?  Internally the market looks weaker then at point 2, but not much different then point 3.  TLT and the VIX were both up today which is a bit odd given the strength in SPX. 

SPX has been up four days in a row.  The last time it squirted up to new highs on a four day run was early April.  That rally sold off rather sharply.  Until we get some selling pressure and see how the market reacts we can't really know if it is different this time or not.


Friday, May 23, 2014

Daily update 5/23

Record close on SPX.  Here is the daily chart.

Today was the lightest volume day of the year.  Did all the sellers take off early for the long weekend?  Lets look at the new high situation.  At the March peak SPX had 72 new highs.  At the April peak there 64.  The early May peak saw 47.  Today there were 23.  That is the very definition of a market that is thinning out.  Did you know that 47% of SPX stocks are now down 7% or more from the high?  No sign of conviction on this retest of the high at all.  They talked about that on TV at the close.  One trader interviewed said he was selling.  They asked him what happens if the market keeps going up another 6-10%.  He said he would have a bunch of cash to do something with and that his family and friends would be mad at him.  He obviously has enough conviction that the market is going down to warn his family and friends.  That takes a lot of guts to say that on TV.  Lets have a look at the futures chart.

This rally has the exact same shape as the last one.  Kind of odd.  We will find out next week if it rolls over again.

The last week of May has been down the last four years in a row.  Will the pattern repeat or now that I mentioned it on the blog will it do something different?

With SPX now making four tops it is do or die time.  If this rally fails to stick I think the selling pressure will pick up.  Each peak got weaker in the number of new highs.  I still think it is going to take a buying spree to go higher.  It is one thing to make a new marginal high like we have done the last few months.  It is quite another to have a big push up.  I would say a close back below 1880 would be very bearish from this chart pattern.  What happens might very well depend on what IWM does.  Lets look at the daily chart.

IWM poked its head above the 200 SMA and the upper trend channel line today.  Is it going to break out of the channel or turn back down into it?

To me it looks like SPX is standing one toe.  In the 15 years I have been studying the market the only time the new highs got this low for this long while SPX was at the highs were in 2000 and 2007.  Is it different this time?

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


Thursday, May 22, 2014

Daily update 5/22

Another run at the highs.  Here is the daily SPX chart.

SPX closed above 1890 for the fourth time ever.  Volume was extremely light again.  Is this the time we break out or turn back?  New SPX highs were very low once again at 20.  No big buying spree today. 

The SPY 60 minute chart does not work all that well in choppy narrow range markets like we have seen lately.  I also don't like the problem the dividend gap creates.  In looking for a substitute I did some research on the S&P futures chart with 24 hour data.  I have access to data going back to 1998.  After much looking at charts I found I like the 8 hour (3 bars per day) time frame.  I have included a MACD and an ADX indicator that I found useful in some instances.  I found a few interesting things about this chart.  One key thing I found is that the futures react to the 100 MA (white line) a lot.  They also react to the 200 (green line), but don't get to it as often.  On deeper corrections the 100 can cross below the 200.  This usually means the correction will last longer then just a quick pullback and the market will be volatile.  A strong break out above the 200 MA generally means the low of the correction is in, but not necessarily that the market is ready to fly up again.  There is often another pullback to a higher low.  The ADX indicator is on the chart specifically for the -DI (red line).  Every major sell off since 1998 has had a -DI reading of 35 or higher early in the move.  The trouble here is that not every occurrence of 35 causes a big sell off.  It is just a caution flag to monitor the market action going forward.  A pullback to the 100 MA without -DI reaching 35 is a high odds swing trade buying op.  SPX does not always make a new high, but it almost always has a decent bounce.  Sometimes a pullback with a -DI above 35 actually launches a new leg up.  That is the tricky part.  You need to monitory closely for the start of a move down, but it could actually be a great buying op.  This is why we love the market isn't it, LOL.  Those new legs up generally have a strong kick off bar off the low to help recognize them.  Big sell offs generally bounce weakly or not at all.
Here is a look at the chart.

