Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Sunday, October 19, 2014

S&P: The Week Ahead

Stock Market Technical Analysis


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Before we take a look at what the bulls have to work with this new week, someone needs to give credit to the Pacman style buyer of the S&P futures during the night last Wednesday and Thursday. It caused the market to put in at least a short term bottom.  Of course, they had a little help, or should say a lot of help, in that there has been massive Put buying the past two weeks and with options expiring last Friday, Wall Street came in to assist in turning the market back up so they could wipe off a great deal of the Puts that had been bought.  Now that their dirty deed is done, we will see how much they would like to work with the Fed on taking the market back up.  

Looking at the charts above, there are a lot of technicals that will be helping the bulls this week.  In the top left chart, we see that the S&P held support at the 324 EMA which is a critical line not to be broken.  In the inlay chart, we see that the weekly S&P candle is a bullish long tail reversal hammer. In the top right chart, we can see that the S&P held at the April low.  In the bottom left corner chart, we see that the VXX's incline channel is helping keep it below the 40.25 line.  

In the bottom right chart we see the most important thing that could help the bulls take back control of the market:  Fed president Bullard came out and announced that QE may be extended right as the market was struggling to solidify a bottom.  Since that moment there has been continuous short covering on big volume and we may actually have a playable bounce now.


Trade well my friends 

Alan

Friday, October 17, 2014

Indexes Back Above Short Term Bull / Bear Line

Stock Market Technical Analysis


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Just a quick look at the Indexes viewed with the short term bull / bear line on sixty minute bars. When the price is below the line the bears are in control and when the price is above the line the bulls are in control.  The VIX, VXX and TLT in the lower charts work inversely.  A lot of automated trading systems key off this line for going long or short.

My weekend blog will be focused on weighing what the bulls and the bears have to work with in the coming week.


Trade well my friends

Alan

Mid Morning Chart Update

Stock Market Technical Analysis



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They're making some progress...

Trade well my friends

Alan

Thursday, October 16, 2014

Closing Charts Update

Stock Market Technical Analysis





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No time tonight, here are the closing charts updates.  


Trade well my friends

Alan

Mid Afternoon Chart Update

Stock Market Technical Analysis




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Since this morning the Indexes have broken out of their blue channels slowly trying to make their way back into their red channels as shown in the top chart cluster.  

Looking at the multiple channels, chart 2 of the S&P, we can see that the S&P showed support at the top line of the green channel this morning but is now starting to show resistance at the lower line of the  brown channel above it. 

Looking at chart 3, VXX, we see that after gapping well above the 40.25 line at the open, here in the past hour it is starting to show support at that line instead of falling back under it.  Overall, pretty neutral and tentative.

Trade well my friends

Alan


Mid Morning Chart Update

Stock Market Technical Analysis




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The market gapped down once again taking the VXX (bottom chart) back above the 40.25 line. However, they are working quickly to try to get it below the line.  What's helping this morning is that the S&P did not drop into the green long term channel (middle chart) as it did yesterday, giving it extra footing to push upward and if it continues will help get the VXX back down below 40.25.


Trade well my friends

Alan

Wednesday, October 15, 2014

S&P: A Foot Slip Into The Bear's Den

Stock Market Technical Analysis



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In the market Wednesday, investors and the Fed got a quick taste of what the stock market would be like if the VXX starts trading above the 40.25 line.  The market took a wicked drop the moment the VXX crossed above it and traded at some scary numbers until they stepped in for the rescue into close, getting the VXX back below the 40.25 line.  As much as the Fed would like to end its tenure as keeper of the stock market, they learned quickly today how badly the S&P can get battered if the VXX crosses the 40.25 line, the entrance to "the bears den". Considering how the S&P was tossed around like a rag doll during the hours the VXX was above 40.25, we will definitely be watching to see if the Fed got religion Wednesday and makes this the beginning of a sustainable stock market bounce.  There is plenty to work with, hammer reversal candles printed on the week and day of the Indexes.  

With the beating the market took today, surely the Fed realizes that after pumping up a bubble in the stock market that they can't just wash their hands of it and disappear, they will have to do more than they have in the past two weeks with their incognito buying of the SPY and QQQ.  Hopefully the Fed came to realize that if they back off on their stealth purchasing of the SPY and QQQ at the same time they end QE that the market might crash hard.  They not only need to continue the SPY and QQQ purchasing program (asset re-inflation as Bernanke referred to it in his early tenure), they really need to step it up considering the selling deluge that keeps on coming.

Trade well my friends

Alan


PS  Here is a link to a very good in a nutshell article by Josh Brown
There she goes, my beautiful world




Midday Chart Update



The bears den is not a very friendly place for stocks.





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Trade well my friends

Alan

Midmorning Update: A Foot Slip Into The Bears Den

Stock Market Technical Analysis



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In the market this morning we had a huge gap down as sellers took down the SPY in premarket with the help of bad economic and ebola news.   In the upper chart we can see that this down move took the VXX up across the 40.25 red line and into the bears den.  Wall Street's trading algos quickly kicked in and brought the S&P back up into its short term blue channel shown in the lower chart cluster. However, by midmorning the VXX came back down to the 40.25 red lower line where it found support and is now starting to rise back up.  If they can push the market higher sometime during the day today technicians might be kind enough to call this a "hard test" of the 40.25 resistance line.  If they can't get the market high enough today to push the VXX below the 40.25 lower line then the S&P could have its first closing inside of the VXX bears den.

