Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, August 18, 2010

Still in limbo

Click on above images to enlarge

The opening this morning was absolutely perfect execution of the technique I mentioned in paragraph 2 of last night's blog.  At the open they held all the big caps firm exactly where they were at and dropped the rest of the stocks so that the advance/decline fell without the indexes falling.  Last night I mentioned that I thought the best they could do would be to bring it down to the center black line of adv/dec but they actually did that plus in that they managed to drop it down to the first green buy area line at the bottom.  All without causing the indexes to come down.  This is a perfect execution of one of their classic maneuvers and just in the fact that they were able to do this shows traders just how much in control of the markets they were this morning.  Thru the morning the traded the market up nice and steady and even built a nice ascending triangle before lunch, probably just to show off.  In the early afternoon, the market hit up against the same resistance that it topped out yesterday, the 1100 mark on the S&P. 

Granted there is always some resistance at the big round numbers but what is really stopping the rally can be seen in chart 1 row 1 of the lower chart cluster.  The price peaked and rolled back over both days when they hit the blue 21 EMA.  Yet in that same chart that's holding the market there is also promise in that the red 5 has started doing the curve up bounce from the pink 50.  This is how the middle wave of most three-way up legs in the market begin.  Tomorrow the 5/50 bounce will have to be strong enought that the price bar punctures up thru the blue 21 line and as of today also the green 10 line  on top of it - double resistance there. 

In chart 2 row 1,  today's candle represents indecision.  In chart 3 row 1, we can see that the red 108 line is actually a third layer of resistance right above the blue 21 and green 10 shown in chart 1.  So we basically have a pancake of moving averages the 10, 21, and 108 stacked up right on top of yesterday and today's high.  This is serious resistance.

In row 2 of the lower cluster, I have drawn a new channel, the brown line descending channel that we can now plot and see easily.  I also went ahead and added the tiny thin red line intraweek channel that we are trying to keep climbing in.  We closed today right on the line, another limbo situation. 

Row 3 of the lower cluster shows how they dropped all the stocks this morning except for the big caps so that the indexes stayed tight and didn't lose anything.

Looking at the top chart cluster row 2, today's morning rally dropped the vix back down inside the safety of the brown downhill channel.  Into the bell, however, if you look closely you can see that it came right back up to the black line and just barely peeked over.  Once again, leaving us in limbo.

Row 3 of upper cluster, we see that at the open this morning the 20yr bond popped out of the channel but then thru the middle of the day came back down in it but not far enough to be convincing with either move. 

The biggest weight on the market is the fact that we have the 3 important moving averages pancaked right on top of yeterday and today's high which is also the 1100 mark on the S&P.  Looking at row 2 of lower cluster once again, you can see that we regained and lost the horizontal blue channel twice when we peeked out yesterday and today.  Tomorrow's trading action will force us either up into it or we will fall out of the tiny red line intraweek channel.  EIther one will end this stalling point.


P.S.  I am lowering the trigger price on SGMS to 11.21.

Blog Archive