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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.


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.


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.


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.


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.



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