Snap back rally...11/24/10

Stock Market Technical Analysis

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Today we saw a full snapback in the market although on low holiday volume.

In Chart #1 - The S&P daily bars chart, we saw the S&P gap up and move back up to its brown channel line.

Chart #2 - The VIX violatility index or fear index  which trades in inverse to the markets. We see that the VIX deflected down from the underside of the purple channel it ran up against at yesterdays close.  It dropped back down to its the lower line of its blue channel and bounced up some in the afternoon as volume dried up for the holiday.

Chart#3 - Th US Dollar index daily bars chart.  We see the dollar climbed a little more, diverging from its normal behavior on market rally days.

Chart #4 - The S&P 2 hour bars chart.  We see that the black line channel did indeed bounce the market up today as was discussed last night.

Chart #5 - The SPY Daily bars chart. This is the chart that keeps everyone a little nervous.  This chart normally leads the action and is bearish right now,  but instead the long term moving average charts  #8 & #9 are running the market instead.

Chart #6 - The VIX daily bars 5-10 ma chart.  The VIX red 5 line got up underneath the green 10 line and turned sideways as I discussed last night  in the chart 6 notes.  If Fridays short, low volume session ends positive the red 5 ma line should continue to curl downward to set up for a forced drop on Monday.

Chart #7 - The 2 hour candles chart of the S&P.  We see that the morning trading took it up through several lines but was stopped by the pink 50 line but found support just below it at the brown 100 line  during the third and the last candle today.  A neutral bias situation.

Chart #8 - The daily candles chart of the S&P.We once gain lifted from the support of the light green 40 ma line, crossed the dark green 10 ma line, and finished the day up against the blue 20 ma line.  This is a bearish situation if and until it breaks up through the blue 20 line.  Being up under the bottom side of that line is not a place it wants to be for very long.

Chart #9 - The weekly candles chart of the S&P. This weeks bar looks like it will close using the dark green 10 ma line for support for the second week.

Chart #10 - The 30 min advance/decline chart. We see that today close put up high into the intra-week sell area.  Friday is likely to give back some at the open, but being a very light volume holiday session, the odds favor the advdec only dropping to the center black line on Friday.

Chart #11 - The S&P 30 min trendlines chart.  We see that todays rally leveled out at the upper red channel line. Plus we also re-entered the blue channel by doing so. Which channel we go by for Friday and Monday will have to be resolved.

Chart #12 - The 30 min S&P moving average chart.  We see that a 5-10 lift was set up into the bell today. This is bullish but the advdec being so high could easily stop that small lift set up, unless we happen to break out of the red channel in chart # 11 right away Friday morning.

Chart #13,14,and 15 - These long term weekly bar  trendline charts show little visible change from last night. 

Chart #16 - We see that the UYG financials ETF is trying to get back up on top of the rose colored 108 ema line.

Chart #17-20 -  Thes 3 long term charts show little visible change from last night.

Chart # 21 - The Daily bars 10/20 ema chart of the S&P. If you look closely you can see that the red 10 ema line is becoming more visible on top of the green 20 line.  If Fridays market starts upward this up biased set up will give big lift.  If Fridays market  starts downward, it cant do a lot of damge to the setup in just one day. 

Overall, the path of least resistance is up Friday, but we need a small pullback at the open to get the advdec back to at least the center 0 line and then we could float up slowly as often happens on super low volume 1/2 day sessions,  assuming no bad news pops up Friday morning,  which could drop the indexs in a heartbeat.

Alan

N Korea serves up market smackdown... 11/23/10

Stock Market Technical Analysis

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Following up on last night's closing paragraph, I mentioned that the market would be vulnerable to any bad news across the wires and this morning we got hit good with the North Korea attack.  Considerable damge was done to a number of charts, but just as many show to be holding at support.

In Chart #1 - The S&P daily bars trendline chart, we see that we dropped all the way from siting on the lower brown channel line last night to as far out of it as we fell last week.

