Bears Taking A Stand On the S&P and NASDAQ

Stock Market Technical Analysis

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Tuesday's market action was a win for the bears negating Monday's win for the bulls.  This increases the pressure on the pivotal situation the Indexes are at right now.  Looking at the top chart cluster above, the midterm channels overall are still holding but looking a little heavier this afternoon.  The Russell 2k actually started to lose its channel going into the bell.  After hours, the SPY and QQQ took a noticeable drop. 

Looking at the second cluster above, the EMA charts, we can see that tomorrow really needs to be a day for the bulls because the upper day chart EMAs are getting dangerously close to a down cross. Skipping down to the VIX charts, we see it's still managing to maintain its upper momentum.  

All in all, Tuesday needed to be at least a sideways day but it wasn't.  This puts tremendous pressure on Wednesday because if it starts with a gap down and doesn't recover then we could see the day EMA charts start to show the beginning of a down cross which could easily trigger big sell programs.  The market really needs a 3 AM Team Yellen intervention on the SPY as they have done so many times before at critical junctures.  

Trade well my friends

Alan

Mid-afternoon Update

Stock Market Technical Analysis

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The VIX turned back upward at midday today going back up to the 16.40 level where there is a cap beginning (shown with the thick horizontal red line).  Such a quick reversal makes it more likely that we may be in for a multi-day test of the upper VIX line (shown in the lower daily chart above) as we had in early August.

Trade well my friends

Alan

VIX Pulling Back

Stock Market Technical Analysis

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Taking a look at the VIX this morning in which its changes will determine which way the big picture charts I focused on yesterday will break.  Looking at the short term channels in the top chart, the VIX is starting to cool down this morning.  More importantly is the lower chart above, the daily chart of the VIX where the historical stock market sell area shown with the red line and the historical stock market buy area shown with the green line.  Notice we touched the green line yesterday and so far we are pulling back down from it which is quite bullish.

Trade well my friends

Alan

S&P and NASDAQ: The Big Picture

Stock Market Technical Analysis 

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In the market, the Monday afternoon close was slightly negative after a big gap down at the open. The midterm channels on the four primary Indexes are still in a holding pattern as shown in the top four trendline charts.  Taking into consideration how the market traded we believe the lower four charts above will become key for the remainder of this week and next.  

In the lower cluster, charts 1-4 are larger EMA pairs that we believe they are patiently working to create lift over the next two weeks.  Charts 1 & 2 are fairly large EMAs on the S&P and Nasdaq daily charts.  Charts 3 & 4 are standard EMAs on weekly bars charts of the S&P and Nasdaq.  Over the next ten days they will be trying to bounce the red EMA line up from the larger green EMA line to create a sustainable rally lift.  If this lift scenario happens on any one of these four charts, a sustainable rally should follow.  If, however, any of these four have their smaller red EMA line cross down through the larger green EMA line then a new wave of selling should follow.  

Notice in weekly charts 3 and 4 how critical these line junctures are.  In chart 3, the S&P has bounced instead of down crossing every time for nearly 2 years.  These are weekly bars in charts 3 & 4 so it may be as far out as the first part of next week before we see visual lift in the red line if they succeed in overpowering the selling that keeps on coming in during the mornings.  Ideally, the market would continue sideways the rest of this week and then start lifting at the beginning of next week so that the two red lines in charts 3 & 4 turn up gradually.  If their efforts over the next few days become fruitful we should start seeing the red lines lift in daily charts 1 & 2 before it starts happening in weekly charts 3 & 4.

If on the other hand, the selling begins to overwhelm them and the S&P in weekly chart 3 starts to show a down cross situation and they cannot immediately reverse it, that down cross would be a true marker of a major down leg in the stock market beginning.  For the last two years, however, they have managed to prevent this from happening every time on the S&P.

Trade well my friends

Alan

It's Going To Be A Close One

Stock Market Technical Analysis

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With this morning's open, the market was slammed with a purge of selling for a big gap down.  Since the open the Indexes have climbed steadily.  In the top chart above, the EMAs that are currently in play are compressed as tight as they can be which means they could easily go either way now. 

