10 Year Treasury Note Mauling The Stock Market

Stock Market Technical Analysis Blog

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In the market today we had another day of serious damage to stocks as the bond market bubble continues to deflate driving the 10-year Treasury Yield higher which ruins corporations profitability and also jeopardizes the recent recovery in housing.  

Taking a look first at the top left corner chart we see that the sentiment EMAs did have the down cross a few days ago shifting the stock market into bearish mode at the instant the down cross happened as I discussed in the June 19th blog.  

Looking at the top right chart of the VIX we see that as it crossed above the blue 432 the stock market sell off began and has been continuing to work higher in its ascension channel causing more selling in the market.  

In the bottom chart above we see what is really causing the stock market selling to happen, the climbing 10-year treasury note being driven higher by the collapse of the bond bubble.  On the same day as the sentiment EMA down cross and the VIX crossing above its blue 432 line we also had the 10-year treasury pop back up into its longterm red line horizontal channel which puts serious pressure on stocks.  Bernanke's speech also happened right as these three junctures crossed the critical point, creating the perfect storm for stocks.  Looking a little closer at the 10-year treasury note we can see that it's climbing in a steep, narrow ascension channel.  If this channel continues to contain it, the 10-year treasury note might pull back giving us a relief rally in the stock market but if it breaks on up out of the ascension channel the stock market is in big trouble.

Trade well my friends

Alan

Bernanke Speaks, Market Pukes

Stock Market Technical Analysis Blog

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In the market today we escaped the QE tapering bullet but learned it may very well be the last time causing  a strong sell off  into the bell.

Taking a look tonight at the Sentiment EMAs on the Daily chart of the S&P,  we see where the smaller red ema was starting to down cross late Friday, but with the liberties taken on the opening of the S&P futures Sunday evening, the set up showed a bounce beginning on Monday.  After today's sell off we can see that the red-green line bounce is in trouble.

Looking back on the past 6 months we see that the Sentiment EMA line bounces are what have been used to keep the market going higher.  Note the early Jan, early March, and late April bounces.  The next two days are critical, if the red line down crosses the green it signals the transition of stock market sentiment from Bullish to Bearish.  If this happens, I am sure every obligatory bounce point will be utilized on the journey down and the 4 am manipulation will be heavy to try and slow the damage.  Nonetheless, when the red is below the green line the path of least resistance is definitely downward.

If they come in at 4 am tomorrow and work their magic, it could delay the resolvement of this key line interaction for a couple of days.

Trade well my friends,

Alan

SPY Pushed Above Resistance

Stock Market Technical Analysis Blog

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In the market today the SPY was driven above the resistance line that had been giving it trouble for the past three weeks and closed above it (right chart above).  This move in the SPY brought the VIX to close right down on its lower line of its extension channel (left chart above).  With Bernanke's speech tomorrow this move in the SPY will be a win win scenario to give his speech in.  If he can manage to say everything the market wants to hear and nothing that it doesn't, this move will be called an anticipatory run up to a speech that calmed the market.  If the market hears something it doesn't like and it triggers a sell off, the market already has a few days of air cushion below it to cushion the blow if the sell off becomes serious.

If Ben's speech calms the market then we are likely to see the VIX finally fall out of that steep ascension channel which is just what the bulls are looking for.

Trade well my friends

Alan

Intervention Monday - SPY & VIX

Stock Market Technical Analysis Blog

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Going into the bell Friday we had mutliple EMA pushdown situations set up to cause a downdraft in the market today but as we all know they just can't let that happen.  They decided to take liberties with the opening of the S&P Futures Sunday night by basically just spinning the dial higher to a pretty number and then starting the Futures trading on it.  The SPY continued the big gap up at 4:01AM with the high elevated opening then followed a big gap open at the regular session and a decent climb until midday.  

In the two charts above, the VIX on the left and SPY on the right, it is easy to see why all this happened.  They were making an attempt to break the SPY up above the two week red horizontal resistance line shown in the right chart above.  While we did get above it in the late morning, the  SPY couldn't hold and we dropped back below it once again.  The pressure is on them time-wise to make it happen before the VIX's red ascension channel forces it above its blue 432 EMA line shown in the left chart.  If they can just get the SPY above the two week resistance line and close above it, this will probably be enough to cause the VIX to drop out of the red ascension channel.  Today was a big effort but it wasn't enough.  Also, Bernanke's speech on Wednesday looks to be timed right as the VIX gets trapped at a point under the blue 432.  If they fail to break the SPY out by then, Bernanke will have to make the speech with the VIX forced into a powerful pivot point where any word he says might move it above the blue 432 or cause the VIX to drop out of its red ascension channel.  Buckle up...

