Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, March 25, 2015

S&P and NASDAQ Lose March Channels

In the market Wednesday, the selling began accelerating as the indices followed through on slipping out of the March uphill green line channels from Tuesday.  Looking at the charts below, it is easy to see that the Nasdaq is in a lot better shape than the S&P as it is likely to catch support in its pink channel on Thursday.  However, the  S&P won't catch support on the lower line of its pink channel until it is nearly down to its lower line of  its long term blue channel line.  

Taking a look next at the VIX and VXX charts below, we see a fairly sizable reactionary move in the VIX but comparing it to the not so volatile move in the VXX, it looks as though traders are still convinced that Yellen's SPY and QQQ buying algorithms will save the day shortly as they always have.  I'm not sure that it is a good assumption to believe that Yellen will never, ever let this market have a substantial correction.

Trade well my friends


Monday, March 9, 2015

S&P and Nasdaq Diverging

In the market Monday, we had a modest up day as the key stock indices maneuvered to hold their twenty-day EMA lines, a token point for at least some sort of a bounce.  While both the S&P and Nasdaq bounced today, an interesting divergence has begun in their channel charts.  Looking at the sixty-minute charts below, we see that the newest channels shown in pink are affecting these two indices differently.  

In the first chart of the S&P, we see that the newly developed pink channel is trying to increase the rate of decline by forcing it out of the black line channel.  In the Nasdaq chart, the newly formed pink channel is doing just the opposite, it is trying to break the Nasdaq back up out of its black line channel.  This refusal by the Nasdaq so far to develop steeper declining channels is being helped by the fact that the Nasdaq found support Monday at the top of its long term blue line channel.  

Next, taking a look at the 120 minute VIX and VXX charts below:

The VIX, shown in the upper chart, is steadily climbing as more and more components of S&P 500 begin to roll over.  The VXX (VIX Futures ETF) has been moving sideways instead of up as VXX traders are taking a more cautious stance because they understand how easy it would be for the Nasdaq to bounce for several days here and lift the broad market with it.  If the Nasdaq slips down into its long term blue line channel, however, I expect the VXX to catch up with the VIX quickly.

Trade well my friends


Wednesday, March 4, 2015

S&P and Nasdaq Establish Declining Channels

In the market Wednesday, the stock indices suffered another modest loss as they continue to establish declining channels.  After peaking, the S&P and Nasdaq skipped the traditional two to three days of sideways movement and instead went directly into the black descending channels after leaving the secondary green line ascending channels shown in the charts below.

The selling that has materialized so far has not produced an equally comparable rise in the VIX and VXX.  The VIX & VXX moves remain somewhat subdued compared to the decline in the S&P and Nasdaq as shown in the charts below.  

Traders and investors remain complacent about the downward travel so far, likely assuming that the Fed's buying algos will be switched back on before any more damage is done to the S&P and Nasdaq.  This is probably a reasonable assumption but we will have to wait and see if they actually do step in and break the stock indices back up out of these descending channels for the purpose of building a second top.  If they don't we are likely to see a continued decline in the S&P and Nasdaq with a lot of bounces planned at every possible EMA pair and intraday channel to keep the shorts at a minimum.  

Trade well my friends


Monday, March 2, 2015

New S&P and Nasdaq Channels Come Into Play

In the market today, the S&P and Nasdaq bounced quickly from the open partly from a Nasdaq sixty-minute On Balance Volume divergence and partly from the new channels that have developed recently and have taken these two indices out of their four-week up channels.  These new channels are shown with green lines in the charts below.

Looking at these new green channels closely, we can see that the two indices started today at the lower line and finished the day at the upper green line.  The Nasdaq was watched closely today as it had room in its green channel to close above the 5000 mark and did.  The S&P will be watched most closely tomorrow as it closed right up under the upper line of its blue channel and up against the lower line of its February red line channel.  

It will be interesting to see if they can work the market higher to stop the heavy selling that was present in the market all through last week as is shown in the Trin chart below.

In the Trin Index chart, anytime its numerical value is above 1.00 there is light to modest selling pressure in the market.  When the red and green moving averages are also above 1.00 it indicates strong selling pressure.  When the red line is above the green line and above 1.00 it indicates there is very heavy selling taking place.  As can be seen above, there was heavy selling all through last week as the S&P maxed out at its upper blue long term channel line.  However, if you look closely in the final hour today the red EMA line did down cross through the green EMA line, a positive development but we will have to see if they can keep the momentum going tomorrow as the Nasdaq's sixty-minute On Balance Volume divergence has been resolved.

Trade well my friends


Sunday, March 1, 2015

S&P and Nasdaq Lose Their 4-Week Channels

The S&P and the Nasdaq indices have both enjoyed four week runs off of the triangles I focused on in my last article.  The S&P stopped at its blue upper long term channel line as it has been a pretty reliable line.  The Nasdaq got a little frothy as it got well above its blue upper long term channel line in an attempt to ring the bell at the 5000 mark.   Late this past week, however, these indices fell out of their red four-week ascension channels as seen in the charts below.

The extended move in the Nasdaq has turned sentiment very bullish but with it failing to break the 5000 mark sentiment will likely shift to neutral if the Nasdaq starts drifting downward.  The real test will be when the Nasdaq gets back down to the blue upper channel line in the 4900 area.  If the Nasdaq can stay above the upper blue channel line it will keep bullish sentiment going, however, if it slips through that line this breakout attempt to reach 5000 will have meant nothing and will be looked upon as a negative and likely weigh heavily on sentiment.  

If the S&P starts declining soon, I would expect it to be measured until traders see what the Nasdaq does when it reaches the 4900 blue line area.

Trade well my friends


Wednesday, January 28, 2015

S&P and VIX Forming Large Triangles

The market action in the past two weeks has been excessively choppy but there is a rhyme and reason to it as the S&P 500 and the VIX are both steadily constructing large symmetric triangle patterns on their daily charts.  

Looking at the daily chart of the S&P above we can see that it is still maintaining its red channel after slipping out of the two-year blue channel.  The inlay chart shows the developing large symmetric triangle that is clearly visible now.

The daily chart of the VIX above shows we can officially say goodbye to the six-year downhill brown line channel.  The horizontal blue channel which took the VIX out of the brown line channel is still containing the VIX but now that the uphill red line channel has become dominant it is quite possible that the blue channel could become history in the next few months if the red channel forces the VIX up out of it.  The inlay chart at the top shows the large triangle also developing on the VIX which is very similar to the S&P.

These large triangles imply that a large sustained move may not be far off in the S&P and the VIX.

Trade well my friends


Sunday, January 11, 2015

Did Oil Put In A Bottom Friday Morning?

With the falling price of oil rattling the global stock markets everyone is trying to figure out just when oil will hit a bottom.  Friday morning oil found support at the lower lines of two primary channels.  

Taking a look at oil viewing it through the weekly chart of the USO (shown on the left side below), we can see that this is the first support of any kind for oil for some time as it now has support from both its long term blue line channel and its midterm red line channel.  We touched down to both Friday morning.  

Taking a look at the daily chart of the USO (shown on the right below), we can see that oil has developed bullish divergences in the CCI, RSI, and MACD plus printed a hammer reversal candle Friday.  Traders will be watching for the possibility of either a pin bounce or consolidation at these lines which would boost optimism that oil has found at least a bottom if not the bottom.