Nasdaq at Most Overbought Level in Two Years

In my April 6th article I wrote how the S&P 500 was grossly overextended and basically pressed against the ceiling on the Percent of S&P stocks above their 50 day moving average.  Tonight we are taking a look at the Nasdaq to see if it is equally overbought.  The chart below shows the percent of Nasdaq stocks above their 50 day moving average.  Friday the percent above 50 closed at the most overbought level in the past two years.  

With such overbought conditions, investors would do well to keep a close eye on their long positions.

Trade well my friends

Alan

AAPL's Situation Worsens

Well, we learned Friday that AAPL is cutting back production of its iphone due to slowing demand.  I guess AAPL forgot to tell us that when investors were buying the channel breakout a couple of days ago.  Looking back, it almost appears that someone had a powerful algo forcing AAPL to break out of the channel.  

Looking at the top left chart above, we see where AAPL broke above its 200 day moving average and then retreated back below it with the news.  In the top right chart we see how AAPL broke out of its steep declining channel but then fell back into it with the news.  Notice the two prior false breakouts marked with arrows and how AAPL is punished severely immediately after having a false breakout.  

In the far right daily chart, we see a bearish RSI divergence and lower in that chart a MACD sell signal has appeared.  Next, in the candles chart we see that a second bearish shooting candle was printed in the weekly candles for this past week confirming the previous week's shooting star reversal candle.  Lastly, the large bottom left chart, we see the weekly moving averages I have focused on in several articles as they continue to develop a bearish setup where the smaller red moving average finds itself up under the larger green moving average and is turned back down or deflected downward by the green moving average producing a power flush downward quite similar to the MACD sell signal in the day chart to the right.

The only thing that might save AAPL here is the continued nightly futures interventions by the prop the market coalition and their tractor program that has been strapped on the market this past week to keep it from selling any whatsoever from the high peak it reached from the short squeeze based upon the now known to be a false report of a Russian / Saudi Arabia oil deal.

Trade well my friends

Alan

A couple of good reads

http://www.zerohedge.com/news/2016-04-15/saudi-prince-drops-friday-night-bomb-no-deal-without-iranwe-are-selling-every-opport  See my Tuesday 4/12 blog post

http://www.zerohedge.com/news/2016-04-15/fed-sends-frightening-letter-jpmorgan-corporate-media-yawns

Focusing on the SPY Top

The trading world is watching the SPY this morning as it is the last barrier of reason on the stock market.  

Trade well my friends

Alan

Pro SPY Traders Agree with VXX Traders

While the iron grip tractor program has forced all the retail stock market indices (S&P, Nasdaq, Dow) out of their multiyear declining channels the past 3 days, pro traders are largely ignoring this as they go by their own chart, the SPY ETF.

Today's high finally hit the upper channel line on the SPY and should close with an overextended shooting star candle that just kissed the line and pulled back.  This is likely why the iron grip tractor program seems to be losing its grip on the retail indices.  The pros on Wall Street will be fighting to maintain the downtrend line on their chart, the SPY.

Trade well my friends

Alan

VXX Believes 3 Day Iron Grip Tractor Program to Force Channel Breakouts is About To End

While the tractor program that has been locked on the market for 3 days has been hugely successful in forcing the stock indices to break out of their restraining channels, the breakouts haven't gone very far and it begs the question of what happens next if the VXX traders are right with their chart indicating the tractor program may be about to be turned off.

Trade well my friends

Alan

XLF Up Against Double Resistance

The XLF financial ETF had a big day yesterday but finds itself up against the upper line of its six-month declining channel this morning.  At this juncture you can expect them to put lipstick on some really foul bank earnings.

Trade well my friends

Alan

Midterm Channels Projecting Market Pullback

The S&P 500, Nasdaq, and USO have maxed out in their midterm channels as the VIX is basing at the 13.75 level which has projected stock market tops for the past four weeks.  The USO was stopped dead in its tracks after the Saudi Arabia oil minister denounced yesterday's oil deal rumor which had triggered the algos into a blind buying frenzy on the USO and stocks Tuesday and fueled a continuing short squeeze higher today.

Trade well my friends

Alan

USO December Support Level Becomes Resistance

The USO continues yesterday's late afternoon reversal downward while this morning Saudi Arabia's oil minister Ali al-Naimi threw water on the hopes of oil producers taking action in regards to crude output at the Sunday meeting in Doha.