Looking at the midterm channels on the indexes on the lower cluster, we see that at the gap down we lost the channels but have recovered them in the first hour.  Technically, this counts as a successful "hard" test of the lower line.  Nonetheless, they are trying to turn the Titanic here and if they do it could take a couple of days of sideways action to provide sufficient base on these lower lines to get the shorts to start covering. If the S&P suffers a down-cross in the the top chart EMA pair it could trigger a new wave of selling but the action so far this morning is demonstrating strength after a gap down opening.

Trade well my friends

Alan

Midterm Channels Come Into Play

Stock Market Technical Analysis

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Over the past week we have been focusing on the breakdown in the Indexes' long term channels and Friday we focused on how the short term channels have shown that the selling has stopped.  In today's blog I would like to focus on the Midterm channels as they typically come into play at this point in the cycle.  

I have posted 12 charts above showing the four primary stock Indexes and eight of the favorite names among investors.  Looking across all the charts it is easy to see that they are all setup for an upward reversal from their lower channel lines.  We just may get some long-side swing trades this week.  

Trade well my friends

Alan

Weekend Focus Chart: The S&P

Stock Market Technical Analysis

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Following up from this afternoon's blog discussing the neutral close at 3pm which has left a lot of investors confused as to whether they should hang on for a bounce or sell now; I would like to take a look at the two EMAs most often used to reverse serious sell-offs.  These two EMAs are large and are applied to a 120 minute bars chart above.  Looking at these EMAs during the last two 120 minute bars it is easy to see that this layup setup starting to lift is what caused the market to climb so quickly this afternoon.  While nothing is a done deal in this market and there have been numerous mornings where strong setups have been overrun by big sellers, it is quite significant that they have orchestrated this sell-off to level out and turn back upward using these two EMAs.  These are their bread and butter workhorses.  

The quality of the layup is very high and the compression response and lift was virtually textbook perfect this afternoon.  If they can keep a lock down tractor program on the Forex Futures Sunday night and handle the big sellers we have been getting Monday mornings their chances of making this layup work and produce a few days of upward travel seem quite decent.

Trade well my friends

Alan

S&P Channel Bounce

Stock Market Technical Analysis 

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In the market today there was a good bounce after yesterday's selloff.  The S&P started lifting from its lower short term channel line right from the open (shown in the top chart cluster, lower right chart).  It can be seen in that chart that it actually closed on the top side of that downhill channel which is fairly bullish looking towards Monday.  The Nasdaq & Russell 2k clusters are not at critical junctures today.

Skipping over to the VIX we see that it failed to drop below the lower line of its short term uphill channel today (bottom cluster, lower right chart) which is bearish looking towards Monday pretty much offsetting the S&Ps bullish short term setup.  Looking at the VIX long term chart (big chart) we see that it closed right at its upper red channel line.

With the S&P short term channel bullish and the VIX short term channel equally bearish, we are basically net neutral on bias.  Then you add the big daily chart of the VIX closing right at its upper line also gives no direction bias making today's closing net neutral across the board.

You have just got to love how these guys operate.  They managed to craft and manipulate today's action to produce a close that gives no clue whatsoever which direction the market will go next week as they often do when the market gets dicey.

In this weekend's focus chart blog I will go over a bigger picture setup that they are trying to build. 

Trade well my friends

Alan

Midmorning Chart Update

Stock Market Technical Analysis

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We are getting the bounce from the S&P's lower line of its short term channel.  We are watching the Nasdaq to see if it can regain its short term channel.

Trade well my friends

Alan

Not Good...

Stock Market Technical Analysis

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In the market today a number of technicals failed leading the indexes to a substantial swing downward.  Of the four index charts above, the S&P shows the most promise for a bounce tomorrow as it closed at the lower line of its short term channel shown in the bottom right chart of the top cluster.  If the S&P bounces from that line it might be enough to pull the Nasdaq back up into its short term channel. 

Trade well my friends

Alan

Late Morning Chart Update

Stock Market Technical Analysis

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The market has already lost everything it gained back yesterday and then some.  Looks like yesterday was just them clearing off as many shorts as possible before this morning's release of bad economic numbers.