As you can see the futures did some testing below the 100 SMA, but did not close below it the last few weeks.  The horizontal line in the ADX panel is the 35 level.  As you can see the -DI line never touched it during this trading range.  The yellow arrow marks the most recent -DI 35 reading and was followed by another leg lower before the final low.  Smaller pullbacks like that one do not always hit the 35 level.  However, all 10% or larger pullbacks did and usually when SPX was down less then 4%.   Unfortunately it is like all other charts, it only tells us where we have been and not where we are going.  We are currently testing the all time highs and we must wait to find out if we break out or turn back. 

The other two rallies above 1890 were turned back.  Will the third time be the charm or not?  This did not look like any kind of important thrust day.  Without getting one of those it seems likely we will turn back down at some point soon. 


Wednesday, May 21, 2014

GLD and GDX 5/21

Well, not much happened since my last post.  The volatility in both these ETFs has collapsed.  The higher level double bottom I mentioned in GLD has not garnered any buying.  Here is the daily GDX chart.

GDX is testing the recent lows.  It has been under the 50 SMA long enough that MA has turned down pretty sharply.  It has also fallen back below the 100 SMA.  This looks like do or die time here.  Lets look at the GLD daily chart.

GLD is still hanging on to the 100 SMA.  Like GDX the 50 SMA has turned down again.  With the volatility contracting it does appear these ETFs might be preparing for a big move.  The direction of that move looks a little uncertain to me.  They need to show more strength to convince me they are ready to go up.  If GDX does not break down then maybe buyers will step in.  If GLD joins GDX in breaking down below the 100 SMA it could end up testing the Dec. low.  I think I would want to see this break out above the 50 SMA before getting bullish again.  Between the 50 and 100 MAs it just looks like noise.


Daily update 5//21

Late day bounce from yesterday continued with yet another gap up to start the day.  Here is the daily SPX chart.

Volume was light once again.  The breadth started out very strong this morning (69% positive), but the mid day pullback really weakened it.  It went all the way down to 51% before recovering at the end of the day to 61% positive.  Even though the pullback from the high was not very big the selling was broad based.  Lets have a look at the SPY 60 minute chart.

I marked the .618 to .786 retrace zone on the chart.  This is the most common area to make a lower high from.  I also marked the rally from the recent low as it resembles an ABC pullback from lows.  If that is what is going on this move is corrective in nature and we should resume the down move that started from the all time high.  I don't know if this is the right interpretation here or not.  Lets look at the SPX new highs chart.

The sell of from the all time high really knocked down the number of stocks making new highs.  We went from the 30s and 40s (already pitiful numbers) down to the teens.  Pretty soon there will be no stocks making new highs.  Looking at this chart is what made me ponder that SPY could be making a corrective move back up into the retrace zone.  That move down from all time highs might be more important then it looks just from the chart.  Lets take a look at the number of SPX stocks above their 50 SMAs.

That sell off knocked down this indicator also and the bounce has not done much to repair the damage. 

What happens tomorrow?  I was hoping you could tell me, LOL.  SPX is back into the resistance zone where it has not been able to sustain trade.  Market internals continue to get weaker with each push up.  I still think it is going to take a high volume strong breadth day with a lot of new highs to break out and continue higher.  Support at the 50 DMA and resistance in the 1885-1900 area.  Somebody wake me up when it decides what it wants to do.


Tuesday, May 20, 2014

Daily update 5/20

About face.  Poor retail numbers set a negative tone early on.  IWM turning back from its 200 DMA also seemed to spark some selling.  Here is the daily SPX chart.

SPX just kissed the 50 SMA and bounced.  That bounce sold off going into the close.  This is the fifth time in the last few weeks to test the 50 DMA.  The other four times it held.  Will the fifth time be the charm for bears?  It seems likely.  Lets zoom in to the SPY 60 minute chart.

