Stock Market Viewpoint

Stock Market Viewpoint
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Tuesday, August 19, 2014

More Money Off The Table

Stock Market Technical Analysis Blog


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In the market today the current short squeeze continued to take the market higher even though the volume on the SPY and QQQ is falling substantially lower each day.  We have decided to reduce the remaining half of our long position (from our 7/25 blog entry and the second entry on 7/28) to a 1/4 long position as the S&P has reached its upper red channel line, shown above.  We suspect Team Yellen will want to test the 7/24  S&P 1990 high even though its horizontal line across is just barely above the upper red channel line.  If they don't goose it a little higher we will be quick to close out the remaining 1/4.

If we continue on up to S&P 1990 level we will close out the last quarter as it hits it.  If the market breaks out above it and then shows support on the top side of the blue line we will begin scaling back in again. Right at that 1990 line will be a dangerous place for both shorts and longs.


Trade well my friends

Alan

Wednesday, August 13, 2014

1/2 Off of the Table

Stock Market Technical Analysis Blog


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In the market today the indexes pushed higher with the S&P and the Nasdaq reaching the upper lines of their descending channels, shown in the left and middle charts above.  We decided to close 1/2 of our long position from the Friday morning and Monday morning entries as we customarily do when up against such a pronounced downtrend line.    Also, the VIX closed at its lower line of its uphill channel.  We will stay in the remaining half of the position if the market breaks out of that channel tomorrow and the SPY and QQQ show no substantial on balance volume divergences. 

This is another pivot and it is important that the market break out of this channel considering the quality of the EMA line bounce setup shown in chart 2 of my last blog.  

Trade well my friends

Alan

Friday, August 8, 2014

Another Pivot

Stock Market Technical Analysis Blog





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In the market this morning we had a pivot complete into a bounce setup.  Two weeks ago today we entered the S&P (SPY) short position and closed it today for a 4% account profit.  We entered a small long position today upon the technicals I will be discussing momentarily and will be adding to the position on Monday if we have follow-thru in the market.  

Looking at the charts:
  • Chart 1:  The red dot shows the entry on the short trade and the black dot shows the close of the position this morning.
  • Chart 2:  Shows a classic pair of EMA lines that are merging to a pivot with an upside bias.
  • Chart 3:  the weekly candles shows the S&P printed a weekly Reversal candle this afternoon.
  • Chart 4:  shows the S&P found support yesterday at the 50% Fibonacci level.
  • Chart 5:  shows the very precise 1 year up channel of the S&P with yesterday's low holding that line.
  • Charts 6 & 7:  are updated charts from my blog on July 25th where I discussed the key relationship between longside bond setups and stock market declines.  Looking at those charts closely tonight, we have seen very little change in the bond price but a drop in the S&P from its top channel line to its lower.  The setup on the bond chart is a large slow changing setup because they are very large EMAs but all investors have to be aware that this bond setup is positioned to lift if it has a sufficient catalyst which as seen in the chart historically causes sell downs in the stock market.  

A lot of investors are concerned right now, not knowing where the point might be where they would look back and wish they had exited stocks.  That lower trend line on the one year S&P channel is absolutely key.  If we have a weekly bar close below that line, stocks could take a substantial decline.  As long as we stay in the channel, the music will continue playing.

Trade well my friends
Alan

Friday, July 25, 2014

BONDS

Stock Market Technical Analysis Blog


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Tonight I would like to take a look at bonds.  The lower chart above is of the TLT (20yr bond ETF) with two rather large EMAs applied.  The upper chart is the S&P 500.  Both show 8 years of weekly bars trading.  Notice in the TLT bonds chart that each time the red line gets on top of the green line and starts pushing up from that green line, the stock market sells off and bonds rally as investors jump over to bonds for a while.  We are once again in that red/green EMA line lift situation in the bond market with all eyes on the stock market to see if history repeats itself.

