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Trend table status

Trend

SP-500

R2000

COMPX

Primary

? 3/31/20

?- 3/31/20

? 3/31/20

Intermediate

Dn 4/3/20

Dn 3/20/20

? 5/8/20

Sub-Intermediate

Up 4/20/20

Up 4/22/20

Up 4/17/20

Short term

Up 5/20/20

Up 5/20/20

Up 5/20/20


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 (-)

Tuesday, May 26, 2020

Target hit 5/26

SPY closed the gap at  300.


SPX opened above the 200 DMA and stayed there until a sell off in the last 30 minutes.  This is a logical place for short term traders to take some profits.  Some kind of pullback or consolidation would be normal.  I don't believe we will close that last gap for quite some time.  The economy is clearly not going to be able to get back to where it was in Jan. for a considerable period. 


The green count reached overbought levels today.  The short term indicator is also in the overbought area. 

The FED liquidity caused a lot of buying, but the momentum has clearly slowed.  I think upside progress from here will be tough to come by.  I saw some option data that suggested retail investors were heavy buyers on this rally.  The Robinhood brokerage also put out some data suggesting the same thing.  In that light the AAII sentiment survey is pretty interesting.


The number of bears in the survey is still very high at 45%.  Investors are not particularly bullish.  Was a lot of the buying from retail traders rather than investors?  If the bulk of the buying since the bottom is from short term traders we will most certainly retest that low.  We could see some turbulence now that the 200 DMA has been hit, but not necessarily a roll over into a retest of the low right away.  There could still be plenty of dip buyers out there.  Until SPX breaks the 20 DMA swing traders should still be looking to buy dips. 

A lot of people are wondering if we are back in a bull market or not.


For the answer to that question we can look at the bottom panel at the long term bull pressure lines.  The green line needs to hit the blue line to signal a bull market.  There is no all clear sign here.  What does the monthly chart tells us?


I wish I knew!  Since Jan. 2018 it is possible SPX is tracing out an expanded volatility top.  However, it is still above the trend line from the 2009 low.  It also looks like SPX will close back above the 20 SMA.  A retest of the low will clearly end the bull market.  Since we just had the longest bull market in history is it logical to expect it to keep going up while the economy is in recession?  Since we just had the biggest crash in employment in history is it reasonable to expect everybody to be hired right back and for the recession to have an imminent end?  Is it reasonable to expect some businesses will not reopen after this economic shutdown?  We could see a wave of defaults that causes pain for markets.  Commercial real estate is of particular concern.  Since I do not have an all clear sign at this time I am very cautious longer term on this market.

Peace and good health to all.

Bob

Friday, May 22, 2020

Slow uptrend 5/22

The market proceeded higher this week as expected last Friday.  The slow uptrend remains in tact, but it is really slow.  SPX closed Friday only 2 points above the Monday close.  The last four days consolidated that move.  It may be ready to try for higher again next week.


SPX is consolidating just below the 100 SMA.  That 200 DMA is not far away.  There might be some sellers in that area. 


The futures show a bounce off the 20 SMA.  This is a good setup going into next week.


The green line is above 50 and the short term indicator is rising.  The bulls are still in control.


The medium and intermediate term indicators are also rising.


Here is a look at the active money managers sentiment index.


The peak so far on this rally came at the end of April.  There was a little bit of selling in May.  At today's close SPX has only gained 43 points since the end of April.  The big guys have been a minor head wind.  This next table is interesting.


Between 4/15 and 4/29 the NAAIM number went from 28 to 78.  That was a period of significant buying.  In other words they did not buy all that much in the early part of the rally.  SPX was 2783 on 4/15.  If SPX drops below that number in the future it could increase the selling pressure as those late April buyers would be under water.  The bullish number at 200 means the most bullish survey respondent was 200% long.  The bearish -50 means the most bearish respondent was 50% short.  With SPX below the 200 DMA being 200% long seems a bit risky.  The 50% bearish number means there could still be some short covering (but probably not a lot) to help push SPX higher if it keeps rising. 