SPY is once again showing a confirmed break of the 50 SMA.  This time after just a few bars above it.  Volume picked up a lot today.  SPY volume was almost double yesterday.  This chart looks more likely to continue down then to reverse up again.  I guess we will see if the bulls respond yet again.

SPX closed about 4 points above the 50 DMA(1867).  The bulls have tried really hard to get the market going up, but they just can't sustain trade above 1885.  We are getting close to three months now with no real progress.  Each rally attempt gets weaker internally.  How many more attempts do the bulls get?  Have we just run out of chances now?  Should we break the 50 DMA the next major support level is the 100 DMA (1847).  The break even point for the year (1848) is also in that same area.  Here is a look at IWM.

IWM has a fairly well defined down trend channel.  It turned back from the 200 SMA today on heavy volume.  It did a number of tests of the 200 before breaking it.  Now rejected with force from the underside.  This action looks like continued downside is in the cards to me.  What do you think?  Is the bubble starting to unwind?  I am starting to hear a lot more talk about this situation.  Some people are questioning whether this is some kind of indication the economy is not as strong as people think.  It makes sense to ask that question since small caps are very much affected by the U.S. economy.  The bloom is off now for sure and the over valuation makes it unlikely IWM will find a durable bottom without going considerably lower from here.  It is hard to believe that SPX will continue to hold up in that scenario.  Everything technically is consistent will a bull market top.  Be careful.


Monday, May 19, 2014

Daily update 5/19

Friday's bounce continued today.  Here is the daily SPX chart.

SPX closed right at our familiar resistance line.  This was one of the lightest volume days of the year.  Not much conviction there.  Speaking of a lack of conviction SPX had 12 stocks making new highs.  We were in the 40s the last time we closed up here.  I am beginning to think we are going to hang out until there are no stocks making new highs.  Lets zoom in to the SPY 60 minute chart.

SPY found resistance at the 5/14 low (red line).  It is above the 50 SMA yet again.  The trading range continues for now.  The volume pattern is still mixed with big red and green bars.  We have a sizable crowd on both sides of the trade here.  The question is which group is the smartest.  The extreme low number of  new highs suggests it is the sellers who will be right.  Some day the range will be broken and we will find out.

This is getting rather boring.  We have the 50 DMA as support and 1885-1900 as resistance.  Internally each push up looks weaker to me.  Some kind of news event that sparks real buying is needed to break out on the upside.  I am not sure a catalyst is needed on the down side.  We are clearly running low on dip buyers.  They will run out without getting upside satisfaction soon.

I can't recall ever seeing the market look this tired before.  There is next to nothing holding it up.  What happens when it does go down?


Friday, May 16, 2014

Daily update 5/16

Yesterday afternoon's bounce continued this afternoon.  Here is the daily SPX chart.

SPX probed below the 50 SMA this morning, but did not break down and eventually bounced in the afternoon.  It ended the day below the 18 SMA.  Do you notice anything odd about this chart?  Today was option expiration and yet the volume was higher yesterday then today.  Usually expiration day is the highest volume day of the month unless there is a big sell off.  Probably not important, but it is odd.  Since 4/28 SPX has probed below its 50 SMA on four days, but has bounced every time.  The last bounce made a slight new high and yet we failed to launch.  The more a level is tested generally the weaker it gets.  If we don't launch here very soon that MA will break.  Very unusual pattern as most of the time it breaks on the third test.  Lets zoom in to the SPY 60 minute chart.

SPY ended the day right at the 100 SMA.  It added another distribution bar this morning.  Clear as mud what it is going to do isn't it?  SPY is above the 18 SMA, but that MA has a pretty severe down slope so a break above is not very reliable.  This could roll over just as easily as continue up to the 50.  Lets zoom out to the weekly chart.

SPX closed above 1880 only once on a weekly basis (just barely at 1881).  It is clearly forming a very tight range.  It should be getting ready to do something soon.  For sure it is going to put me to sleep if it keeps this up.

