Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, May 21, 2012

5/21/12 Dressed Up Ready To Dance

Stock Market Technical Analysis

Click on above image to enlarge

The major indexes today had a synchronized structured bounce that would constitute a major bottom if we were not under the heavy cloud of the euro zone situation.  In the top left corner we have the weekly chart of the XLF (Financials ETF) showing a red weekly 5 bouncing up from the pink weekly 50 as the price bars are overextended enough for a snap back up.  This is a huge pivot point for the financials. 

In the second chart on the left, the weekly chart of the VIX, as last week ended the 5 closed up at the underside of the 50 line and was turned sideways trying to turn downward from today's big short squeeze.  If this 5/50 pushdown follows through it could mark the beginning of a major move up in the market, key word if.
In the bottom chart on the left, the weekly chart of the VXX (VIX Futures), we see an underside pushdown situation developing there also.  Another marker for a sustained rally if it follows through.
On the right side, the daily charts, the top chart S&P 500 is showing the obligatory 5/200 bounce beginning.  The second chart down the right, the daily QQQ shows the 5/150 bounce beginning.  The bottom chart, the daily AAPL shows the 5/100 bounce beginning.
Also noteworthy for the bulls, the QQQ had two 349.65k paired institutional entries after the bell along with one 2m share super low block at 60.87 nearly 1.50 under the current afterhours trading price, another institutional entry.  Afterhours, the SPY had a 6.28m block along with 3.71m block.
Not forgetting the UUP (Dollar Index) which got itself substantially overextended on the daily chart late last Thursday afternoon and is now looking very toppy.
Completely disregarding the euro zone situation that currently has its grip on the market, this structured bounce has all the bells and whistles of a very sustainable move up in the market but backing off to take in the reality of the euro mess which has put the vast majority of traders in a show-me state of mind not wanting to trust anything anymore this bounce point will be whatever they make it to be if they can.  We saw similar synchronized structured bounces last summer only to see everyone go in for two days, volume dry up, then everyone bail back out.  Most traders will remember last summer well and feel fortunate to just have survived it.  The sentiment is far too weak to bring in real, aggressive sustained buying day after day.  Have no doubts about it, today was one wicked short squeeze.  If WallStreet and PPT work together though they could definitely turn this into a sustainable rally but only if they continue to sponsor it everytime the volume starts to dry up. 
We will just have to see what they can do with it now that they have a starting point.  It should be quite tradeable but anyone looking more long term should monitor it closely on a day by day basis as the market can change entirely upon any bad euro zone news.
Alan