He was asked this morning about the possibility of this action happening and said " forget about this topic".

Trade well my friends

Alan

Is Russian / Saudi Arabia Deal a Game Changer for Stocks or a Ruse?

The stock market ripped higher Tuesday as oil took off on a monster squeeze from the moment a Russian news agency reported that a Russian diplomat said that Russia and Saudi Arabia had reached a deal ahead of this week's OPEC meeting.  This news / rumor / prepackaged algo spiker was effective in triggering an outrageous short squeeze in oil and the accompanying squeeze in stocks.  

The algos are set so tightly to oil news now that they have no need for confirmation they will just buy the rumor then sell the news come Monday if we find out this weekend's OPEC meeting that the news was true.  Either way it is a risky trade as if it's true, the sell the news exit is Monday and if it is not true, oil will take a nasty turn back down and take the stocks with it.  

The charts below show where the indices are in the channels after Tuesday's short squeeze.

Trade well my friends

Alan

S&P Establishing a Steep Declining Channel

The S&P 500 continues its topping process even though oil has been squeezed relentlessly the past few days.  Monday we had a two point confirmation of the S&P market top that is textbook.  First, the third lower high was printed in the newly developing declining channel shown in red in the chart below.

Also, in the same trading day the S&P closed outside of its transition channel shown in blue.  These two together provide textbook technical confirmation that a new leg down has begun.  This is also where technicians pull out the Fibonacci scale to mark the token bounce points on the downward path.  The first benchmark Fibonacci line is the 38% retracement which is at 1974.  Swing traders wanting to catch the flip in the options montage when we catch a solid bounce will be watching for that 1974 Fib number and/or the Percent of S&P stocks above their 50 day moving average to reach the 40 level as I discussed in my April 6th blog post.  

Don't look for smooth natural trading for the next couple of months, I expect constant interventions in the overnight futures which will produce very choppy charts.

Trade well my friends

Alan

AAPL Rejected by 200 Day Moving Average & 1 Year Declining Trendline

AAPL's bearish situation has worsened considerably recently as it tested its 200 day moving average and the upper line of its one year declining channel a week ago and was rejected by both simultaneously.  Since then AAPL has traded lower for five days giving confirmation of the rejection as can be seen in the two upper daily charts shown below.

Looking next at the two lower charts which are weekly bars.  The chart on the left shows the two moving averages that started the big up leg in AAPL with the red crossing above the green back in November of 2013 and then it shows the end of the run with the red crossing down through the green a couple of months ago.  Since that recent down cross AAPL's price has been climbing as the make the stock do the opposite algo kicked in.  Now, however, we have a situation where the smaller red moving average is up under the larger green moving average whereby if AAPL goes a little higher again such as another test of the 200 moving average and the upper channel line in a new weekly bar and then stops, they will have inadvertently created a powerful push down situation as the chart could start showing the red moving average being deflected or forced downward by the larger green moving average.

Not to add insult to injury but AAPL printed a weekly shooting star candle this past week as shown in the bottom right corner chart.  Barring a major intervention, AAPL could go a lot lower.

Trade well my friends

Alan

An Interesting Article on Oil

http://www.zerohedge.com/news/2016-04-10/iraq-latest-announce-record-oil-production-why-just-beginning-supply-glut

Stocks & Oil Indices At Major Resistance

As the stock market closed another week of trading, we found the S&P 500, Nasdaq, QQQ, XLF, XLE, and the USO still stalled at major trend lines.  

The exceptions are the VIX and VXX which are sitting on major support.  Expect sudden moves in both directions to be coming soon.  The reality is that the prop the market coalition cannot afford for all these indices to rollover at the same time as it would be damaging to the stock market in both the short term and long term.  Keep an eye out for interventions in the overnight oil futures sessions.

Trade well my friends

Alan

Float Up Friday Hits A Snag

The S&P 500 is experiencing another float up Friday where they went ahead and gapped it up at the open to make sure they get a green day using a oil squeeze early on as I mentioned was likely last night.  One hour into trading the rally appears to have hit a snag.

Trade well my friends

Alan

Another Float Up Friday?

A lot of rising channels failed this week.  The charts below are 195 minute bar charts showing two months of trading.

