Stocks vs Bonds

Stock Market Technical Analysis

 

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Tonight I would like to look at stocks and bonds comparatively.  A lot of people trade the inverse relationship of stocks vs bonds.  In the four charts above the two left side charts are a one year view of weekly bars of the Nasdaq and 20 year bond.  The right side charts are three-month charts of daily bars.  Looking back over the past year, we can see in the top left chart that when the stock market dropped big at the end of July the bonds directly below had a big run.  As the bonds were getting tired at the first of January this year and started to sell for 3-months the stock market inversely had a 3-month run up in the first three months.  On April 1st when the stock market was looking overextended and started selling down the bond market started rising again inversely.  In mid July the stock market took off for a multi week run and the bond market sold off for several weeks which comes to where we are at now where the bond market is starting to rise for its next wave up but the stock market is being fiercely propped.

When you look to the right side charts, the daily of the bonds, we see that the bonds took off on a hard run last Tuesday as the stock market above put in an ominous shooting star.  As the bonds have been climbing fast for the past week and a half, the stock market in the upper chart is being propped up.  This has happened several times in the past few years.  They are vehemently trying to defend the red 5 / green 10 EMA juncture that happened this morning.  Although the bond market is already well on its up wave, we will have to see how long the stock market can hold.  The stock market will not drop until heavy shorting comes in as the power players on the shortside fully understand the manipulation that goes on at overextended 5/10 and 5/20 junctures.  They won't risk getting crushed by a massive gap up for whatever convenient reason until the stock market gets at least a 5/10 down cross and then many will wait for a 5/20 down cross before shorting. 

Those who went into bonds last Tuesday are making good money quickly but if the PPT decides the economy cannot afford to have the stock market start a wave down here and intervenes, the bond traders will need to be nimble and ready to exit even though the bonds weekly chart in the bottom left corner is really solid. 

Alan

UUP and VIX

Stock Market Technical Analysis

 

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Today would be a good point to take a look at where the UUP (Dollar Index) and VIX are.  The two left side charts are the UUP and the right side are the VIX.  Looking first at the bottom left corner chart, the weekly bars chart of the UUP, we see the red weekly 5 EMA line is trying to turn back up at the blue weekly 20 EMA.  At the same time, the price bar is getting support from the weekly 50 EMA line.  This could be a powerful pivot point.  So far, the bias is to the upside on the UUP.  In the chart right above it, the daily trendline chart of the UUP, is also building a base on top of its longterm blue line channel and actually has an ascending triangle formation.  Barring intervention in the market, these two charts favor upside movement in the Dollar which causes upside movements in the VIX (Volatility Index) and takes stocks lower. 

 

In the two right side charts, both daily charts of the VIX, we see that the stock market took a double hit today as  the VIX opened above its 3 month downhill brown line channel as seen in the top chart and also opened above its pink 50 day EMA line shown in the  lower chart. 

 

Caution is the word here, the market is obviously trying to set itself up for a correction but the two months before the presidential election have historically been a period of very intense market manipulation.  Looking at the money flow in the big cap names and the Put / Call action, a lot of traders are preparing for a pullback.  There doesn't seem to be any signs of heavy shorting though and a lot of traders don't want to take the chance of getting caught in an out of the blue short squeeze.  Here for a while every move on the UUP and the VIX will be watched closely.

Alan

AAPL +$110 from May 13th Blog

Stock Market Technical Analysis

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Tonight I would like to take a follow up look at AAPL.  On my May 13th blog post (6th blog down), I made the bull case for buying AAPL for $570 at that point.  Since then it has run up $110 through Monday morning's opening of $680.  Anyone who went into AAPL big on 5/13 might consider taking money off the table now after banking a 17% move in 3 months.  Many traders will be cashing in on AAPL now and waiting to see what it does starting after the election is over.  Granted, if they pull QE3 out of the hat, then anything could happen.  But still it's just too big of a move to risk a pullback and end up giving part of the big move back.

It's easy to see from the chart above that it is extended high above its pink 50 day moving average and the likely best case scenario would be a sideways move here until the 50 line caught up with the price.  Worst case scenario, we have a nasty pullback and the price falls a good deal also to find the 50 once again.

Alan

8/28/12 Wall Street Makes Good on May 29th Entry Markers

Stock Market Technical Analysis

 

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Hello again traders, I've been on a three month summer hiatus from the blog.  On May 29th, the third blog down, I called out the flurry of longside entry markers put out by Wall Street as the entire financial media was hyping sell in May and go away.  Since then they have taken the Nasdaq 250 points higher during these three summer months as shown in the top chart where I drew a green line at the Wall Street longside entry markers. 

 

In the lower chart, the pattern of the VIX 5/10/20 moving averages is showing a basing setup implying the easy longside money has now passed and now is likely to get a little tougher for the bulls.  We can't ignore elections around the corner though, this period heading into elections can be volatile with lots of smack downs and also fierce short squeezes.  Technically though, the VIX has had three nice waves down since 5/29 and is seriously trying to base for an up move.  Also, the Nasdaq put up a fairly overextended shooting star last Tuesday which is giving fresh buyers pause until we see this developing VIX situation start to show resolve.