VIX Triggered at Midday Friday

Stock Market Technical Analysis

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Taking a look at the S&P over-extension chart shown above, we see that the S&P has been going sideways at its upper red trend line for the past several trading days. Friday morning's opening showed the S&P at 214 points above its 324 day EMA line, the midterm neutrality line for stocks & indexes.  Looking back over the past two years I have marked in the peak over-extensions and how many points each was over-extended from its 324 EMA line.  The average over-extension peak is +219 points.  Technically we stopped five S&P points below the average over-extension peak, but the fact that the S&P has not been able to break through the resistance of the upper red trend line shown above lends to the argument that the peak might be here.  

Everyone knows that the trading action over the past week has been nothing more than keeping the S&P as high as possible to entice consumers to be a little looser with their purse strings during black Friday shopping.  However, there has been considerable conversation on the internet the past 24 hours as to what happened shortly after lunch on black Friday when the indexes and key stocks took a sharp dive.  This sudden drop was triggered by the up crossing of a channel line in the VIX chart below.

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Taking a look at the VIX chart above, focusing on the last trading bar, we see that the VIX opened still below the lower lines of both the black line long term channel and the red line midterm channel. By late morning Friday, the VIX crossed up back into the black line channel and and then at midday it crossed back up into the red line channel which caused the sudden drop in just about everything.  

The Fed's task of getting the market as high as possible for the black Friday shopping weekend was obviously a success.  Now that the job is done and the bulk of the consumer's retail spending has been done (consumer spending is 70% of the economy), everyone will be watching to see if the VIX's return back into its uphill red channel is an indicator that we just saw the traditional Santa rally and that December trading will be nothing more than chart noise or a decline.

We will see...

Trade well my friends

Alan

Fed Still Pumping Up Stock Market

Stock Market Technical Analysis

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There has been misinformation coming out of the franchise news sites over the past few weeks that the reason the stock market reversed back upward after the farewell to QE speech six weeks ago and has been climbing to ever increasing heights since, has been greatly attributed to investors believing that QE wasn't necessary and that the market can climb with out it now having gone up 200+ S&P points in six weeks.  This all sounds good but the facts of public record show a different picture.

The chart above shows the size of the Fed's balance sheet in trillions of dollars with its once a week numbers posted above corresponding weekly bars of the S&P 500.  

• 9/10 - the S&P starts showing signs of faltering, looking like it was about to roll over

• 9/17 - the Fed injects 28 billion to see if it can stop the sell off from beginning

• 9/24 to 10/13 - S&P suffers a staggering sell down

• 10/15 - the Fed injects another massive sum of 19 billion to start a global short squeeze

• 10/15 to 11/19 - Fed's bond buying / liquidity injections continue as normal even though  it has been officially turned off with the Fed's balance sheet increasing a massive 37 billion in the past six weeks

As long as the Fed continues injecting liquidity into the market, the S&P will likely continue to become even more overextended.  When will the market run end?  Very likely, the first week the liquidity injections show a zero for the week or an actual reduction in the Fed's balance sheet for the week.

Trade well my friends

Alan

Weekly Index Charts Holding In Overbought Condition

Stock Market Technical Analysis

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Taking a look at the weekly charts of the S&P and the NASDAQ, we see that both indexes are still holding at their maximum distance from their weekly 65 EMA lines shown in blue in the upper part of the two  charts.  Also, both indexes are still holding at the upper line of their expanding triangle patterns, an unnatural place to just hold when extended so far from the weekly 65 EMA line. 

Looking at the middle section of the two charts, we see that the S&P and the NASDAQ both just pegged the weekly 100 stochastic level after making a zero to one-hundred stochastic run in record time.  

Looking at the bottom section of the charts above, we see that the bearish RSI divergence that took the market down a couple of months ago is set up once again for doing the same.  

Normally, this is a textbook sell off situation ready to start but two things have to be considered:

1. Friday is options expiration and Puts have been outselling Calls three to one.  We should have been seeing a quick move up in the market Wednesday and continuing into Thursday so that they can wipe out the Put holders but it's not happening.  It's unusual that we are not seeing this, pumping the market higher right before expiration has been free money for the option divisions of the big Wall Street firms the past two months.  
2. The Fed is no doubt not at all pleased with how these charts look and how paired institutional marker trades continue to come through on the SPY.  If you are a bear you might not want to be the first to go short because up until now, standing in front of the Fed's stealth buying programs has not been a very healthy thing to do.