Trade well  my friends

Alan

Monday, May 26, 2014

And NFLX

Stock Market Technical Analysis Blog


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Following up from my two previous blogs, where I showed how the QQQ broke through resistance Thursday afternoon and the Russell 2000 and AAPL broke through their resistance Friday morning; the chart above shows that NFLX also joined the party Friday afternoon, breaking up through the lower line of its mid-term channel.

Now lets see if these breakouts can sprout some legs.


Trade well my friends,

Alan

Saturday, May 24, 2014

Russell 2000 & APPL

Stock Market Technical Analysis Blog



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Following up from last night's blog about how the QQQ and Nasdaq's outlook is improving quickly, I would like to look at the IWM - Russell 2000 Small Cap Index which has plagued the Nasdaq for the past four months and also APPL, the 800 pound gorilla in the Nasdaq.


  • Chart 1:  Russell 2000, looking closely we can see that it has been contained in a very tight steep and well defined downhill channel the past four months.  It has tried four times to breakout and couldn't.  Friday was its fifth attempt and this time it actually broke out.  It's not hard to see why in that this last down wave found support at the lower line of its longterm channel.  If this IWM breakout follows thru Tuesday and Wednesday then the Nasdaq should be back in business.
  • Chart 2:  AAPL - for the past 16 months AAPL has been banished into the red line doghouse channel but Friday afternoon it broke up thru its upper channel line into its longterm blue line mother channel. If this APPL breakout also follows thru Tuesday and Wednesday then the key components, QQQ, IWM, & AAPL will be working together to take the Nasdaq higher and the odds will be in favor of going back to the March highs. 

The key words in last night's blog and tonight's is follow thru, it absolutely must happen.  This will be the bears goal line stand and if they see any weakness developing at all the tide could turn really quickly.

Trade well my friends

Alan

Friday, May 23, 2014

Could They All Be Wrong?

Stock Market Technical Analysis Blog



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If you have been following CNBC & Marketwatch.com over the past month, you know that virtually every prominent WallStreet technician and strategist has made detailed commentary predicting the stock market is about to take a fall of 10-25%.  These are people who make their living by being correct.  That is all fine but let's take a look at the charts where it can be seen that something else could already be beginning.

  • Chart 1:  the Weekly bars chart of the Nasdaq shows a symmetric triangle that started breaking to the upside this week.
  • Chart 2:  the Weekly bars chart of the QQQ, the driver behind the Nasdaq, shows an ascending triangle breaking to the upside this week.
  • Chart 3:  the 120 min bar chart of QQQ broke out of its short term channel Thursday much to the surprise of the bulls and bears (not to the surprise of Team Yellen, but that's another topic).  Going higher was not a consideration until the Thursday afternoon breakout because that upper QQQ channel line has been ruling the market very precisely and has been the token short play.  The upper breakout we see in charts 1 and 2 is the movement in the QQQ chart where I marked in the blue arrow on Thursday and its upper movement thru this afternoon.  
  • Chart 4:  Daily bars chart of QQQ shows what is being attempted, if they can just get the QQQ a little higher on Monday it will be back into its mother channel and a short covering frenzy could begin.   If it stalls where it is at, all bets are off and the market could get really volatile really fast.
  • Chart 5:  the S&P 120 min chart.  For the past several weeks the S&P has been a tool to frequently produce "new all time market high" headlines for Team Yellen.  It has been a bit of a dubious game in that you can let the S&P drop 10 points then squeeze up 11 points and create a new all time high, over and over.  The S&P is not what is moving the market now thru the SPY as it used to be. Numerous weeks ago they got control of it and they are maintaining this sideways channel to produce that frequent bullish headline.
Heads up folks...this may be a time to ignore what you think the market should do and must do and no doubt will do but instead have an open mind and take a look at what it is doing.  Thursday's QQQ breakout caused both triangles in charts 1 and 2 to begin their upward launch which measure high enough  to take the Nasdaq back to its Spring highs.  Nothing is a done deal of course, and any really bad news broadsiding the market could stall it but Team Yellen has proven to have the tenacity to take the market higher that is likely to surprise even Bernanke.  We are at record short interest levels now.  

To squeeze or not to squeeze?



Trade well my friends

Alan