Everything seems to be pointing higher, but upside progress is likely to continue to be slow. 

Have a great Memorial Day weekend.  While freedom may be somewhat restricted at the moment let us not forget all those brave men and women that gave their life for this country!

Peace and good health to all.

Bob

Friday, May 15, 2020

Pullback over? 5/15

The bulls came out to buy the gap down this morning and closed SPX above yesterday's high.



SPX closed back above the 20 SMA after just two days below and no confirmation of a break of that line.  That setup is usually bullish.


The futures consolidated just below the 50 SMA today.  This could still turn down on Monday, but if the futures are up they should continue higher next week.


The green count just crossed below the red line.  The overbought condition has been worked off.  The first cross after a strong rally often brings out the buyers.


The bull pressure chart shows the last peak came with the short term red line (top panel) above the green line.  The market was out of gas.  The long term chart in the bottom panel needs to get the green line above the blue line to give a sign the bull market is back on.  It still has not cleared the red line.  Usually bear market rallies last long enough to get that cross.  Of course we are in an unprecedented situation so history is not as useful as usual.  


Unless there is bad news over the weekend it looks like the market wants to try up again.  The 200 DMA could act as a magnet since we got fairly close before this pullback.  If the market turns back down the 50 DMA should catch it and it might only retest the recent low.



Have a great weekend.

Bob

Thursday, May 14, 2020

Top heavy rally 5/14

The rally off the March low as been top heavy as we know.  Here are an interesting chart and some words from SentimenTrader.


Some combination of FAANG or FAAMG (Facebook, Amazon, Apple, Netflix - or Microsoft - and Google) has been handily beating most other stocks. And that matters, because those stocks are huge, and they're driving a big portion of the gains.
In the 35 days since the March 23 bottom, the top 5 drivers within the S&P 500 have accounted for 138 points out of the total 565 that the S&P has gained. So, only 5 stocks have accounted for more than 24% of the total point gain.
We looked at every 35-day rally off of a 52-week low over the past 30 years and compared those that were the most top-heavy versus those that were more evenly spread, meaning the top 5 stocks made up less than 20% of the S&P's gains.
There was a very stark difference between the two, with top-heavy rallies not faring well.

Here is a look at the tick signals on this rally so far.


I count 6 tick accumulation signals and 2 almost.  There are 8 tick distribution signals.  Here is a look at what happened coming off the Dec. 2018 low.



Between the Dec. low and early Feb. there were 8 accumulation (1 almost) signals and 1 distribution (3 almost) signal. There was very little selling by money managers in the early stages of that rally compared to the current rally.



The futures got really oversold short term this morning as they hit the 100 SMA.  That combined with news the president would consider more fiscal legislation brought out the buyers.



I just set up this new look at market internals.  The red lines mark overbought and the green lines mark oversold.  Obviously the market was extremely oversold for a prolonged period of time.  That is very unusual.  The short and mid term charts were showing sizable negative divergences at the last peak as the market was thinning out.  The long term line has dropped below its moving average for the first time on this rally.  It spends most of its time above 50 in a bull market.  Obviously there are a lot of broken stocks after that big crash.

Listening to money managers talk is interesting.  There is a camp that thinks the fiscal stimulus and FED liquidity is more important than economic fundamentals for the market.  Another camp believes the fundamentals are so bad they could override the liquidity factor and push the market down longer term.  Looking at the tick signals makes me believe the fundamental crowd has the stronger opinion.  Without some really good news out of the medical community regarding a solution to the virus in the near term a retest of the low is still possible.

We could stay in a trading range for some time while investors gauge how the reopening of the economy goes.  Economic activity is certain to pick up in the months ahead, but how much?  That is the question on investor's minds.  I am not going to pretend I know the answer.  This is the most uncertain situation the market has ever had to deal with.  Back in 1918 during the last major pandemic there were few people in the stock market.  We have a much different situation today.  Conviction about where the market is going might be the one thing we should not have at the moment.

