Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, September 7, 2011

More Gains From Yesterday's 11AM Switch Signal 9/7/11

Stock Market Technical Analysis

Click on above images to enlarge

For 401k holders - another nice day of gains from yesterday morning's Bonds to Stocks switch signal.  

The active traders are doing quite well with the SPY 117 Call from yesterday morning. 

I would like to make a comment for both 401k holders & the active traders.   There has been a deafening lack of bad economic news the past two days.  When we are playing the bond market's move up, bad economic news makes us more money but realize when we are playing the stock market's move up that every minute of every hour we are vulnerable to any bad economic news coming across the news wires.  I feel like we have gone a little too long without some bad economic news showing up. 

If you look at the lower chart cluster, the bottom right corner chart shows the GLD (Gold ETF) traders are already positioning themselves on the lower channel line with a high quality ascending triangle pattern in anticipation that we cannot go a third day without being blindsided with bad economic news.   The bond traders shown in the TLT chart in the lower cluster are also smelling surprise bad news around the corner and are positioning themselves on the center line of their channel.  While the NASDAQ & SPY charts look just fine and really the VIX trendline chart looks fine for another day of gains, I need to mention that the VIX moving average chart (not shown) has a Day 5/10/20 EMA pancake compression which is an extremely volatile setup.  The hardcore bond and gold traders are no doubt keying in on this setup knowing if we get any bad economic news on this volatile pivot point they might be rewarded with a nasty stock market smackdown (if the bad news comes out premarket).  Granted the NASDAQ is already lifting from its 5/10/20 pancake compression but the VIX's 5/10/20 pancake is lagging and has not started a pushdown from this compression and therefore could still go either way.   If we have no bad economic news, we should be good for a third day of gains but there may be some profit taking in the afternoon.

Just be aware that the stock bears will be out tomorrow and they are really sweating this move up. However they see that the Advance / Decline is at 5024 which is effectively against the ceiling.  This number tells us we will more than likely have some sort of pullback tomorrow which would be okay as long as it is modest and controlled but if there are any signs of real weakness during the day tomorrow, we will see the bears shorting with both hands and both feet.


Please see my risk disclaimer at bottom

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