Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, November 24, 2014

Fed Still Pumping Up Stock Market

Stock Market Technical Analysis


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There has been misinformation coming out of the franchise news sites over the past few weeks that the reason the stock market reversed back upward after the farewell to QE speech six weeks ago and has been climbing to ever increasing heights since, has been greatly attributed to investors believing that QE wasn't necessary and that the market can climb with out it now having gone up 200+ S&P points in six weeks.  This all sounds good but the facts of public record show a different picture.

The chart above shows the size of the Fed's balance sheet in trillions of dollars with its once a week numbers posted above corresponding weekly bars of the S&P 500.  

  • 9/10 - the S&P starts showing signs of faltering, looking like it was about to roll over
  • 9/17 - the Fed injects 28 billion to see if it can stop the sell off from beginning
  • 9/24 to 10/13 - S&P suffers a staggering sell down
  • 10/15 - the Fed injects another massive sum of 19 billion to start a global short squeeze
  • 10/15 to 11/19 - Fed's bond buying / liquidity injections continue as normal even though  it has been officially turned off with the Fed's balance sheet increasing a massive 37 billion in the past six weeks

As long as the Fed continues injecting liquidity into the market, the S&P will likely continue to become even more overextended.  When will the market run end?  Very likely, the first week the liquidity injections show a zero for the week or an actual reduction in the Fed's balance sheet for the week.



Trade well my friends

Alan

Wednesday, November 19, 2014

Weekly Index Charts Holding In Overbought Condition

Stock Market Technical Analysis


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Taking a look at the weekly charts of the S&P and the NASDAQ, we see that both indexes are still holding at their maximum distance from their weekly 65 EMA lines shown in blue in the upper part of the two  charts.  Also, both indexes are still holding at the upper line of their expanding triangle patterns, an unnatural place to just hold when extended so far from the weekly 65 EMA line. 

Looking at the middle section of the two charts, we see that the S&P and the NASDAQ both just pegged the weekly 100 stochastic level after making a zero to one-hundred stochastic run in record time.  

Looking at the bottom section of the charts above, we see that the bearish RSI divergence that took the market down a couple of months ago is set up once again for doing the same.  

Normally, this is a textbook sell off situation ready to start but two things have to be considered:
  1. Friday is options expiration and Puts have been outselling Calls three to one.  We should have been seeing a quick move up in the market Wednesday and continuing into Thursday so that they can wipe out the Put holders but it's not happening.  It's unusual that we are not seeing this, pumping the market higher right before expiration has been free money for the option divisions of the big Wall Street firms the past two months.  
  2. The Fed is no doubt not at all pleased with how these charts look and how paired institutional marker trades continue to come through on the SPY.  If you are a bear you might not want to be the first to go short because up until now, standing in front of the Fed's stealth buying programs has not been a very healthy thing to do.
We will see...


Trade well my friends

Alan

Monday, November 17, 2014

Big Market Move Imminent?

Stock Market Technical Analysis


click on image to enlarge

In the market Monday we had another day of the horizontal tractor program that has been running the past week and a half on the SPY.  This is actually the second tractor program since the Advance Decline divergence began three weeks ago which I focused on in my previous article.  Chart 2 above has the two tractor programs marked in blue lines and shows the EMA pair whose up cross marked the beginning of the rally and shows that they still have not down crossed on the S&P.  However, in chart 3 we see that the NADSAQ had the same EMAs down cross midday Monday and chart 4 shows the Russell 2000 down crossed last Thursday afternoon.  It would have been another meaningless sit and wait day for the S&P except that there were very important trades after the close today.  

Looking at the top left corner of the cluster above, I have a time and sales log for the SPY showing after hours activity.  After the close, there were multiple institutional marker trades that the big Wall Street institutions send out when they have decided it's time for the market to start a new and pronounced move.  Team Yellen has been running the show with the two tractor programs for the past three weeks but Wall Street is signalling that it is time for that to end.  The trades were a pair of 1.10 mil block trades followed by a pair of 4.50 mil block trades.  Several times throughout the years I have brought attention to these same 4.50 mil and 1.10 mil marker trades when they have come through after hours.  The Wall Street institutions that send these trades through always have them paired and in these same amounts each time.  The reason being is to communicate clearly to the professional and institutional investment communities to be prepared for a big move in the market to begin soon.  We finally got both pairs this afternoon and if we look to the Bollinger Bands chart of the SPY with two hour bars just to the right of the log above, we can see that the Bollinger Bands have constricted about as tight as they ever get which happens right before a major break in one direction or the other happens.