The big question is whether this rally has more to go.  The way the dip buyers have stepped in over the last few weeks it is hard to say it is all over just yet. SPX is still above the 50 DMA which could hold as support if the pullback continues.  A move up to test the 200 DMA is still a possibility.  I need more evidence to conclude the rally is over.

Bob

Monday, April 20, 2020

Update 4/20

It looks like the rally is running out of steam as SPX hits the 50 DMA.


There was another tick distribution signal today.  That makes 3 in the last 6 days with only 1 almost accumulation signal. 



The futures found support at the 20 SMA.  A break of that MA could lead to a pullback to the 50.


The green count has been dwindling over the last several days.  The rally is getting thin.

Bear market rallies often have some kind of consolidation near the highs.  It is rare to do an inverted V top.  However, this situation is unlike any in history.  I view this as purely a technical bounce from a deep oversold condition.  I am not sure how the big money fundamental investors feel about things.  The way the economy gets opened up again is leaving a lot of questions. 

In the short term the market looks like a pullback from the 50 DMA might be in the cards.  The question is whether the buyers show up strongly again if we get a dip.  I don't have a clue.  This is a play by ear situation if there ever was one.

Bob

Wednesday, April 8, 2020

Update 4/8

Yesterday's weakness was met with buyers this morning.


There was another tick accumulation signal today.  So far 3 distribution and 3 accumulation signals on this rally.  The blue line is the next gap to fill assuming the market continues higher.  The red lines mark important lows from 2019 and could be an area with some overhead resistance.  The higher red line is the most important one.


SPX has run into the bottom of the Keltner 50 channel which often provides a pause or pullback in a situation like this.


The futures closed above the 100 SMA.  They stopped in the area of the prior high.  They need to confirm a break of that MA with a higher close.  At the moment this is a poke through and this line sometimes is fairly stiff resistance.  The futures held above the prior rally highs confirming the green line as support for now.  As long as that line stays intact the rally should also be intact.


The green count is well into overbought territory.  That often slows upward momentum or causes a pause.

All three charts are showing some potential resistance in this area.  The red/green count shows a short term overbought condition.  A short consolidation to let the shorter daily chart MAs catch up is possible.  There are still gaps to potentially fill above.  I don't see anything to indicate the rally is about out of steam, but it may pause here.

Peace and good health to all.

Bob

Monday, April 6, 2020

Daily update 4/6

A strong day on the possible bending of the curve.


This 5 minute chart of the futures shows some odd action late day.  The futures rallied 40 points after 3:30 and then dropped 20 points in the last 5 minutes.  Beats me what happened.


The daily close on SPX reflects about half of the late drop in the futures.  Breadth was a strong +89%.  The most obvious pattern here is the upside island reversal which are pretty reliable patterns.  Some people also see a J hook pattern.  The close above the recent high is also a positive sign. 


The futures are above the recent highs.  The chart looks bullish like the daily SPX chart.  I suppose this could turn out to be a double top, but that would probably take some bad news to make that happen.  The 100 SMA is the first target at 2739. 


The green line is above 50 after a bounce cross of the red line confirming the bulls are in control.  One thing to note is the intermediate indicator reached the lowest levels seen since the last bear market in 2008.  Not surprising given the magnitude of the crash.  The market has considerable repair work to do.

SPX is in the middle of some open gaps.  There are three open gaps above from the 2/21, 2/27 and 3/9 downside gaps.  Below we have two open gaps.  Today and the one from 3/24.  It will take a very volatile market to close all those gaps. 


There was no tick accumulation signal today.  It is not surprising money managers did not want to chase the big upside gap.  If we see some dips they might come in and do some buying.  It will be interesting to see how many more signals we get if the market continues to rally.