Chart #2 - The VIX vilatility index, or fear indicator.  we see that the VIX jumped well up into its blue channel after closing slightly below it last night.  This move is a short term sell signal on the markets.

Chart #3 - The US Dollar Index ETF. we see the Dollar reversed dramatically giving a short term signal for the markets.

Chart #4 - The S&P two hour bars chart.  We se that the S&P found support today at shadow channel that I drew in heavy black lines.  This implies that the Bulls have not lost control yet.  Since this channel caught the S&P I am holding off on transferring the VIX and the Dollar sel signals up tp the S&P chart as I normally do.

If the knee jerk reaction to Korea is done then this black channel shows the S&P is still trending up. If we lose this 5 week chanel then I will transfer them immediately.

Chart #5 -  The SPY trading ETF for the S&P.  One again this is the primary chart for the bear case tonight.  We can clearly see the red 5 ema line is starting to push downward from the blue 21 ma line.

Chart #6 - The daily bars chart of the VIX.  we see a complete reversal of the red 5 ema lines direction. It has done a "U" and turned back upward.  Note however that if the market has an up day tomorow this line could easily get turned sideways underneath the green 10 line, a set up for a downward pushdown the next day possibly. 

Chart #7 -  The two hour candle chart of the S&P.  We see that we hit intraday resistance at the light grey 150 ma line.

Chart #8 - The Daily candles chart of the S&P, shows that we slipped down through the light green 40 ma line briefly today but closed back up at it. This 40 line has been used 4 times out of the last 5 days for support.

Chart #9 - The weekly bars chart of the S&P shows that the dark green 10 ma line is still providing intraweek support for the S&P.

Chart #10 - The 30 min bars chart of the advance-decline indicator.  We se that we are now sold down fairly deep down into the green buy area. Tomorrow favors being a bounce day because of that.  This is another reason I am hesitant to transfer the VIX and Dollar sell signals up to the S&P on a knee jerk reaction to international news.  

Chart #11 - The 30 min bars chart of the S&P shows the Bulls had to abandon the blue line channel and now are set to work the very slightly inclined thin red line channel. 

Chart #12 - The 30 min bars ma chart of the S&P show a tiny symmetric triangle as a price pattern intraday. That pattern is a pivot point with no bias up or down.

Chart #13, 14, and 15 show very little change in the long term view of the major indexs.

Chart #16 - The finacials ETF took a big hit today,  this is real ammo for the Bears.

Chart #17,18 and 19 show no visible change from last night. 

Chart # 20 - The day bars chart of the S&P with 10 and 20 ema is still holding that parallel compression as of tonight.  Tomorrows direction will heavily affect which direction this pivot point breaks .

Chart# 21 -  The 2 hour bars chart of the S&P with 10/20 ema show the green 20 ema sent the red 10 ma line downward firmly today, but is now slightly overextended away from the red 10 line, implying some snapback potential tomorrow morning.

Overall the market has shown how quickly it will hit the sell button on bad news right now. Todays selling seems to be overdone though and we could easily bounce back up at the open considering the channel support held in chart #4 and the advance decline (7) is fairly deep down into the buy area now.  Tomorrows Bull-Bear battle may very well be fought at the grey 150 line in chart #7.

Alan

A Mixed Day... 11/22/10

Stock Market Technical Analysis

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In the markets today we saw a bearish opening as the sentiment regarding Ireland's bailout worsened.  The bears seized the opportunity and took control of the market early on, but not without a struggle as trading was choppy at a negative level.  As the day wore on the bears tightened their grip and we sold down considerably until midday when the bulls established a new not so aggressive 4-day channel shown in blue on chart 11, a compromise from the steeper pink channel they were working yesterday.

Chart 1:  we dropped back out of the uphill brown channel again but in the afternoon rallied back up to the brown line once more.

Chart 2:  the VIX last night was at a double channel pivot point and is pretty much still at that pivot point tonight.  It needs to either drop down into the red or brown channel and move in it or pop back up into the blue channel and move in it to give us a firm market direction either way for the next week or so.