I don't have any idea what happens on Monday.  With four trips below the 50 DMA already I don't think SPX will survive another one.  So the bulls need to get it going to new highs and beyond pretty soon.  Failed break outs often lead to big moves in the other direction.  SPX clearly failed the break out to a new all time high on heavy volume.  If we roll back over and break the 50 DMA it should continue down a good significantly.

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


Thursday, May 15, 2014

Daily update 5/15

I got back a little earlier then I expected so here goes.  Clearly something rattled investors today.  All I can find are some comments from David Tepper.  He said "I'm not saying go short, I'm just saying don't be too frickin' long right now" and "The market is dangerous right now."  I have seen him interviewed on TV a few times over the last few years and he has been a raging bull and made a lot of money being long.  His comments could carry some weight.  Here is the SPX chart.

SPX crashed back down through 1885 on a surge in volume.  The 50 SMA held as support for now, but that looks like a failed break out to me.  Lets look at the SPY 60 minute chart.

Now that was some volume this morning.  I see the afternoon bounce had pretty decent volume also.  Never fear, the dip buyers are here.   Once again we have a confirmed break of the 50 SMA.  Will it continue down this time or reverse yet again?  Lets look at the breadth chart.

The 10 DMA breadth lines had a negative crossover for the first time in weeks.  The McClellan oscillator has been in and out of negative territory lately.  This is the third time since early March they have been negative together.  Is the third time the charm for the bears?

This market has been extremely choppy and keeps switching back and forth.  However, IWM clearly failed at the 200 DMA.  The QQQ has tried 3 times to get above the 50 DMA and looks rejected again.  SPX has a potential triple top.  There are so many divergences I can't begin to count them all.  Does any of this matter or will SPX continue to ignore anything negative?  It seems like it might actually correct this time, but then again maybe the bulls have yet another magic trick.

This crazy market is hard to predict day to day.  The late day bounce might continue to retrace some of the down move.  SPX is still above the 50 DMA at this point so the bulls might come out.  If we continue down tomorrow a close below the 50 DMA should see follow through in the days ahead.  The 100 SMA is the next key level down at 1846.


Wednesday, May 14, 2014

Update 5/14

Late day sell off.  Here is the SPX daily chart.

SPX tested the support line today and held.  Will it bounce or break?  One day off of a new all time high close we had 13 SPX stocks make a new high.  That is pitiful.  Since Monday's buying spree we have had two days of negative breadth and no real sign of any buyers.  I said on Monday we are not particularly over bought because of the sideways range the last two months.  There is no excuse for the bulls here.  If they do not show up and drive this market higher it is because price is too high.  What else can it be?  Lets take a look at the SPY 60 minute chart.

We got some more distribution bars today.  SPY got a confirmed break of the 18 SMA this afternoon.  However, Monday's big gap up could provide support.  We got down near that important support today and held it.  The bulls may come out to defend that level tomorrow. 

Today confirmed yesterday's bearish looking shooting star.  The lack of any follow through does not bode well for bulls.  IWM closed back below its 200 SMA and gave up more then Monday's big 2% gain over the last two days.  I think more and more people are noticing the weakness in small caps and wondering why.  People are also starting to ask questions about why interest rates are falling.  Economic weakness is definitely one possible explanation for both phenomenon.  If enough people come to that conclusion there could be more selling pressure then we have been seeing so far.  The economic data may become important again.

I will not be able to do an update tomorrow.  I should return on Friday.  SPX 1885 is the first key support.  The 50 DMA (1867) is next in line.  If this market fails here expect volatile summer trading.


Tuesday, May 13, 2014

Daily update 5/13

No follow through today.  Here is the daily SPX chart.

Today's bar looks a little like a shooting star.  The upper tail was not very long though.  SPX managed to close fractionally above the prior intraday all time high.  The breadth was 57% negative and there were only 143 new highs.  Poor internals continue.  After the 4/1 thrust bar to a new high the next day saw an increase in new highs.  Not the case today despite trading at a  new all time high over 1900.  Lets take a look at the SPY 60 minute chart.

