Thursday, March 26, 2015

Price Logic Confirms Probable New Downward Pattern Off The Recent Highs In Stocks


Click on Chart of QQQ to Enlarge

The hourly chart of QQQ above shows that the current decline off of the 3/20/15 high is occurring rapidly and has retraced the recent rally up from 3/13 in less time than the rally took to form.  That is reasonable price logic confirmation that a larger phase of market action is ending and a new (at least short term) downward pattern has begun.  If a major top is not in place, then the pattern may not result in much further downside.  But given some of the things I've shown here over the last several weeks, the overall context seems ripe for a market high.

I would not advise an exit of short positions here until some bullish divergence develops.  And even then, a partial exit may be wise with prospects of greater gains.

Given the price is now at a 1 month low, my bottom spotting algorithm with begin to flag certain 1 day reversal patterns as potential bottoms.  Those would be my preferred exit signals here - waiting for at least the shortest term signal, a "1 month low" to get picked up by my system.

Also given the data point registered on Monday, please review the stats in my December post highlighting the put/call ratio sell warning.  


Pete

Wednesday, March 25, 2015

Sell Warning From Total Put/Call Ratio

Click on Chart of Total Put/Call Ratio to Enlarge

I haven't had time to provide more detailed info on this, but Monday the total put/call ratio gave a sell warning with the 5 day average closing below the 20 period 1 standard deviation band.  I have discussed this signal quite a number of times here in the past, and you could search the blog for related terms to find more info.

Interestingly, this signal came at a slightly lower high in the SP500.

I will try to provide more detailed info here in the next day or two.

Currently I feel the two most reasonable price scenarios are for a continued rally to new highs as suggested in the recent video on an ending diagonal in the SP500 OR for weakness into the end of the month followed by a rally to new highs in May, which could also be the end of an ending diagonal if the price relations remain within the rules of logic for such a pattern.

The most recent signals from the ratio mentioned above were

  • 12/26/14
  • 12/26/13
  • 7/19/13

Pete

Tuesday, March 17, 2015

Ending Diagonal In the S&P 500 Possible

Ending Diagonal In the S&P 500 Possible

This technical analysis video of the S&P 500 and the total put/call ratio displays a possible ending diagonal pattern forming since the October 2014 low.  It cannot be confirmed yet, but the first 4 out of the 5 waves of the pattern are potentially complete.  Ending diagonals MUST be followed by explosive reversals in price action as the video details.  If not, then the pattern is not really and ending diagonal.  An ending diagonal ENDS a major market move, and then price will explosively move in the other direction.

There is an FOMC announcement tomorrow which may lead to a market reaction.  Currently my expectation is for a rally into the end of the month.  Beware a breakout of the February high.  If a move to new highs occurs with broad scoped divergences in breadth, price, volatility, put/call ratios, and other sentiment measures, and a bearish top reversal candlestick forms around or below the upper boundary of the wedge, it could offer a great short selling opportunity for stocks.  

I will update as price action unfolds here in the coming weeks.

Friday, March 13, 2015

QQQ Hourly MACD Bullish Divergence - Early Week Rally Probable Next Week

Click on Chart of QQQ to Enlarge

This is an hourly chart of QQQ.  Evident on the MACD below the chart is a pronounced bullish divergence between the MACD and price.  Price made a lower low, and the MACD made a higher low and reversed modestly higher today.  This is not enough to trigger a buy signal in my trading algorithm.  But it won't necessarily catch every turn, especially on a short term time frame.

Its seem likely that price could form a short term rebound of at least part of a day, and maybe about 2 days.  Now there is certainly potential even for new highs, but the weekly chart appears solidly bearish at this point, so I don't necessarily count on new high to create the classic multiple time frame bearish divergence which I mentioned in my stock market top video last week.

At this point, my expectation is for a brief rebound from these levels, followed by a move to yet lower lows for this decline.  I won't offer any more expectation than that currently for the short term trading time frame.

On an investment point for stocks, it seems like the only reason stocks have held up is "free money" that has continually been shunted into stocks and stock futures in the last couple years of quantitative easing.  So if long stocks, the February low would be my suggested stop loss point to exit investments.  On could certainly rationalize just remaining long stocks with a stop at that support level or with some % based trailing stop.  That would allow continued appreciation.

Pete


Wednesday, March 11, 2015

US Dollar at Climax Point - Breaking Above Upper Trend Channels

Click on Chart of UUP to Enlarge

In a recent post I suggested that the US Dollar index may break above the upper boundary of a high-high trend line.  As of today it has done so on three separate high-high trend boundaries of increasing vertical angulation.

While it appears to me that some more sideways and slightly higher action would be ideal before a top, I view this at an ideal momentum point to exit longs.  This appears to be a climactic move.  I would suggest to keep a daily routine of analysis on commodities the trade inversely to the dollar for trade set-ups.  I follow gold, silver, and oil most closely, and so I am watching those on multiple time frames to potentially purchase at a trough on the chart that has the potential for a nice rebound.

Pete

VIX and Bollinger Bands Today

Click on Chart of VIX to Enlarge

This chart of the VIX shows that relative to the recent range the VIX is elevated as evidenced by the shorter term bollinger band being outside of the upper longer term band.  Additionally, the VIX has touched and closed outside of this longer term upper band.

Now this is an hourly chart, so it needs to be viewed as a shorter term signal.  However, notice the red circles at prior dates and compare to your charts for reference.  It warns us that this move down may have an upside reaction soon.  For the very short term trader who is short indexes, I would suggest that a trailing stop of some sort be used in the market given the current configuration.

Another point of note is that the VIX is somewhat lower than the previous signals, so it is not really that extreme and could certainly see upside continuation which would occur with stock declines.

I am making no position changes today, but will assess my trading indicators after the close.

Pete

Tuesday, March 10, 2015

SPY MACD and Money Flow Index 3-10-15

money flow index MACD with no divergence
Click on Chart to Enlarge

This hourly chart of the SPY etf shows MACD and money flow index below the chart.  Also there are some vertical lines also which represent the time of the recent rally from low to high in February and that same time amount projected forward from the February high.  If price manages to fall another 4% by March 23, it would move below the February low and would break support but also would retrace the recent rally in less time than the rally took to form which would be a solid logical indication from price action that a pattern completed at the February high.

At this point I don't really have an opinion of whether that is likely, but given the information covered in the stock market top video I made this past weekend, it is on my radar.

The indicators below the price chart show that the money flow index is in the oversold region, but without bullish divergence.  Since it includes volume in the calculation, it tends to diverge and lead prices significantly at important turns.  So this suggests to me that we will see at least a few bars of price action on this time frame with lower lows.

The MACD indicator is relatively oversold and is also not displaying a divergence at the time of this typing.  So, while the possibility is certainly reasonable that prices rally later today and a short term low is formed, a low close today after a gap down may indicate at least a few more days of lower lows in or order to create a more classic bullish divergence in the hourly MACD.

Until otherwise posted here my vote is for generally (and possibly sharply) lower prices in the next several days.


Pete