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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.


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