After another gap up and a slight push higher in the first hour SPY pulled back a little bit and went sideways the rest of the day.  No sign of excited break out players piling in that I can see.  Will buyers show up in force tomorrow?

All market internals remain weak.  This could easily turn into another top.  The bulls need to come out and show some strength.  IWM was down over 1% today.  There just does not seem to be any real conviction by the bulls.  If that conviction does not show up very soon I suspect the bears will pounce.  The market is clearly vulnerable at the moment.  A close below today's low would be slightly bearish.  A close back below 1885 resistance would indicate a failed break out and could bring on some selling.  This is May and we have an obvious triple top staring at us.  Below the 50 DMA (1867) the market could get some serious selling.  I don't see anything that gives the bulls an all clear yet.  We need to see some significant upside follow through and a surge of new highs.


Monday, May 12, 2014

Daily update 5/12

The bulls woke up in a good mood today.  Test of April high in progress.  Here is the daily SPX chart.

SPX made a slight new closing high.  It fell fractionally short of a new intraday high.  The breadth was strong at 75% positive.  New highs on the other hand were only 155.  We had 261 at the March high, and 186 at the April high.  SPX highs in the same period were 84, 65, and only 47 today.  Contrast that with Dec. where we had 128 new highs in SPX stocks.  It still does not look like we are preparing to break out and go higher to me.  I guess we will see.  Lets take a look at the SPY 60 minute chart.

SPY added another accumulation bar on this time frame this morning.  The pattern is still rather mixed though.  Most of the gain today came in the first hour and was likely mostly short covering.  We will have to wait and see if buyers are ready to push prices higher from here.  Lets zoom out a bit to the 195 minute chart.

SPY has traded sideways long enough that the 50 and 100 SMAs have come together.  The volume pattern was showing a lot of big red bars in March and April, but those have calmed down since the April low.  That would seem to indicate less selling pressure the last few weeks.  However, the market is still struggling to go up.  Is the selling pressure completely done or will it come back?  What happens if it does come back? 

SPX is testing a key level.  Since it consolidated the last couple of weeks it is not in an overbought state.  There is no excuse for the bulls if it turns back again.  The new high data is showing divergences.  The bullish percent indicators and the number of stocks above their 200 MAs are doing the same thing.  That is on top of the obvious QQQ and IWM divergences noted before.  This leads me to believe that if SPX turns back here it will sell off harder then it has so far this year.  Will people be willing to push prices higher into all time high ground with those divergences and this being May?  I guess we will find out.  I would not be surprised to see a hanging man bar tomorrow.


Friday, May 9, 2014

Daily update 5/9

The Dow eked out a slight new high close.  It was the only major index to do that today.  It is now a whopping 7 points above the 12/31/13 high.  I wonder how much hoopla they can create in the media on that, LOL.  At this pace everybody will be rich enough to retire soon.  Here is the daily SPX chart.

SPX closed 12 points below its all time high close.  There were a whopping 15 new highs in SPX stocks.  On an up day this close to the highs that is really abysmal.  Across the NYSE there were only 64 new highs compared with 56 new lows.  This is not a healthy market.  SPX has a doji weekly bar showing indecision at major resistance.  Volume was light today.  Lets take a look at the SPY 60 minute chart.

SPY added another distribution bar this morning.  We are getting quite a few of those now.  The rally the rest of the day came on light volume.  Even the last bar push up to the close was light.  SPY closed once again above the 50 SMA.  Not a confirmed break, but then again does that really matter.  It has been confirming breaks in both directions and reversing.  I don't see anything in this chart that makes me believe it will stay up there this time.  Lets zoom way out and look at the monthly SPX chart.