Trade well my friends

Alan

The Bigger Picture

Stock Market Technical Analysis Blog

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Tonight I just wanted to step back a little and take a longer term look at the channels on the S&P and the VIX shown in the two charts above.

Trade well my friends

Alan

VIX Focus

Stock Market Technical Analysis Blog

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Taking a closer look at the situation on the VIX, I've applied the brown upper and lower primary channel lines showing its upper lines ceiling effect on the VIX.  I also applied the ascension channel in red lines showing how it is trying to carry the VIX up to trading above the blue 432 line which causes market havoc when it trades above it.  Until the VIX falls out of this red ascension channel the market will be really nervous as that channel is trying to take us where we don't want to go.  

Alan

SPY & NASDAQ Triangles

Stock Market Technical Analysis Blog

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In the market today, we lost part of yesterday's gains as the VIX reversed again and went back up to the underside of the blue 432 line.  One thing that is quite noticeable is that the past two weeks trading has been spent building large symmetric triangles on both the SPY and NASDAQ.  The market may get more volatile as these triangles near a point and breakout in either direction.  

Trade well my friends

Alan

SPY Channel Saved

Stock Market Technical Analysis Blog

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During the first hour today they did indeed step in to rescue the teetering SPY channel.  Not too far into the first hour they broke the SPY out of yesterday's downhill channel and started a new intraday uphill channel.  This caused the VIX (in the bottom chart) to pull back down below the blue 432 EMA line and as soon as it did the rally was on.  Anyone who was ready and watching for that VIX to cross back down below the 432 could have bought the SPY June 163 weekly Calls in the .35 range and held tight thru the day with the help of the narrow channel they were trading it in and then sold before the bell in the 1.40 range for a monster 300 percent gain.  

Trade well my friends

Alan

NASDAQ SPY VIX

Stock Market Technical Analysis Blog

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In the market today we had a big swing downward intraday.  Taking a look now to see how we are set up for tomorrow, I have posted trendline charts of the Nasdaq & SPY above along with the VIX 432 line chart. 

• Top chart - NASDAQ - if it continues to sell the next couple of days it doesn't actually break its uptrend, it will just simply be re-entering its multi month steep uphill channel.  It is still in the safety zone.
• Middle chart - SPY - is in a serious situation because if it continues selling it will fall out of its multi month uphill channel which would hit the market pretty hard.  A real concern here.
• Bottom chart - VIX 432 EMA - we looked at this several nights ago and we see that it actually stopped today no farther above the critical 432 line than it did on its headfake a few days ago.  This is an extreme pivot point situation.  If the VIX turns back down again tomorrow and closes back down below the 432 then it's very possible this was just another headfake of the VIX and the SPY channel will no doubt have been saved.  However, if the SPY loses its multi month channel convincingly tomorrow, the VIX chart will rule the day and we will have a serious sell off.  

I would like to believe they will feel it necessary to step in and support the SPY to prevent a VIX breakout but I wouldn't bet on it, we will see.

Trade well my friends

Alan

First Summer Premarket Smackdown

Stock Market Technical Analysis Blog

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We got hit with the first summer premarket smackdown this morning which has become the trademark of summer trading.  This news driven premarket dump by WallStreet shown in the intraday chart posted at the top where I have drawn an arrow at the 4AM EST opening where WallStreet immediately came in and sold the SPY down all the way to the 930AM EST regular session opening.  This power dump of the SPY was triggered by overnight news that the bank of Japan decided to not offer up any new QE measures.  This announcement couldn't have come at a worst time as the TLT touched down to its lower channel line yesterday.  It bounced up quickly from it today.  You can see the one year downtrend in bonds (June to June) and with this morning's bounce triggered fears this might be the end of the downtrend.  Also, it was widely assumed that this big neckline formation would break to the downside as the summer season begins.