Trade well my friends

Alan

Tuesday, October 14, 2014

The S&P Future's Intervention Had To Happen Monday Night

Stock Market Technical Analysis



Last night there was a major intervention in the S&P Futures that actually started in the late afternoon and continued on through.  It gave the S&P a gap up Tuesday morning and a short squeeze before giving back most of it into the bell.  A lot of traders are asking, why did it happen last night besides the obvious need to break the downward momentum?  

The first chart, the VXX (VIX Short Term Futures) dictated that it had to happen then.  The VXX was due to cross up into its huge red line channel Tuesday morning.  By holding the Futures up until a regular session gap up open and keeping the S&P green the entire day, they got the VXX to back away a little from the bottom of that monster channel.  We really do not want the VXX to get into that channel.  If they can hold the stock market tight where it's at long enough for that red lower channel line to become resistance, they will likely save a lot of 401k holders a great deal of grief. That line has to continue to hold as resistance to the VXX.  If it does we might well have a playable bounce here.  






Next let's take a look at what the bulls have to work with now that they have broken the downward momentum.  Looking at the second chart, the multiple channels chart of the S&P, we can see that it sat down on the lower line of the brown channel (3).  It's too early to say if we will have play in that channel for sure but with the success they had last night and their ability to keep the S&P from going red today was quite impressive.  Granted, no one will want to be the first to go into the water but once a few do, the brown channel could be where we spend the rest of this week.  Don't bet big either way in this market though, it is so day by day.


Trade well my friends

Alan

Final Hour Begins

Stock Market Technical Analysis



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As we begin the closing hour of trading, the Indexes are continuing to slowly give back the opening gains as can be seen in the sixty minute bars chart above.  


Trade well my friends

Alan

Midday Chart Update

Stock Market Technical Analysis


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There was a fairly impressive intervention in the S&P futures late last evening.  They were able to hold until the open for a gap up and a small squeeze.  Looking at the intraday charts above, we see that the S&P did climb back into its downhill red channel but the NASDAQ did not.  The  chart to be watched is the bottom right corner chart of the VXX (short term VIX Futures) to see if it drops out of its steep blue line channel or turns back up.  Whichever way it breaks will likley determine trading for the rest of today.

Trade well my friends

Alan

Monday, October 13, 2014

Wall Street Reining In Its 7-Year Cycle?

Stock Market Technical Analysis


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In the market Monday, we had additional technical failures once again.  The S&P has suffered small, medium, and large EMA down crosses in the past two weeks.   It has fallen out of its two year Fed bubble channel shown with blue lines in this chart.  Plus, it has also sliced through its 200 day line today as if it were butter and the selling only appears to be increasing.  It may be time to seriously consider if Wall Street has begun reining in its 7-year cycle.  

Over the past twenty years Wall Street has been maintaining a cycle whereby the market peaks every seven years.  It was used heavily in earlier decades but during the late eighties it stopped.  Then as the computer revolution began in the early nineties the 7-year cycle began again.  In the chart I have posted, it shows the three 7-year spans each culminating to a peak at the end of the month of September in the years 2000, 2007, and now 2014. 

Studying the chart closely, it's easy to assess that the 2-year stock market bubble has just burst as we slipped out of the blue line, super steep, 2-year channel and it happened right as the third seven year span came to a close last month.  

LIKE CLOCKWORK


Trade well my friends

Alan

Bounce Attempt Fails

Stock Market Technical Analysis


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20 minutes to the bell shows we have the market rolling over as the bounce attempt this morning failed when the VIX settled back down to the 21 area but reversed back up implying that the 21 level has now changed from a resistance line to a support line for the VIX, the bulls worst nightmare.  We could have some short-covering into the bell, nonetheless, if the VIX 21 level continues to show as support another wave of selling will likely come into stocks.

Trade well my friends

Alan

Midday Update: Bounce Beginning?

Stock Market Technical Analysis


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This morning the VIX & VXX are looking maxed out short term.  This is giving the S&P and NASDAQ opportunity to see if they can get a bounce going.


Trade well my friends

Alan

Sunday, October 12, 2014

The S&P Channels

Stock Market Technical Analysis


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Taking a look at the multiple channels the S&P has been using during the past 18-months.

  • Channel 1 - Midterm (orange lines):  this channel was back tested on Friday and failed at midday which caused the S&P to sell down again in the afternoon after rising up to it.
  • Channel 2 - Longterm (red lines):  this is the primary 2-year channel which was also lost during Friday's selling.
  • Channel 3 - Midterm (brown lines):  we dropped down into this channel Friday, which is not a very tall channel but we did close at the midpoint line (not shown).  We could reach the bottom of this line if we had another hard day of selling though.
  • Channel 4 - Longterm (blue lines):  we could open right at the lower line of this channel on Monday.  If it holds it would bolster the case for the 200 day SMA holding also as I discussed in my last website blog post, The Contrarian View.  
  • Channel 5 - Longterm (green lines):  this is a very tall channel with a well established center line, the lowest of the channels that could provide support if the selling continues.  The bottom of this channel is currently at S&P 1700 which is what the bears are targeting because even if we get down to that lower line the S&P will still be in a healthy uptrend.  

Any of these channels that we enter could hold and normal trading could stay within it for any amount of time.  Fortunately for the bull case, there are three prominent channel lines crossing through the next 75 points below where we are at on the S&P.  Normally, every channel would provide at least a few days of support even in a cascading sell off.  The situation we are in however, is anything but normal.  The S&P has been driven halfway to the moon over the past two years by the Fed to capture the residual economic benefits of increasing the wealth factor of consumers.  We are in uncharted territory now, no one really has any idea how this will play out in the short term or long term.



Trade well my friends

Alan

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