We will see...

Trade well my friends

Alan

Big Market Move Imminent?

Stock Market Technical Analysis

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In the market Monday we had another day of the horizontal tractor program that has been running the past week and a half on the SPY.  This is actually the second tractor program since the Advance Decline divergence began three weeks ago which I focused on in my previous article.  Chart 2 above has the two tractor programs marked in blue lines and shows the EMA pair whose up cross marked the beginning of the rally and shows that they still have not down crossed on the S&P.  However, in chart 3 we see that the NADSAQ had the same EMAs down cross midday Monday and chart 4 shows the Russell 2000 down crossed last Thursday afternoon.  It would have been another meaningless sit and wait day for the S&P except that there were very important trades after the close today.  

Looking at the top left corner of the cluster above, I have a time and sales log for the SPY showing after hours activity.  After the close, there were multiple institutional marker trades that the big Wall Street institutions send out when they have decided it's time for the market to start a new and pronounced move.  Team Yellen has been running the show with the two tractor programs for the past three weeks but Wall Street is signalling that it is time for that to end.  The trades were a pair of 1.10 mil block trades followed by a pair of 4.50 mil block trades.  Several times throughout the years I have brought attention to these same 4.50 mil and 1.10 mil marker trades when they have come through after hours.  The Wall Street institutions that send these trades through always have them paired and in these same amounts each time.  The reason being is to communicate clearly to the professional and institutional investment communities to be prepared for a big move in the market to begin soon.  We finally got both pairs this afternoon and if we look to the Bollinger Bands chart of the SPY with two hour bars just to the right of the log above, we can see that the Bollinger Bands have constricted about as tight as they ever get which happens right before a major break in one direction or the other happens.

The Advance Decline divergence chart in my previous article says the market is about to plummet like a rock, however, Team Yellen's tractor programs have somehow morphed from a rather sloppy narrow trading channel before the end of QE announcement to an incredibly powerful program that keeps the market locked tight in a very narrow channel regardless of any large sell orders coming through when the SPY is at the lower line of this tractor channel.  Only one of these two major market forces will have their way if the two are not in sync.  It is worthwhile mentioning that these same pairs of 4.50 mil and 1.10 mil marker trades came through the day before the 200 plus point S&P short squeeze started in mid October.  Logic now says that these marker trades are Wall Street's signal that the market is about to turn down.  However, there is that word, logic.  If you have been using logic for your trading in the past month then you probably had your head handed to you in a basket.  For those who are not aware, all after hour trades are masked as to whether they are a buy or a sell so you have to figure out whether the marker trades are signalling if the market is about to sell off or start another rally.  Yellen's PPT no doubt also saw the marker trades come through and I'm sure they realize that if they are going to start a short squeeze to make the market do what is widely viewed as impossible at this point in the cycle, their window to do so just became very small.  The questions now are these marker trades exits or entries and is the market going to break upwards or downwards?  

Either way, get ready because Wall Street has officially signaled that they are about to break the market out of these tractor programs with a pronounced move in the market very soon.  

Trade well my friends

Alan

Major Advance - Decline Divergence

Stock Market Technical Analysis

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There has been a lot of discussion as to what happens when the global short squeeze winds down to an end.  Many are wondering if this move is real or even sustainable.  The key to analyzing this question is to look at the market breadth of this huge move.  The Advance Decline Index is the easiest and most accurate way to see what is really going on behind a move.  The purpose of the index is to confirm that a move is real and sustainable by checking to see if the Advance Decline climbs as the rally climbs.  If the Advance Decline makes higher highs as the stock market makes higher highs then it is a confirmation that the rally is both real and sustainable.  If, however, the Advance Decline trends down as the market climbs  it indicates market manipulation as the Indexes are being dragged higher by a small handful of mega stocks and ETFs while the vast number of stocks are selling leaving fewer and fewer actually participating in the market move. 

Taking a look at the two charts above, the top chart is of the VTI (Vanguard's total market index ETF) which is a good representation of the entire stock market and is a very good match for comparing to the US stocks Advance Decline Index (shown in the lower chart).  We can see that the stock market has been climbing higher for the past three weeks while the Advance Decline has been down trending fast.  A textbook non-confirmation of the rally.  Historically, when this happens this is the ultimate buyer beware because a hard drop in the market may be imminent.  

