Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, November 28, 2012

SPY Almost Across Quadruple Barrier

Stock Market Technical Analysis Blog

Click on image to enlarge

In the stock market today we saw a serious tank at the open.  The PPT came in and executed a rescue as they have been working behind the scenes since fifteen minutes after the opening bell on Monday when they sent out their two trademark one million share block buys on the SPY at a full dollar above that moment's price (I tweeted their marker at that time).  While they have had mixed success through the past few months, today they had no trouble in bringing the market back up to close near its high of the day and just barely crossing above two of the four barriers I discussed in last night's blog.

Taking a look a those four barriers shown in charts 1-4 above:

  • Chart 1: SPY closed about $0.15 above its pink 50 day EMA line
  • Chart 2: they failed though to take it above the center basis line of the weekly Bollinger band
  • Chart 3: it peaked a few cents above the 50% Fibonacci but then retreated and closed right at it again
  • Chart 4: we see it breaking clear of the upper channel line primarily because it is a descending line but still a few cents above the high of the past few days
Out of the four barriers, two are crossed, one is neutral and one is still resistance.  It won't take much upward movement tomorrow to move up across the weekly basis line and 50% Fibonacci if they just refuse to let up.

Looking at the lower three charts we see that today's rescue of the XLF prevented a blue 20, pink 50 downward line cross.  In chart 6, after a huge move in the VIX this morning it fell so much into the bell that we now have the tiniest point of the red trying to show underneath the green which if it becomes fully visible tomorrow below the green it will put the bulls back in business.  In chart 7 we see the 120 minute UUP where we had a big spike at the open this morning taking it back up into the steep uphill red channel but with today's market rescue it actually closed barely down inside the horizontal black channel.

If they can just keep this going the bulls will be back fully in charge by Friday morning.  IF is the key word, I don't know how many times over the past few years I have called out a PPT entry and watched them take it to the threshold of having the bulls back in control but then the next day they totally drop the ball and it falls apart and the bears come back in for a week.  Considering that many people believe we are actually going to go over the fiscal cliff because it is not possible to get a deal by then, you just have to believe that the PPT will continue to drive the market as high as they possibly can into year end knowing that the market could get a 10% haircut in one day if we actually do go over the cliff.

As I mentioned last night, crossing above a barrier or multiple barriers is not confirmed until the price falls back and tests the line to be sure that the line switched from resistance to support when we crossed it and then pushes back up from the line in a classic retest.  My gut feeling is that if they successfully clear all four barriers tomorrow they might not risk letting the price fall back and confirm the crossed line as support just in case it slips back through with a bear attack at the key moment.  The safer play will be to cross all four and then turn on one fierce short squeeze and never look back.   We will have to see.


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