The damage done by today's sell off was extensive and particularly harmful because so many indexes and key stocks were at Sentiment EMA pivot points.  Unless they decide to have the first intervention tomorrow, which is also a frequent summer event, this will probably mark the beginning of the market going from a swing trading environment to a daytrading environment until the end of summer.  Intraweek we are oversold, no doubt, but most traders are savvy as to when to stop trusting multiday hold setups and play intraday only until we see if there will be any patterns or channels develop this summer or if it will be day to day knockabout environment from premarket news.  

Trade well my friends

Alan

Sentiment EMAs Being Set Up

Stock Market Technical Analysis Blog

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In the market today we had a sideways consolidation day.  Tonight I would like to look at the Sentiment EMAs applied to a few indexes and key stocks.  

In the top row, chart 1, the S&P 500 actually started its lift Friday.  QQQ & SPY are just beginning to turn upward.  In the second row FAS is already starting to turn up.

Tomorrow's action is pivotal, as the red line of the VXX (VIX Futures) must cross back down below the green line for an all clear.  It might have happened this afternoon except for the AAPL meeting wasn't much for anyone to get excited about.  Nonetheless, AAPL is set up perfectly to get its lift in the couple of days if it doesn't catch sellers tomorrow from the lacklustre news.

In the bottom row, GOOG & NFLX are also set up for the Sentiment EMA lift with GOOG already starting to rise.  NFLX is still in holding mode with a symmetric triangle price pattern.  We need for AAPL or NFLX to lift tomorrow to be sure that the VXX does have a down cross coming.

The last chart, LDK (one of the solar stocks dirty dozen) had a pronounced Sentiment EMA lift today, looking pretty energetic.

If they keep control of the market tomorrow and manage to get AAPL started upward from its pivot, a run to the month ago highs is quite possible.   However, if AAPL gets trashed tomorrow it will definitely increase volatility in the market and we will just have to see how it affects the VXX setup.

Trade well my friends

Alan

Day 2, Still Looking Good

Stock Market Technical Analysis Blog

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Trade well my friends

Alan

432 Holds

Stock Market Technical Analysis Blog

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In the market today we saw the classic "hard test" of the VIX 432 EMA line (top chart above) as we went above it in the morning but retreated back below, starting a market rally in the afternoon.  Statistically a hard test, where it actually slips thru the line then recovers is considered more reliable than a pinpoint test at the line.  This is the scenario #2 I discussed last night, the head fake.  

Coinciding with today's VIX text we had the S&P 500 successfully have a hard test of its Day 50 EMA line shown the bottom left corner chart.  

This is bullish but realize we have clearly been in a downtrend in the past two weeks after four weeks of strong uptrending prior to that shown in the bottom right chart.  Today's hard test was merely stage one but a good thing for the bulls.  Next we will have to see if the S&P can break out of the upper line of the descending channel in this chart which will likely be 2-3 days before it can get that far.  If it can't break out of the channel then this hard test of the VIX 432 and S&P 50 will only have produced a channel play in a descending channel which was due to happen anyway.  Effectively rendering two important pivot points somewhat wasted.  

However, if we do break out of this channel we might be good to go up for a week or two.  Notice though that in the upper VIX chart, each time there is a dip they are getting shallower implying a smaller rally also with each new one.  The trendline I drew under the dips makes it easier to see.

We will have to look next tosee how the market behaves when the S&P reaches the upper line of its two week descending channel. 

Trade well my friends,

Alan

VIX At Threshold

Stock Market Technical Analysis Blog

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Tonight we need to focus on where the VIX stopped today.  In the chart above, I've applied the  Day 432 EMA line.  In the past 6 months we have come up to the line three times, stopped and began a rally by pushing down from the line.  The first one was on the last two days of December  where it actually blipped over a bit but in consideration of the craziness going on in with the Capitol Hill follies it would be safe to say they intended to hold it there and a third day later brought it back down below the line to start a rally.  The second and third time, 2/25 and 4/18, the VIX once again reversed at the 432 and a multi week rally began.  Today's bar closed exactly at the 432, all eyes will be on that line to see if we reverse from it and start another rally or go above it for a couple of days then reverse back down for a headfake or we could blast on across and keep going up for a pronounced market sell off.

I'm not seeing a lot of big block trades favouring any one of these scenarios more than the other.  It looks like traders will be feeling their way through this one, hour by hour and day by day.  

Trade well my friends

Alan