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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.


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