The Advance Decline divergence chart in my previous article says the market is about to plummet like a rock, however, Team Yellen's tractor programs have somehow morphed from a rather sloppy narrow trading channel before the end of QE announcement to an incredibly powerful program that keeps the market locked tight in a very narrow channel regardless of any large sell orders coming through when the SPY is at the lower line of this tractor channel.  Only one of these two major market forces will have their way if the two are not in sync.  It is worthwhile mentioning that these same pairs of 4.50 mil and 1.10 mil marker trades came through the day before the 200 plus point S&P short squeeze started in mid October.  Logic now says that these marker trades are Wall Street's signal that the market is about to turn down.  However, there is that word, logic.  If you have been using logic for your trading in the past month then you probably had your head handed to you in a basket.  For those who are not aware, all after hour trades are masked as to whether they are a buy or a sell so you have to figure out whether the marker trades are signalling if the market is about to sell off or start another rally.  Yellen's PPT no doubt also saw the marker trades come through and I'm sure they realize that if they are going to start a short squeeze to make the market do what is widely viewed as impossible at this point in the cycle, their window to do so just became very small.  The questions now are these marker trades exits or entries and is the market going to break upwards or downwards?  

Either way, get ready because Wall Street has officially signaled that they are about to break the market out of these tractor programs with a pronounced move in the market very soon.  


Trade well my friends

Alan

Friday, November 14, 2014

Major Advance - Decline Divergence

Stock Market Technical Analysis


click on image to enlarge

There has been a lot of discussion as to what happens when the global short squeeze winds down to an end.  Many are wondering if this move is real or even sustainable.  The key to analyzing this question is to look at the market breadth of this huge move.  The Advance Decline Index is the easiest and most accurate way to see what is really going on behind a move.  The purpose of the index is to confirm that a move is real and sustainable by checking to see if the Advance Decline climbs as the rally climbs.  If the Advance Decline makes higher highs as the stock market makes higher highs then it is a confirmation that the rally is both real and sustainable.  If, however, the Advance Decline trends down as the market climbs  it indicates market manipulation as the Indexes are being dragged higher by a small handful of mega stocks and ETFs while the vast number of stocks are selling leaving fewer and fewer actually participating in the market move. 

Taking a look at the two charts above, the top chart is of the VTI (Vanguard's total market index ETF) which is a good representation of the entire stock market and is a very good match for comparing to the US stocks Advance Decline Index (shown in the lower chart).  We can see that the stock market has been climbing higher for the past three weeks while the Advance Decline has been down trending fast.  A textbook non-confirmation of the rally.  Historically, when this happens this is the ultimate buyer beware because a hard drop in the market may be imminent.  

Will the market drop happen?  In light of the all powerful tractor program that has been locked down on the market for the past week and a half and the manipulation that has gone on in the SPY and QQQ shamelessly, I would not go short just yet as they continue to show that they have no problem bulldozing reason, logic, and technical analysis to achieve their desired results in the stock market.


Trade well my friends

Alan

Thursday, November 13, 2014

Wednesday, November 12, 2014

VIX Finds Support at Lower Channel Line

Stock Market Technical Analysis


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In the market Wednesday the S&P took its first small dip giving the VIX a pop up from its lower channel line that it reversed up from on Monday.  Monday's VIX reversal led to the S&P dropping out of its three-week uphill channel Tuesday morning.  Since then the S&P has been sideways as they are very determined to keep it from dropping which almost all traders are expecting it to happen very soon because the VIX has a big EMA pair set up ready to lift which is shown in the lower left corner chart above.  This same EMA lift setup is what triggered the sell off to begin in late September.  

The lower channel line of the VIX is very well defined and technically the market should be beginning to roll over now.  However, they are fiercely determined to keep the market going sideways hoping that if it continues sideways long enough it might cause the VIX to drop on down through its lower channel line which would really change the dynamics of where we are at in this cycle.  Their efforts being applied against a very heavy market is why the market has become so stale and boring.  They know that if they don't break the VIX down through that lower channel line that the S&P could easily roll over and drop 210 points just as fast as it squeezed 210 points up from the sharp "v" bottom.


Trade well my friends

Alan

...and the Battle Begins

Stock Market Technical Analysis 


click on image to enlarge


Trade well my friends

Alan

Tuesday, November 11, 2014