The first two rows are the key stock indices where we see that all but the QQQ have lost their rising channels.  The bottom row shows that the TLT (bonds) and gold became maxed in their channels Thursday.  The TLT needs a pullback tomorrow as does gold and if this happens this would allow a window for stocks to rise tomorrow and with Friday being the thinly traded session where the prop the market coalition is highly effective in squeezing oil and with the USO pressing against the upper line of its declining channel, it looks like we are set up for another classic "float up Friday".

Trade well my friends

Alan

S&P Percent Above 50 Day MA Still at the Ceiling

There was a big squeeze in stocks Wednesday that was triggered by an even bigger squeeze in oil as the prop the market coalition seems to have abandoned their effort to decouple stocks from oil after some days without success and instead built a fire under oil futures knowing that just as soon as they moved a minimum amount up that it would trigger a storm of buying by the algos that now run the market and are tuned tightly to every tick up or down of oil.  This sudden intraday move up in the stock market may make some people wonder if a new wave higher is beginning but it is only a new wave higher if starts either from the 40, 20, or 10 level of this key market navigation chart.  A couple of days ago it was at 92.20 and today it is at 91.80, still tight against the ceiling and nearly 20 points above the red danger line which is at the 73 level.

If you study the chart for the entire year of 2014 you can see that every time the percent above 50 day MA got up to the red line the market started a leg down.  However, just as important notice that the reversals back up happened when the S&P percent above 50 got down to the 40 level, the most bullish level for the market to turn back up.  A couple of times it had to go deeper, for instance in early October 2014 when the market went on down to the 20 level before it could start a new leg up.  In uptrending markets as in 2014, the 40 level is pretty safe to buy in at and it has worked well.  In downtrending markets such as 2015, the level for which the market can start a new leg up is either the 20 or 10 level.  Notice that last summer it pegged the 10 level before a new leg up began and just three months ago in January it pegged the 10 level once again.  In downtrending markets the 20 and 10 levels are key but with the prop the market coalition manipulating the market on a daily basis it is pretty likely that the 40 level will become the effective turnaround point even though the market is downtrending.  So, 40 is the number to look for a sustainable up leg in the market.

Now look at the upper chart where we are still way above the red danger line.  It is almost comical that oil is being used to try to start an up wave when the S&P is already tight against the ceiling.  The percentage of stocks above 50 day moving average has been the most reliable indicator of "where" we are at in the cycling market and is also indicative of how desperately the prop the market coalition needs to keep the market from selling any at all.

Trade well my friends

Alan

S&P Hanging On By A Thread

The S&P 500 finds itself in a precarious position this morning.

It has now failed twice at its upper horizontal channel line (shown in black).  

Trade well my friends

Alan

NYSE McClellan Oscillator Drops Below Zero

The NYSE McClellan Oscillator is a technical indicator and it serves best as a simple measure of when the market goes from bullish to bearish.  When its value crosses below the zero line as it did yesterday, the big players in the market turn bearish shown by today's big gap down.  

This indicator alone cannot be used to determine a market top but when used in conjunction with the Percent of S&P stocks above 50 day moving average and the S&P's current GAAP PE and whatever the leading sector is for the market which is currently oil leading the market downward then you have the four components necessary to be conclusive that a market top has been reached.  These other three components are shown in the charts below.

 Trade well my friends

Alan

Percent of S&P Stocks Above 50D MA Points to a Market Top

Another way to detect market tops besides the S&P GAAP PE Ratio is the percent of S&P 500 stocks above their 50 day moving average.  The upper chart below is a two year line chart on a weekly time frame showing percent of S&P stocks above their 50 day moving average and the lower chart is the S&P index in weekly bars.

If you look at the top chart and note each time the percent above 50 reaches the top red line, that point corresponds directly with a market sell off beginning in the S&P chart below.  The eight above 50 percent peaks in the top chart produced the eight market rollovers shown with red marks on the S&P chart.  The eighth one is where we are right now.  

Bulls should be very careful here.

Trade well my friends

Alan

Are the S&P 500 Stocks Cheap?

There are some permabulls out there this weekend pushing the idea that the S&P 500 is cheap at this juncture.  The following chart shows S&P's current PE using GAAP accounting (not Proforma, mickey mouse, etc).