Chart 3:  the dollar caught a small bounce this morning but pulled back in the afternoon assisting the bulls afternoon effort to bring the market back up. 

Chart 4:  during today's 4 trading bars we dropped back down to the pink descending channel of the past 2 weeks but found support at its upper line and allowed the bulls to take back control of the market in the afternoon.

Chart 5:  the 5/10/21 interaction (red/green/blue lines) improved somewhat today in that instead of the red 5 being stuck underneath the blue 21 as we were last night, this evening we see all three moving averages restricting to a point which has no bias but implies a sudden strong move in either direction is coming.

Chart 6:  the VIX 5/10 chart shows a firm downward cross which is bullish as long as it follows thru tomorrow morning and doesn't have a nasty gap down from the opening tick that could twist the 5 EMA back up above the green 10 MA line if the gap down is deep enough.

Chart 7:  the 2 hour candles chart shows that today's second candle found support at its 150 bar EMA and lifted throughout the afternoon but notice that it stopped up against its 40 MA line as it did yesterday afternoon also.  If you look back to 11/15 in that chart you will see the light green 40 MA line was also resistance there.  This is a fairly firm intraday resistance level for the time being.

Chart 8:  the daily candles show that we are using the light green 40 MA line of the daily chart as firm support for the past 5 trading days leaving us with the situation that we are range-bound between the daily chart & 2-hour chart.

Chart 9:  the weekly candles show that this morning's selloff found support at the dark green 10MA line and rallied in the afternoon up from it.  This was also the intraweek support last week as seen on its candle and once again we closed above the black weekly 200 MA line.

Chart 10:  the 30 min. advance/decline breadth indicator shows that we sold down to the shallowest byline and rallied back up to the black zero line at the bell.  Normally this would be bullish but the descending fine red line above it is having some control over the market for the past several days.

Chart 11:  the 30 min. S&P bars chart shows that the bulls adopted a not so aggressive channel by connecting the 3 points of the bottom blue line today giving up on last night's quite aggressive pink channel that I've removed.

Chart 12:  the 30 min. S&P intraday moving averages chart shows the red 5 EMA was just barely caught by the orange 324 EMA at midday today.  Allowing the S&P to pop above the red 108 EMA.

Chart 13:  S&P 500 with the opening of the new weekly bar we can barely see the dip and rally back up but once again today's low found support at the longterm brown line channel.

Chart 14:  the Dow shows that the new weekly bar found support midday today at the lower line of its longterm brown line channel.  It looks to be the case that on the S&P and the Dow that the bulls really want to hold that lower brown line of their respective longterm channels.

Chart 15:  the NASDAQ - overall this chart looks the most bearish because it has been stopped twice at the lower line of its blue longterm channel.  The new weekly bar actually held its ground and didn't take the dip and rinse that the S&P and the Dow had.

Chart 16:  UYG big financials ETF - shows that the bulls are trying to build a floor at the 55.75 level.

Chart 17:  S&P qrtrly bars chart - no noticeable change today.

Chart 18:  S&P monthly bars chart - no noticeable change today.

Chart 19:  S&P weekly shows that the bottom of today's dip found support at the red 10 EMA line.

Chart 20:  S&P daily chart is at exactly the same pivot point with slightly upward bias as we had last night in that the 2 lines are compressed together for another day.  The red 10 EMA is on top of the 20 which gives it a bullish bias and having the tiny dragon doji bar at the tip increases the bullish bias a little more.

Chart 21:  S&P 2 hour bar chart shows it is also in the same position as last night in that the red 10 line is still trying to cross above the green 20 line.

Overall, we are still at a major VIX pivot point (2) with the S&P hanging on for dear life to its brown 7 month up channel (1) but considering that the weekly NASDAQ chart looks to be starting another run at the blue channel above it and the S&P & Dow are finding footing when setting on the lower line of the their longterm channels.  The bias feels modestly bullish this evening but we have a lot of serious economic problems in the news and any really bad developments premarket could easily tank the market considering how high up the NASDAQ summation index is and how high the percentage of stocks above their 50-day moving average is.  It could be a day by day market until the VIX picks a direction and goes with it.