Trade well my friends

Alan

One Day Bounce? Or Something More?

Stock Market Technical Analysis Blog

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In the market today we had follow thru from a strong bounce at the open on the Nasdaq.  It lifted all indexes back into safer areas.  

Looking at the large charts above:

• Chart 1 - S&P - climbed back up into the red channel it fell out of yesterday and got above the horizontal blue line coming across from the July peak.  However, it still needs to break thru the upper line of the black channel to show that the black channel is not now the dominant channel restraining it.

• Chart 2 - Nasdaq - price closed right at the upper line of its red channel and the center line of its black channel, truly sitting on the fence.

• Chart 3 - Russell 2000 - had a more modest move today, overall it is the chart that is the weakest.

• Chart 4 - VIX - had a substantial drop today making it down to the center of the red channel in its big daily chart.  In its short term channel chart just below it, we see that it got back down into its big downhill channel in the afternoon.

All in all, it cannot be determined yet whether today was just a one day bounce where Team Yellen wipes out all the shorting that took place yesterday or if they will be able to keep the market rising since the VIX could easily have 2-3 days of travel before it gets down to its lower red line.

Trade well my friends

Alan

Midday Chart Update

Stock Market Technical Analysis Blog

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This morning's bounce was fueled by the Nasdaq lifting from its lower line of its short term channel.  The VIX pulled back considerably from this.

Trade well my friends

Alan

Support Lines Don't Hold

Stock Market Technical Analysis Blog

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In the market today we had an intense struggle at support lines early on, however, as we got into the afternoon they gave way on several indexes.  

Taking a look at the large charts above:

• Chart 1 - the S&P turned loose of the horizontal blue line coming across from the July peak by late morning and in the afternoon slipped out of the 8 month red line channel.

• Chart 2 - the NASDAQ actually slipped back into its year long red channel yesterday but fared a little better than the other indexes today as it did not breach last week's lows during the selling.

• Chart 3 - the Russell 2000 Index (IWM) has a lot of people concerned.  It slipped out of its 2.5 year black line channel last Friday and it's not looking like it may try to get back into it.

• Chart 4 - the VIX (Volatility Index) broke out of its red line channel this afternoon.  

Of the four charts, the VIX breakout is the most concerning because as long as we are above that red channel the market is not going to be very friendly.

Trade well my friends

Alan

MACD Monday

Stock Market Technical Analysis Blog

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In the market today the action was dictated by the MACD oscillator, a somewhat over-smoothed interpretational tool for directional momentum.  Generally, it pinpoints very few trades, tending to follow day to day movement.  But like a squirrel that sooner or later finds a nut so did the MACD today.  Looking at the two top charts above showing a day MACD on SPY and VIX we see that the SPY had a pushdown setup this morning and the VIX had a lift setup at the open this morning.  We took a large short position at the open and closed it out after lunch for a nearly 1% gain in 4 hours.  We decided not to hold the short position overnight as we feel it would be too easy for them to bounce the market tomorrow as can be seen in the bottom charts above.  Plus we closed right at the critical 1995 level, the July peak where Team Yellen should be interested in at least a modest defense of this level.  

Trade well my friends

Alan

Are They Done Yet?

Stock Market Technical Analysis Blog

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In the market Friday we saw the three day blistering short squeeze lose its steam.  The move was a strong pronounced move orchestrated by Team Yellen and was boosted by Wall Street's desire to get the market higher quickly right before Friday's option expiration to allow them to keep a great deal of the money investors had spent on Puts the past two weeks.  Not pretty but that is the way the game is played.

Could we please have a few days of less manipulated stock market activity now?

Trade well my friends

Alan

And The Music Plays On...

Stock Market Technical Analysis Blog

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In the market today Yellen's announcement didn't remove the phrase considerable time triggering a spike short squeeze.  It will be interesting to see if they can put legs on it in the next few days.

