Stock Market Technical Analysis Blog
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In the above chart set the stock market is set up and ready to begin stage two of the fall rally. Back at the open on 10/5, I discussed that there was a major intervention happening in the stock market to stop the perilous fall that was imminent at that point. On the two blogs I posted on 10/10, I discussed how that date should be the marker for the official beginning of the fall rally. Since then the NASDAQ has climbed well above its 50 Day moving average and out of its Aug/Sep trading range and has come back down to retest the pink 50 EMA and also the blue Day 20 EMA as shown in the top chart. After yesterday's retest of both key lines the market gapped open today back above the 5 EMA then sold back down and retested that line for support then lifted strongly into the bell. With the afternoon lift up from the 5 EMA line this completes all the steps for the beginning of a multi-month rally in the stock market.
Also in the lower chart above the bond traders finally gave in on that light gray floor line I have drawn in and the TLT is now down to its 50 EMA line. On Monday if the TLT slips through its pink 50 EMA line, that will mark the end of the 3-month bond position trade and seriouos bond money will begin migrating to the stock market to increase volume on a potential 2-3 month rally upwards in the stock market.
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In the lower chart above, the TLT has finally dropped out of its core 12-week blue line channel. Also marking the imminent end of the bond trade.
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In the above charts we see that both the SPY & the DOW have now regained their core blue line channels.
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In the above chart set, the UUP, TLT, and VIX have lost their weeklong uphill brown line channels today which were a very persistent effort to keep the indexes from breaking down but now it is happening.
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In the above chart set the QQQ and the SPY both bounced up from the center of their blue line channels in the afternoon today, a sign of increasing bullishness. The VIX is now back down to the lower line of its 3-month horizontal black line channel where if it closes below that line on Monday, then opens and falls lower on Tuesday morning, more and more market technicians will be getting on board to the idea that we will have a fall rally afterall and it is beginning now.
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In the above chart set there are three positive things that happened today, the Advance Decline broke above its 3-month downhill blue channel and also, its 3-week downhill brown channel and regained its 3-week uphill green channel. While we are obviously high at today's close on the Advance Decline and its due for a numerical pullback on Monday, it's easy to see we are working ourselves out of the suppressing 3-month heavy blue line channel.
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The above chart set is once again the most imporatant as we see that with today's trading bar the NASDAQ, S&P 500, and the DOW have all three regained their red line channels and the NASDAQ has also regained its May thru July horizontal black line channel. All three now have their blue channel as their dominant channel and barring any surprise blow up situation in Europe, we can see that as each of these indexes climb to their upper blue channel lines they will also be well up into their horizontal black line channels which should be a return to market stability. On the right side, the TLT dropped below its pink line channel today and is clearly now in a major downtrending channel. The UUP also slipped thru the lower line of its horizontal pink line channel today and is now being driven down in a very steep brown line downhill channel. In the VIX we see that yesterday's reversal the center line of its 3-month horizontal channel did indeed cause it to break down today as it begins establishing a downhill brown line channel also.
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In the above set the moving average retest bounce on the quarterly and monthly bar charts of the indexes that I brought attention to on 10/10's second evening blog, now have their red 5 EMA lines showing that the lift is starting to happen. In chart six, the DOW's red 5 EMA has already turned upward, the S&P's has leveled out and today's closing price has now barely reached the top side of the red 5 EMA line which will cause it to start turning up with upside market movement next week. The NASDAQ closed today well above its 5 EMA line and because it's a more volatile index it often does pinpoint bounces that climb really fast as can be seen in last summer's pinpoint bounce. It's not hard to see that after last summer's line retest in the monthly bar charts 4, 5, and 6 that this setup produced an 8-month market rally which is virtually identical in the setups being worked here once again. Thus, a three month rally is a reasonable expectation. Next week is the key week, if we close Friday considerably higher than we are now then they have pulled it off and we should be going much higher over the next few months.
Alan
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