This is a look at the signals at the late 2015 and early 2016 lows which both had a retest.  Notice there were more accumulation signals than distribution signals between the initial low (Sept. and the other one in Jan.) and the retest.  In each case there were way more up arrows into the middle high than red arrows.


This is a look at the 2011 low.  The overall pattern from low to low has one more down arrow than up.  However, the first leg up into the 8/31 high has 11 up and only 5 down.  The other little bounces had more up than down arrows also.




This is a look at the 2010 low.  This was a complex pattern to say the least.  Across the entire bottom from late May into late Aug. there are over twice as many up arrows as down.  Each bounce also had more up than down arrows.

Using that same kind of analysis no matter what the ups and downs turn out to be we want to see more up arrows on rallies than down arrows. 


The bull pressure chart should help us out.  The red line in the bottom panel confirms we are in a bear market.  To ensure the bear market is over the green line must get above the blue horizontal line.  Once that happens the bull market should be back on.  SPX should be back above the 200 DMA by that time.  If the green line in the middle panel gets above its horizontal blue line the risk of a retest would be greatly lowered.  In this bull market the only time a low was retested was the double bottom in late 2015 that was exceeded in early Jan. 2016.  In that instance the green line in the lower panel did not get above the blue line.  If the current rally rolls over before the middle line gets above the blue line a retest of the crash low would be highly likely and based on past history a lower low would be probable. 

The only crashes in history that compare to this one are 29 and 87.  In 29 there was a crash low in Oct. and bounce.  The  bounce only lasted 2 days and over the next 7 days the Dow made a new low, but only the last two days were below the Oct. low.  I guess that was kind of a double bottom.  The Dow rallied about 50% into April 1930 before crashing down again to new lows and of course the great depression followed.  In 1987 SPX bounced off the Oct. crash low then retested that low in Dec. with a higher low before continuing the rally.  In 1987 there was no recession and the market never traded below the initial crash low. 

The global economy has been shutdown like never before.  We are in a global recession unlike any in past history.  No human is smart enough to know how this all plays out.  It seems unlikely we will see a V bottom type economic recovery because the virus is not going to suddenly go away.  It will take time and some parts of this country might open up before others.  That is probably true for the entire world also.  At the end of the day the market is going to react to what happens to corporate earnings.  We know they are crashing now, but where will they settle out?  How fast will they rebound?  Nobody knows.

I am confident I will know when the bear market is over by the bull pressure chart.  How the price action plays out between now and then I have no idea.  I wonder how many people that got seriously hurt want to raise cash on this rally.  Isn't that kind of selling what usually causes a retest of the low?  In the short term the market is in rally mode and my task is to catch a roll over if it happens.



I mentioned the book I have been working on in telechart chat today, but for those readers that are not on the Worden Brothers software I want to update.  I have completed a draft which is in the hands of my editor AKA my wife.  The title is the "The Default Hypothesis: God Really Does Exist".   As you can see it has nothing to do with trading.  A key part of the book is a look at how nature and science point to the existence of God the creator.  The Lord showed me a lot of information that shoots giant holes in the theory of evolution.  That theory should have been thrown out decades ago.  Once the final edits are in I will have to work on getting it published.  That should not be as time intensive so I should be able to post on the blog more often.  I probably will not go back to daily postings, but I will try to post whenever I see something that looks important.

Peace and good health to all.

Bob

Thursday, April 2, 2020

Update 4/2

Bulls make a stand based on hope for the price of oil.  There was a tick distribution signal despite today's rally.


SPX closed slightly above yesterday's high because of a furious late day rally.  Unfortunately those last hour moves are not very reliable for future direction.  Breadth was +56% which is not especially strong.  It was even slightly negative with 20 minutes to go.


The futures found some support at the 50 SMA.  The rally today ended at the 20 SMA.  Tomorrow should break out above the 20 or below the 50.  In between those lines market moves are just noise.

