Late Friday Afternoon Entry Signal

Stock Market Technical Analysis Blog

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In the market today we had a decent lift that climbed into the bell.  After being flat for the past four days, we decided to take a small long position in SPY right before the close today.  We had been looking for a little more sideways action to show that S&P 2000 area is becoming a base but we felt like Team Yellen is likely to gap the market open on Monday as they have done for the past three weekends.  Whether or not we move higher beyond a gap on on Monday will be a dynamic situation.  Considering Team Yellen chose to put the burners under the market late this afternoon when they know that 90% of the Wall Street pro traders close out and call it a day at noon on Fridays, makes us believe they will come in again at 3am Monday and open the SPY considerably higher to produce a regular session gap up.

This is a high risk trade considering we are still greatly overextended from the 108 EMA line but nonetheless, this Friday afternoon to Monday morning routine they've been working is where they have their best success when trying to ratchet an overextended market higher.

Looking at the charts above:

Chart 1:  S&P 60 minute, shows our trademark entry signal was produced in the closing hour today.  Not a good layup entry signal but it's enough to work with.

Chart 2:  the S&P found support yesterday at its upper red channel line and today's low found support at the horizontal blue line.

Chart 3:  the VIX after failing to stay above the horizontal black mother channel line yesterday, found resistance at the line again today creating a pocket it might be able to trade sideways in for a few days.

If the S&P follows thru on Monday with a gap up we will be looking for a solid intraday retest to add to the long position.  If it doesn't gap up, the small position was worth the risk considering we are looking at a repeating Friday / Monday pattern.

Trade well my friends

Alan

Holding Steady, No New Position Yet

Stock Market Technical Analysis Blog

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In the market today , the S&P opened above the 1995 level at the 3 am open of the SPY and held it until 8:30 for a gap open higher.  As I discussed in the previous blog we closed our last 1/4 position as the S&P hit the 1995 level on Thursday.  As we continue with our plan we are staying all cash for the time being with this hop over the 1995 line.  We are looking for a solid retest and then a push up from that line before opening a new long position if we do.

Another situation we are watching closely is the VIX  (shown in the lower chart overlaid above).  At the S&P gap open today the VIX briefly dropped below the red and blue lower channel lines.  Shortly after that it jumped back up into both channels and climbed through the day. This doesn't bode well for this hop above 1995.

While we are still all cash, we realize that this is the point where the manipulation becomes heavy and unpredictable.  Thus, we have to wait for something with a little more meat on the bone before we will be convinced this level will hold and be a base for a push higher.  Should Team Yellen decide they might not be able to build a base at this level and instead gap the market up again to start a short squeeze, we may have to reenter reluctantly on the fly. 

Trade well my friends

Alan

More Money Off The Table

Stock Market Technical Analysis Blog

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In the market today the current short squeeze continued to take the market higher even though the volume on the SPY and QQQ is falling substantially lower each day.  We have decided to reduce the remaining half of our long position (from our 7/25 blog entry and the second entry on 7/28) to a 1/4 long position as the S&P has reached its upper red channel line, shown above.  We suspect Team Yellen will want to test the 7/24  S&P 1990 high even though its horizontal line across is just barely above the upper red channel line.  If they don't goose it a little higher we will be quick to close out the remaining 1/4.

If we continue on up to S&P 1990 level we will close out the last quarter as it hits it.  If the market breaks out above it and then shows support on the top side of the blue line we will begin scaling back in again. Right at that 1990 line will be a dangerous place for both shorts and longs.

Trade well my friends

Alan

1/2 Off of the Table

Stock Market Technical Analysis Blog

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In the market today the indexes pushed higher with the S&P and the Nasdaq reaching the upper lines of their descending channels, shown in the left and middle charts above.  We decided to close 1/2 of our long position from the Friday morning and Monday morning entries as we customarily do when up against such a pronounced downtrend line.    Also, the VIX closed at its lower line of its uphill channel.  We will stay in the remaining half of the position if the market breaks out of that channel tomorrow and the SPY and QQQ show no substantial on balance volume divergences. 

This is another pivot and it is important that the market break out of this channel considering the quality of the EMA line bounce setup shown in chart 2 of my last blog.  

Trade well my friends

Alan

Another Pivot

Stock Market Technical Analysis Blog

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In the market this morning we had a pivot complete into a bounce setup.  Two weeks ago today we entered the S&P (SPY) short position and closed it today for a 4% account profit.  We entered a small long position today upon the technicals I will be discussing momentarily and will be adding to the position on Monday if we have follow-thru in the market.  

Looking at the charts:

• Chart 1:  The red dot shows the entry on the short trade and the black dot shows the close of the position this morning.

• Chart 2:  Shows a classic pair of EMA lines that are merging to a pivot with an upside bias.

• Chart 3:  the weekly candles shows the S&P printed a weekly Reversal candle this afternoon.

• Chart 4:  shows the S&P found support yesterday at the 50% Fibonacci level.

• Chart 5:  shows the very precise 1 year up channel of the S&P with yesterday's low holding that line.

• Charts 6 & 7:  are updated charts from my blog on July 25th where I discussed the key relationship between longside bond setups and stock market declines.  Looking at those charts closely tonight, we have seen very little change in the bond price but a drop in the S&P from its top channel line to its lower.  The setup on the bond chart is a large slow changing setup because they are very large EMAs but all investors have to be aware that this bond setup is positioned to lift if it has a sufficient catalyst which as seen in the chart historically causes sell downs in the stock market.  

A lot of investors are concerned right now, not knowing where the point might be where they would look back and wish they had exited stocks.  That lower trend line on the one year S&P channel is absolutely key.  If we have a weekly bar close below that line, stocks could take a substantial decline.  As long as we stay in the channel, the music will continue playing.

Trade well my friends

Alan