Will the market drop happen?  In light of the all powerful tractor program that has been locked down on the market for the past week and a half and the manipulation that has gone on in the SPY and QQQ shamelessly, I would not go short just yet as they continue to show that they have no problem bulldozing reason, logic, and technical analysis to achieve their desired results in the stock market.

Trade well my friends

Alan

Bears Starting to Salivate

Stock Market Technical Analysis

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Trade well my friends

Alan

VIX Finds Support at Lower Channel Line

Stock Market Technical Analysis

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In the market Wednesday the S&P took its first small dip giving the VIX a pop up from its lower channel line that it reversed up from on Monday.  Monday's VIX reversal led to the S&P dropping out of its three-week uphill channel Tuesday morning.  Since then the S&P has been sideways as they are very determined to keep it from dropping which almost all traders are expecting it to happen very soon because the VIX has a big EMA pair set up ready to lift which is shown in the lower left corner chart above.  This same EMA lift setup is what triggered the sell off to begin in late September.  

The lower channel line of the VIX is very well defined and technically the market should be beginning to roll over now.  However, they are fiercely determined to keep the market going sideways hoping that if it continues sideways long enough it might cause the VIX to drop on down through its lower channel line which would really change the dynamics of where we are at in this cycle.  Their efforts being applied against a very heavy market is why the market has become so stale and boring.  They know that if they don't break the VIX down through that lower channel line that the S&P could easily roll over and drop 210 points just as fast as it squeezed 210 points up from the sharp "v" bottom.

Trade well my friends

Alan

...and the Battle Begins

Stock Market Technical Analysis 

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Trade well my friends

Alan

...Or Trouble In Paradise?

Stock Market Technical Analysis

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Trade well my friends

Alan

Another 27 Points Left In S&P Run?

In the market Friday the S&P had a third day of slow creep up where it closed above the multiple resistance lines I have focused on in my recent articles.  Now that the S&P is technically above resistance everyone is wondering just how much higher it can go in an overbought condition.  

Taking a look at the two small charts below, I have posted an overview of the current run.  

Chart 1: the S&P chart I posted in my October 21st article showing the large EMA setup they constructed to provide the lift power for a sustained short squeeze.

Chart 2:  shows the run up with our swing trade EMAs applied.  Our entry was at the up cross marked with the small green dash.  Our exit will be whenever it down crosses.  While there have been several close calls at multiple resistance points we are still in the trade even though it is getting overextended because until it down crosses the trade is still on.

If the S&P continues to inch higher we plan on going ahead and selling in the 2058 area for the reasons I will outline in the chart below.  Taking a look at the large chart below, I have marked in the overextended peaks for the past two years.  The heavy green line is the Day 324 EMA which I have discussed numerous times through the years on my blog showing how this line is considered midterm neutrality for stocks and indexes.  An "overextended condition" can be measured numerically by how many points the S&P is currently above the 324 EMA line. In peaks A through E I have noted the number of points the S&P reached up from its 324 EMA line before the rubber band became stretched all it could go and the market decline began.  If you study the chart you can see that once the S&P gets 200 points above the 324 EMA line it is basically living on borrowed time with the 217 to 227 range being the peaking area.  At Point F, I marked in the next potential peak at S&P 2058 which would be a 215 point extension.  Looking back we see that it often moves another 10 points higher than the line before the peaking day which would be in the +225 area possibly another week or so out if the creep up move continues.  We are actually targeting the red line this time around 2058 as the market's steadiness when not in a short squeeze has diminished somewhat since the October plunge.  Friday's close is 187 points above the 324 line.  In the bottom corner of the chart I posted the simple math showing the 2058 red line target less Friday's close which was 2031 leaving a net of 27 points left to the upper red line.  

Another 27 points anyone?

Trade well my friends

Alan

Closing Minutes Chart Update

Stock Market Technical Analysis

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Trade well my friends

Alan

Midday Chart Update

Stock Market Technical Analysis

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After two days of a tight tractor program running on the SPY, the S&P has inched across its primary resistance lines as can be seen in the chart clusters below.  We could have the very beginning of a breakout in the S&P.  The biggest hindrance to this is that Wall Street's trading algorithms have been steadily downshifting for the past week and a half which indicates just the opposite, that a pullback may be imminent.  This downshift can be seen in the Advance Decline chart above with the red declining line.  

