Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, September 29, 2014

S&P and NASDAQ: The Big Picture

Stock Market Technical Analysis 

click on image to enlarge

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


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