Last month was a hanging man bar.  That means a monthly close below last month's low would be confirmation of the potentially topping bar.  Oddly Feb. and April were outside months.  There have only been two of those previously in this entire bull market Jan. 2010 and Oct. 2011.  It seems pretty odd to have two of them close together.  Recent outside days on the daily chart have been bearish.  Will these monthly bars turn out to have the same meaning?  The volume in March and April increased over the prior month despite not going anywhere.  That hints at distribution on this time frame.

This market looks about as tired as I have ever seen it.  We had almost as many new lows today as new highs with the Dow at an all time high close.  That just ain't right.  I suspect there will be an about face next week.  Bears need to see a break of the 50 DMA (1865).  Bulls need a hell of a break out to new highs with a lot of volume and a bunch of stocks making new highs.  That seems pretty unlikely to me.  I guess we will see.

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


Thursday, May 8, 2014

Daily update 5/8

I guess some people think it is a good idea to sell in May.  Here is the daily SPX chart.

SPX tested the 1885 area once again and once again was turned back.  I believe the bulls have run out of chances.  Key support is the 50 DMA (1865).  This market looks like a bunch of dominoes standing in line.  The dominoes started falling two months ago with IWM and QQQ.  It has spread to many stocks as more and more are breaking down.  The market is running out of dominoes.  I think it is now time for SPX to fall.  Breaking the 50 DMA is likely to unleash a lot of selling.  Lets zoom in to the SPY 60 minute chart.

Quite the little run up and reverse there.  We had pretty good volume in the afternoon on the move down.  SPY ended the day back below the 50 SMA yet again.  Is it going to stay there this time?  Lets take a look at the SPY daily chart.

SPY is showing a short term triple top, but remember this is happening inside the bigger triple top marked on the SPX chart above.  Notice the price bars of late.  We had a doji and inverted hammer last week.  Now we have a hanging man yesterday combined with a doji today.  That pattern is known as a Shanghai duo.  This is not a pattern written up in a book.  It was named by David Elliot of the First Wave web site.  The March 2009 low was made in the same manner.  This pattern needs confirmation of course.  If tomorrow is down it is likely to be extremely important.  With the market falling apart internally this would make a perfect bull market ending pattern.

I like small patterns inside of bigger patterns.  Tomorrow is a key day to confirm the bearish looking charts.

I forgot to mention this yesterday so here goes.  Janet Yellen mentioned that small cap stocks could be over valued.  That is hardly something to be taken lightly.  They are so extended even the FED acknowledges it.  They have a long way to fall before this is over.  They will be a big negative force on the rest of the stock market.


Wednesday, May 7, 2014

Daily update 5/7

The bulls came in today trying to hold the market up.  Here is the daily SPX chart.

SPX dropped below the 50 SMA for a bit this morning and the selling just stopped.  The market floated up the rest of the day amid bouts of selling into strength.  A big push at the end of the day made it look better then it probably was.  The volume picked up today, but a lot of that was in the morning sell off.  Will the bears show up again tomorrow?  SPX is on thin ice and still below key resistance.  Lets have a look at the SPY 60 minute chart.

SPY may be forming a down trend channel.  It ended the day at the upper channel line and the 50 SMA.  A perfect place for the bears to attack from if they so desire.  The first hour sell off had considerable volume and added to the distribution bar count.  SPY did not get above yesterday's high. Will it break out of the channel tomorrow or be turned back?

I want to take a look at a monthly percent change chart of SPY, IWM, and QQQ tonight.

Throughout this entire bull market SPY, IWM, and QQQ have topped in the same month whenever they corrected.  That is until now.  There is quite the disparity at the end of this chart.  IWM and QQQ are primary risk on/off indexes.  They are in risk off mode even if SPY has not fallen yet.  Something is different this time.  I am having a hard time believing that SPY is not going to join them at some point.  The VIX remains low and there is no panic in the air simply because the Dow and SPX have not caved in.  The bulls point to them and say all is well.  This does not look like all is well to me.  I guess we will see.



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