Also,  I have the S&P, NASDAQ, and Russell 2000 in the three lower charts above with our swing trade EMAs applied.  While there have been several close calls at resistance levels, the red line on the S&P has held and not down crossed at every juncture all the way up keeping us in the trade.  Additionally, with the tractor program on the SPY the past  2.5 days, the S&P (SPY) trade is still looking safe.  The NASDAQ and Russell 2000, however, have been trying to down cross all week and nearly did a couple of times putting them on shaky ground.   The Russell 2000 led the lift off the bottom and is expected to lead the rollover whenever it happens.  

Today being a Friday, rather a "float up Friday", where the volume is low and drifts to anemic in the afternoon which is where Team Yellen has been coming in and have made good progress because basically they don't have any resistance since most professional traders call it a week at noon on Friday.  We will be watching closely this afternoon to see if the low volume float up starts to happen and causes the trading algorithms to reverse on the Advance  Decline and break up out of that declining red trend line they have been working.

Trade well my friends

Alan

Midday Chart Update: Propalooza Inches S&P Higher

Stock Market Technical Analysis

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Trade well my friends

Alan

S&P Still Holding At Resistance

Stock Market Technical Analysis 

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In the stock market Wednesday, we had the token gap up from Tuesday night's Republican win.  This move basically took us back up to the resistance level that the S&P pulled away from on Tuesday. Wednesday was the fourth day the S&P has hovered up against multiple resistance lines.  Taking a look at the chart above, we can see that the S&P is up against the lower line of its steepest channel shown in blue and also up against the line drawn across from the mid September highs.

Looking at this second chart cluster, we see that in chart 2 the expanding triangle is still containing the S&P.  In chart 3, the midterm channel is still containing the S&P also.  In chart 4, we see a bearish RSI divergence with lower highs in the RSI as we had higher highs in the S&P.  In chart 5, we see the S&P is still holding at the center line of its two-year bubble channel.

Lastly, looking at the short term channels shown in the cluster just above.  The S&P is faring the best at it is actually clinging to the upper line of its 2-week uphill channel.  The NASDAQ, however, took a hit today as it slipped out of its 2-week uphill channel.

Technically, the longer the S&P is contained by all these resistance lines the more bearish the situation becomes.  If it continues much longer this level could become a firm ceiling for the S&P. However, with everything we have seen the past three weeks, anything is possible.


Trade well my friends

Alan

Election In, Jury Still Out On S&P

Stock Market Technical Analysis

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The expected gap up from the Republican win turned out to be rather small.  Many were expecting the S&P might gap over all the lines it is up against in the two upper chart clusters but it didn't happen.  We are now right back to these lines once again with no indication yet if the market will break out or break down at these junctures.

Trade well my friends

Alan

Election Night

Stock  Market Technical Analysis 

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Trade well my friends

Alan

Market Waiting For Election Results

Trade well my friends

S&P: Short Squeeze Finished or Just Beginning?

Stock Market Technical Analysis

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As we enter the new market week, the S&P finds itself at three important junctures shown in the charts above.  

• Chart 1:  shows the S&P closed Friday exactly at the mid September all time high.  Friday's closing also left the S&P up against the lower line of its most aggressive channel, the blue line channel above which is actually inside of the two-year red channel shown in chart 4.  The slightest movement upward from here will put the S&P back into that super aggressive channel.

• Chart 2:  shows that the S&P also has a massive expanding triangle pattern which indicates a big sustained move in one direction or the other is about to begin.  The triangle measures nearly 200 S&P points tall at its current face.  Technically, if it breaks to the upside the size of this pattern could take the S&P to the upper line of this blue channel over the next few weeks. Possibly, an early start to the traditional Santa rally.  However, if the S&P fails to break above the upper triangle line it would technically be expected to fall the same 200 points back down to the lower line of the triangle.

• Chart 3:  shows that the S&P closed Friday at the upper line of its midterm channel shown with green lines.  The upper line of this channel has dictated the stop of all upward movement since late June.  There could be substantial resistance here if we don't pop across it immediately.

• Chart 4:  shows the S&P is already halfway up through its two-year bubble channel. Actually, there is a center 50% line right where the S&P closed Friday (not drawn in).

With the US midterm elections Tuesday, it's not likely we will see much change in the market until Wednesday morning.  A lot of traders and investors will not even consider whether they will double up on their long position or flip and go short until they see the market's reaction to the midterm election outcome.

Trade well my friends

Alan