The tick signal came during an afternoon sell program.  SPX rallied 35 points in the last 20 minutes to get the close above yesterday's high.  Somebody wants the market to go higher.  I don't have a clue how this plays out.  If the bulls come out to play again SPX might test the recent highs and then roll over and test the low.  We will need to see more strength in the days ahead if the market is going to break out above the recent highs.  Closing below yesterday's low should tip the scales to the bears for a retest of the low.

Peace and good health to all.

Bob

Wednesday, April 1, 2020

Update 4/1

The bears came out to play again today.  There was a fresh tick distribution signal.


SPX appears to have been rejected at the 20 SMA yesterday with downside follow through today.  Breadth was -92%.  That could be enough to kick start a move to retest the low.


The futures show a double top pattern and are currently testing the low in the middle.  The bulls still have a chance to rally the market here, but I think they must show up tomorrow in force. 

The virus case  news is only going to get worse for the next few weeks according to the experts.  The economic data is clearly going to get worse.  The only good news I can see for the market would be related to treatment of the virus.  I have no idea how to analyze that.  Does the market have a clue how to analyze that?  The bulls need to prove they area willing to step up and buy or the market is headed lower.  We will see if they are up for the task tomorrow or not.

Peace and good health to all.  Stay home and stay safe.

Bob

Wednesday, March 18, 2020

Update 3/18

SPX took out the Dec. 2018 low and fell somewhat lower.  However, it bounced going into the close and ended the day above that low.


There is a possibility the Dec. low holds for now and causes a bounce.  It is along ways down to the next support level so that would be a good thing.


The futures show the break below the recent lows and recovery back into what looks like a consolidation.  This is the best looking bounce setup yet.  Will the bulls step through the door?

What I am looking for as a good indicator of a short term bottom is for the VIX to plunge at least 13% in one day.  We have had several big bounces, but the VIX did not meltdown on any of them.  It is up to the bulls now.

Peace and good health to all.

Bob

Monday, March 16, 2020

Update 3/16

I did not expect the FED to act over the weekend.  The action of cutting a full point Sunday night and ramping up QE indicates they expect a recession is unavoidable at this point.  The FED has now fired all the ammo they have.  I have been worried about the next recession for years because I believe there has been a gross misallocation of capital because of the extended period of low rates.  A lot of investors were buying all kinds of risky bonds to get the higher yields.  I think a lot depends on how fast we can get this virus under control and get the economy running again.  Too long a recession will probably start causing considerable financial stress.  I have no idea how long is too long.  There is far more uncertainty in the economy now than anytime since the early 30s.  I don't think there is any hurry for investors to rush in and buy.


The weekly chart shows SPX is approaching the Dec. 2018 low.  Everybody that bought into SPX last year and still holding is underwater.  I suspect that is a considerable amount of people due to the rapid decline.  About the only thing I can predict is that the market will be volatile for quite some time.  We just blew through a number of potential support levels as if they were not there.  Emotions are running the market and there is no way to analyze that technically.  If the emotions were not enough of a problem we are in the dreaded margin debt unwind I have been talking about for years. Back in 2017 in Daily update 4/5 What Could Possibly Go Wrong? I wrote:

"I was listening to one analyst today saying he did not see the ingredients for a big decline.  Here is the problem I have with that statement.  If one studies the history of the market and margin debt it becomes obvious that high levels of margin debt relative to GDP (>2%) have caused more crashes (including 1987) then any other factor.  We have record levels of margin debt today.  The ratio to GDP is lower then it was in 1929, but probably a record high otherwise.  Margin debt is like a loaded gun.  It can sit around and not be a problem for a very long time until the trigger gets pulled.  All of a sudden the market is crashing uncontrollably.  Wall street has many ways to measure risk, but they never include margin debt.  I understand that because the risk can't really be quantified.  Just because it can't be quantified does not mean the risk does not exist.  In my book margin debt is the single biggest risk in the market any time it is above 2% of GDP.  Its north of 2.5% now.  However, it has been high for years.  That is the very trouble with it.  Nobody knows when the trigger will get pulled.  So while things are calm and the volatility is very low the market could still crash much more severely then people think.  The problem is it may not happen anytime soon.  This is a subject that has bothered me for years when doing this blog.  I am 100 percent sure there will be a very ugly margin debt unwind some day.  But when.  It is highly likely to happen during the next recession.  When the market sniffs out a recession is coming people will unload in mass and surely trigger many margin calls.  That is why I spent so much time going through the economic data in 2015.  I want to know as early as possible when a recession is happening. "