Alan

VIX at a pivot point 11/21/10

Stock Market Technical Analysis

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I have reformatted my regular twin chart cluster and numbered the charts for easier reference.  In chart 1, the SPY reached the upper gold horizontal channel line and sold down to and even dropped thru the lower line of the brown ascension channel.  After falling out of the brown channel, the next day we had an inside bar because of what happened in chart #2, the VIX, and chart #3, the dollar index below that.  Looking at chart #2, Tuesday morning when we opened below the brown channel on the SPY the VIX reached the top line of its blue channel it has been working for six months.  This caused the VIX to turn back down giving a buy signal to the SPY for a 3-day run up in the market which took the VIX down to its lower blue channel line & went a little farther below and stopped at a two channel junction.  One is the upper line of the brown downhill channel from earlier in the year and the other is the upper line of the red downhill channel from May to Nov.  If the VIX bounces up from the brown channel and red channel on Monday, it could cause the SPY (1) to lose its lower brown channel line again.  If on the other hand the VIX punctures down thru into both the made in Nov downhill red channel and the yearlong brown downhill channel, it will cause an explosive rally securing the lower brown channel line for the SPY.  I marked that pivot point on the VIX chart with a tiny red & green dot reflecting the pivot point.  In chart #3, we see that Thursday morning the dollar fell out of its steep rising red channel sending an additional buy signal to the SPY. 

Chart 4 is the closeup view of the SPX/SPY ascension over the past 3 months as that is a 2 hour bar chart.  On that we see that Friday morning's dip (4th bar back) produced a hammer reversal candle that bottomed out at the top line of the pink 2 week downhill channel and lifted slowly thru the day with it threatening to break into the upper half of the 4 week sideways red channel as is shown.  In chart 5, we see that the SPY's red 5 EMA actually did cross down thru the blue 21 last Tue & Wed.  As we rallied up, it has produced a bearish setup whereas the 5 is now stuck under the blue and could easily start a retest downward from the blue 21 line.  A great deal of traders and market commentators have gone bearish because of that failure and no doubt has increased the short interest tremendously.  I believe a great deal of the participants in the market place are relying solely on the 5/10/21 chart failure and have gone fully bearish because of it.  Granted it is a bearish situation on chart 5 the SPY but if you consider the pivot point scenario in the VIX chart 2, it's easy to see that the market could go either way this coming week. 

Chart 6, also the VIX, while the red 5 and green 10 have met, when the new VIX bar opens Monday it will clearly show a 5/10 down cross unless we were to have horrible news come out premarket causing the VIX to gap open to a number above 20 which would bend the red 5 EMA line into an upwards retest instead of a down crossing.

In charts 7, 8, &9 we see the traditional moving averages: the 10/20/40/50/100/150/200 SMAs plus the 108 EMA.  Starting with chart 9, the weekly candles, this past week's candle formed a dragon doji that drew support from the green week 10 MA line.  It also closed above the black 200 week MA line.  Chart 8, daily candles, the S&P bounced off light green 40 MA line Wednesday.  Chart 7, 2-hour candles, shows Friday morning's opening 2 hour bar formed a hammer reversal candle drawing support from the red 108 EMA line.  All three of these candle charts have bullish setups for the market in contrast to the 5/21 failure in chart 5. 

Chart 10 in lower cluster, the 30 minute bars advance / decline shows we gained support just above the black zero line and is threatening to cross the red downhill drawn in channel line.  With plenty of room to move up until we get into the overbought area.  Chart 11, 30 min. bar chart of S&P, Thursday's market action established a new short term channel upward shown in pink lines.  Chart 12, S&P has its 5/10/21 and 108 MA lines compressed to a knot pivot and starting to lift from that point into the close Friday. 