Every investor should decide for himself if that chart says cheap or insanely overpriced. 

Trade well my friends

Alan

Oil Starting Next Leg Down

The price of oil has been retreating the past few days and it is important to know if it's a move starting from daily chart moving averages or weekly chart moving averages as the latter is a much more serious situation.

It can be seen that this is a weekly chart moving average push down that is beginning (using the USO chart since it has liquid options).  Looking at the top two charts, the left is the regular view of the two moving averages showing the smaller red moving average being pushed down by the larger green moving average on weekly bars.  The chart to the right is a focused view of the same chart.

The lower two charts show that it is not only a weekly moving average push down but it is also a weekly upper channel line failure that is pushing the price down.  The chart to the lower right shows a focused view that I converted to daily bars for a more precise view.

How much lower oil will go again no one knows but a new leg down has already begun.  As everyone knows oil has been leading the stock market up and down by its nose for some time now because of the detrimental effect on banks should oil companies start filing for bankruptcy.  On Friday there was a large drop in oil that rattled the stock market in the morning but it was quickly driven up in a fierce short squeeze as the prop the market coalition took advantage of the thinly traded Friday to attempt to decouple the stock market from the price of oil.  Then in the afternoon when most Wall Street traders are already gone for the weekend they turned up the heat because they were essentially unopposed on an empty playing field.  Whether or not they can make this one day decoupling stick will be the big question on everyone's mind next week.  If they can, it is very possible that the indices may break up out of their restraining one and two year channels.  If they can't make the decoupling stick then the stock market will likely follow oil lower once again.

Trade well my friends

Alan

Indices Close Friday at Major Resistance

The S&P 500, Nasdaq, QQQ, and XLF all four were squeezed right up to major resistance Friday afternoon.  The S&P and QQQ are in virtually the same situation as they are both up against their one-year and two-year upper channel lines simultaneously.  The Nasdaq is up against one major channel line but it is a clearly defined and well honored two-year channel line.  The XLF was rejected by the center line of its two-year channel recently and it is now caught in a steep short term declining channel shown with green lines.  

Next, taking a look at how Monday is looking I posted the sixty minute bars chart below.

We can see that the S&P closed Friday at the upper line of the new channel being established (shown in blue).  Considering the S&P is maxed out in this channel, it suggests that Monday will bring a pullback for the S&P.  

Trade well my friends

Alan

S&P Longterm Bear Market Signal Still In Play

Back in my March 6th blog, I wrote about how the S&P 500 monthly bars chart with a 10 and 20 moving average is widely accepted as the universal indicator for longterm bull markets and longterm bear markets.  Since then the prop the market coalition has forced the biggest stock market squeeze in history.  Today being the opening of a new monthly bar, it is time to re-examine that chart below.

The up crosses and down crosses of these two moving averages are widely used by Wall Street and institutional money managers to mark the beginning of longterm bull markets and longterm bear markets.  

On March 1st the down cross appeared and the make the market do the opposite effort was initiated.  Looking at the closeup view of last month's down cross in the focused view on the right, we can see that the monster short squeeze has pulled the tip of the red line up from a thirty degree downward pitch that it showed back on the chart in my March 7th article.  After the opening of Friday's new bar, the red line is horizontal underneath the green line which is impressive for one month of movement but the way the chart works, it is still a longterm bear market until if or when the tip of the red line appears above the green line.  It's that simple.  

Considering there is a bad earnings season beginning next week (top line revenue-wise but expect estimate beats as the bar has been guided so low that they are in danger of tripping over it), it's obvious why the market had to be forced as high as possible before this begins.  

The normal down cross progression can be seen in the previous two longterm bear market down crosses.  It will be interesting to see how these lines interact in the next few months after being artificially altered.  

Trade well my friends

Alan


Two good reads:

http://www.zerohedge.com/news/2016-04-01/inside-janet-yellens-diary-stunning-discovery-two-phone-calls-saved-world

http://www.zerohedge.com/news/2016-04-01/godfather-technical-analysis-nails-correction

S&P Confirms Failed Backtest of 5 Week Short Squeeze Channel

The past two days the market has been watching the failed backtest of the S&P 500's five-week short squeeze channel.  Today's negative opening provides a third day of confirmation that the biggest Stock Market short squeeze in history is over.

Trade well my friends

Alan