I never expected a virus to be the culprit for a crash.  I have no idea how this plays out and I see no point of guessing.  I think we are in a full fledged bear market and rallies will be sold by the pros.

Peace and good health to all.  Stay safe.

Bob

Friday, March 13, 2020

Update 3/13

Much better.


The futures were limit up at the open.  The sellers went to work right away and SPX gave up much of the gains before buyers stepped in.  Breath was strong at +86%.  Volume was very good also.  This is the best bounce set up yet.  Will the bulls show up on Monday?

The FED is expected to cut rates on Wed.  I heard some saying 1 point.  I doubt that.  A cut of .25 seems to be what the FED fund futures are saying.  With a lot of bad news already out as far as travel restrictions and event shut downs and closings a rally is possible.  People also expect more testing and an increase in the numbers.  I think it is possible the market has discounted all that we know at the moment.  The ticks showed good buying today which started on central bank moves to support economies around the world.  The market rallied strongly during the president's press conference the last hour of the trading day.  Unless there is a negative shock over the weekend the bulls might be able to get a bounce going on Monday.  A rally into the FED announcement is possible.  I was thinking that yesterday's big crash down could have caused the need for a lot more margin calls again.  However, today's big rally leaves SPX just 30 points below yesterday's close.  A good bounce on Monday should take that threat away.  Maybe next week will be a little better for bulls.

For all March madness fans sad to hear it is cancelled this year.


Peace and good health to all.  Have a great weekend.

Bob

Wednesday, March 11, 2020

Update 3/11

SPX trying to hold support.


The green support line SPX is testing was from the June low last year.  SPX tested below the low of the last two days but bounced back.  Breadth was -94%, a level not often seen.  The down volume was 96% of total volume, another level not often seen.  New lows were 1121, down from 1606 on 3/9.  There were a lot of really negative tick readings and another tick distribution signal. 


The futures show some consolidation at the lows.  They are up from the 4 pm close as I write this.  This pattern could spring forth a bounce.  Time will tell.


The red count is over 90% again.  The intermediate indicator is below 25% so we should expect this low to be retested if we do get a bounce here. 

SPX closed at a slight new pullback low, but despite intense selling pressure it did not massively break down.  This kind of action has led to short term bottoms in the past.  If this low does not hold it is going to get really bad.  In that case you might want to put on your crash helmets.  I hope that does not happen, but until we get some lift it is a possibility.

I think the crash in oil prices has greatly increased the odds of a recession in the U.S.  The oil price crash that started in late 2014 slowed down the manufacturing data in the U.S. significantly.  However, the rest of the economy outside of production for the oil industry held up well.  In the current case the ISM manufacturing data has been down to 50 and below for several months.  Further slowing because of the oil industry would not be good.  In addition it is clear the services data will get hit hard with the virus.  I don't think there is any doubt about that.  Large gatherings are being cancelled all over the country.  The NCAA just announced today the games will be closed to the public.  It will still take 4 months or so before we would know if we are in recession and by that time the market would probably be much lower than it is now.  With this one-two punch it will probably be very difficult for the U.S. economy to keep growing no matter what kind of fiscal measures might be enacted.  You know the old saying prepare for the worst and hope for the best.  I believe that is fitting here.

Peace and good health to all.

Bob


Important

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