Trade well my friends

Alan

Like Clockwork

Stock Market Technical Analysis Blog

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In the market today Team Yellen did the traditional market jam / short squeeze that somehow manages to happen at the beginning of every Fed speech.  It's almost enough to make you think that they are trying to give the market its reaction to Yellen's speech    ;)

Trade well my friends

Alan

Market Waiting for Yellen

Stock Market Technical Analysis Blog

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In the market today we had a serious drop in the Nasdaq but only a two point drop in the S&P as Team Yellen is in full prop mode on the S&P.  With Yellen's speech the next two days the world is basically in standby mode.  

On the lighter side there has been wide debate whether AAPL should have a two or three digit stock price as the iphone 6 comes out.  The link below helps put the iphone 6 in perspective:

http://finance.yahoo.com/news/android-fans-laughing-over-graphic-120439555.html

Trade well my friends

Alan

Weekend Focus Chart: Treasury Yields / Interest Rates

Stock Market Technical Analysis Blog

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There have been big changes happening in the bond market over the past two weeks.  We have seen the TLT (10 year treasury ETF) drop from 119 to 113 at a speed rarely seen.  At the same time, the TNX (10 year treasury yield index ETF) has rocketed from 2.30 to 2.60.  This sudden change in direction for these indexes lets us know that the bond market has decided that interest rates may start rising sooner than expected.  

Looking at the chart above, a weekly bars chart of the 10 year treasury yield with large EMAs applied shows they are working a powerful lift setup that just began rising the previous week.  The bond market believes that Yellen is about to turn more hawkish in her Fed meeting speech this week.  Many believe that she may drop the coveted phrase "considerable time" (interest rates will remain low for a considerable time beyond the end of QE) from her speech.   If she does remove it, it is likely the volatility will increase.  Does the bond market have it right?  They certainly think they do as they have crafted a powerful lift setup shown above.

Team Yellen no doubt sees this setup and realizes that if she does omit the phrase she could easily create market instability.  Therefore, one could argue that she won't omit it because of the delicate market situation of an overextended stock market.  Or will she? This Fed meeting speech is going to be a big one.

Trade well my friends

Alan

Major Sellers Unload Into Buy Signal

Stock Market Technical Analysis Blog

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In the market today the S&P suffered a technical breakdown right at the open from major sellers waiting for a buy signal to unload into.  I tweeted our stop loss was triggered right after the open, taking us out of the trade.  In chart 1 above, the S&P lost the blue channel firmly today as it is now being controlled in a downhill channel shown with pink lines.  

Next we will see the QQQ try the same lift likely Monday or Tuesday as shown in the lower right chart.  If it also fails it should accelerate the downtrend in stocks.  We will consider a new position Monday morning.  One notable item, today at the close there were two twin 10 million share institutional trades in the SPY.  Someone big is betting huge that this sideways action is about to convert to a definitive direction.  Next week is the Fed meeting .  Could get really interesting really fast. 

Trade well my friends

Alan

Over The Weekend Trade, Six Time's A Charm?

Stock Market Technical Analysis Blog

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In the market today the S&P took an early drop due to it stopping at its lower channel line right at the bell yesterday as I pointed out in last night's blog.  Stopping at that line is what kept us from going long yesterday but by the closing hour of the day Team Yellen had prepared another weekend happy meal trade for everyone and we decided to take a bite, buying the SPY at 2:30 pm today.  Over the past 5 weeks, the weekend trade has started earlier each week starting out as a 2:45 pm entry on the first one and then last week it started at midday with the bulk of the money being made in the run up to the Friday bell instead of a gap open Monday.  If we had sold at the bell last Friday we would have had a nice profit for the afternoon but ended up nearly flat with the failed gap opening on Monday.  Once again this is another high risk trade but as the pattern rotates earlier, we decided a closing entry today had the best chance of capturing lift tomorrow.  

The reason behind our entry can be seen in the charts above.  In chart 1, the S&P finally reentered the blue channel before the bell as the VIX dropped out of its blue channel.  We combined these channel requirements with the lower chart above, one of our favorite EMA pairs, that is showing a high quality lift scenario ready to begin at the open tomorrow.  Between the two, we felt it is worth the risk to trade Team Yellen's weekend happy meal once again.  The question will be whether to sell tomorrow or go ahead and hold until Monday which is losing favor after the past two weekends. 

Trade well my friends

Alan