Stock Market Technical Analysis Blog
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In the market today we had one of the largest gap up opens we have seen in recent history followed by mostly sideways trading and then a slightly higher close than the opening numbers. While the Nasdaq, S&P, QQQ, and SPY charts have diverged in recent weeks from index propping and overselling of AAPL, I feel like it would be best to focus on the S&P 500 Index vs the VIX to take a broad picture look of where we are at tonight.
First note that the charting software data suppliers have chosen to show today's trading bar as opening at Monday's close and then climbing all day. Even the digital readouts give the S&P as opening 1426 and closing at 1462. The reality is that 80% of today's move was done at the gap up open and then they added on a little more into the bell. If you follow the market using professional software long enough you will be aware that they take this liberty when they are absolutely bent on taking the market higher the next few days no matter what. I have learned from personal experience is that when the charting data feed is being manipulated you do not want to stand in the way of this bullish force. They are intent on making the first five trading days of this year a big run and then will remind people next week of the historical data that shows 85% of the time that the entire year in the market goes the same direction as the first five trading days of the new year.
Looking at the S&P heavy black line channel above it's easy to see there is space for 3-4 days of upward run before reaching the upper black line. Especially considering that one of the days will have to be a consolidation day, most likely tomorrow. Looking below at the VIX, it is also easy to see we have 3-4 days of space for downward movement before it hits its red floor line. Add to this the fact that today is just day two of AAPL's latest 432 EMA line bounce that I called out on twitter on Monday morning and you would have to say that the bulls have the wind at their backs for 3-4 days.
However, a closing Advanced Decline today of nearly 5500 indicates the move should / really needs to have a pullback or sideways consolidation tomorrow before we could higher another couple of days. They may use the technique that they used often in July & August of 2010 where they were able to get the Advanced Decline back down near the -2500 buying level from a 5000+ overbought level the day before by coordinating a slight drop in virtually all of the small cap stocks right at the open while simultaneously juicing the mega caps which produces a low buy area Advanced Decline at the open without giving back almost anything on the indexes because of the market cap overweighting of the mega cap stocks.
Also, the other reason for first five days of the new year push is to entice as many investors as possible to put new money with their financial managers from their end of year bonuses. Having said all that, the market has been developing a habit of waking up in a different world every couple of days lately and it is extremely jittery about any bad economic news. Notice however, that during these multi-day pushes there has been a pattern of bad economic news virtually disappearing like magic until the move is over. We will have to see...