Chart # 13, 14, 15 and 16 are big picture charts of the indexs.  In chart #13 we see that the  weekly bar S&P show last week as a dragon doji drawing support and climbing from the lower line of the long term brown line channel - very bullish.  In chart # 14 we see that the DOW weekly bars chart did exactly the same thing, successfully testing the lower line of its long term brown line channel - also very bullish.  Chart # 15, the Nasdaq composite is mixed bag.  While its candle of last week is a dragon doji reversal candle,  we can see that the Nasdaq stopped at the underside of its long term blue line channel just as it did back in April which is bearish unless the reversal candle takes us on up thru this time.  Chart 16, the UYG big cap financials ETF, I am showing daily bars instead of weekly bars because there is a lot going on in that chart and it needs to be looked at more closely.  First we can see how strongly it relates to its 108 EMA line shown as the thick rose colored line.  It gave the financials support from mid Oct to early Nov and provided the launch lift on Nov 3rd that broke us above the heavy 6 month ceiling shown with dark red line.  As the market sold off from its peak, so did the UYG ETF but we can see that Friday's daily bar is a dragon doji drawing support from the topside of the 108 EMA line.  This also is bullish for the broad market.

Charts 17 - 21, I show 5 charts of the S&P, chart 17 is quarterly bars, 18 is monthly bars, 19 is weekly bars, 20 is daily bars, and 21 is 2-hour bars.  All 5 charts are shown with 10 EMA lines in red and 20 EMA lines in green.  Chart 17, the S&P is threatening an upward 10/20 cross.  Chart 18, the past 3 month lift has come from a successful and gradual 10 EMA line retest up from the green 20 line.  Chart 19, the recent run up off the 10/20 upward cross on 9/1 along with a rather high peak 2 weeks ago and then a retest bar drawing support from the 10 line for last week.  Chart 20, is the focus chart for tonight and it can clearly be seen that the red 10 EMA line is working a smooth gradual retest upward from the green 20 EMA line - a very powerful bullish setup that simply needs the completion lift on Monday.  Chart 21, Monday morning looks to have a 10/20 upward cross which would complete the 10/20 daily chart to the left of it. 

Overall, I believe that the overwhelming technical analysis is on the bullish side tonight with the only opposing TA being chart 5.  If the 5/21 down pierce did draw in fresh shorts into the market, I suspect it would be very easy for the market to lift tomorrow with a successful 10 EMA / 20 EMA lift in chart 20 which would cause a serious trendline breakdown in the VIX which could cause a powerful short squeeze in all the indexes.

Alan

Bernanke's Short Squeeze Shifts into High Gear...11/4/10

Stock Market Technical Analysis

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The market roared today off of the news that QE injection will be in the market shortly.  Looking at the upper chart cluster row 1, today's move broke us out of the 2 week ceiling the S&P had run up against and barely got above its upper black line of its ascension channel.  It will be interesting to see if the market turns vertical here or if it pulls back into the ascension channel as it did 9-22 and 10-14.  If we actually break out of this already steep ascension channel into an even steeper one we might be seeing the beginning of a new stock market bubble.  The US economy has continued to be strong over the years by going from one bubble to another to another.  We had the gold bubble in the late '80s, the stock market bubble in the '90s, real estate bubble from 2000 to 2006 and personal credit bubble from 2005 to 20008.  There has been lots of discussion on the internet as to where we will have our next bubble as it's widely viewed that we must have another one to continue borrowing from Peter to pay Paul.  As recently as a couple of months ago, the whole world was beginning to think the bond market might be the next bubble, but it is apparent that Bernanke firmly believes that the key to a strong economy is high stock prices.  A new stock market bubble would be like the tail wagging the dog in that the economic outlook for the next 6 months is widely viewed as deteriorating but the stock market is roaring.  The stock market has always been a leading indicator of what's to come in the economy 6 mos from now.  We may be about to see the biggest divergence  between the stock market and the economy that has ever taken place.  It's apparent Bernanke believes that instead of a strong economy producing a strong stock market,  we are going to see if a strong stock market can produce a strong economy.  

Alan