Monday, July 26, 2010

More Rally Ahead?

Click on Chart to Enlarge

On a short-term basis the market is overbought or very near it. However, my personal feel for things right now is that this rally has further to go. Based off of chart technicals, I think the S&P should test the 1130 level at minimum.

The chart above is from showing that small option traders (DUMB money) are buying as few calls as they have at any other time the last few years other than near the end of the bear market. So they are not bullish for sure. This alone seems to make it a likely case that the market has further upside ahead before pulling back.

Also, I looked at charts of almost every stock in the S&P 500 this past weekend, and I am seeing several attractive bullish patterns, and lots more with strong technical bullish divergence that could still unwind a good bit.

I don't really have any tricks up my sleeve right now to have a great idea of if/when the rally will reverse. As long as the recent S&P low at 1060's holds, then I will assume an intermediate term rally is in effect, and may post a bullish trade if there comes a nice short-term oversold set-up.

Thursday, July 22, 2010

More Bearish Divergence on SPX

Click on Chart to Enlarge

The hourly chart of SPY looks to be set-up for another possible bearish divergence on a push to new rally highs. Also, some of the shortest term indicators are a bit overbought, so it seems like we may see a pullback pretty soon.

That being said, if this is still a bull market, then the July bottom should hold, and there may be very little if any pullback from these levels.

Wednesday, July 21, 2010

Exit GLL Trade Today

Gold is not moving down as fast as it should if a new downtrend has started. And the hourly chart on gold is now coming off a nice bullish divergence. Also, many individual gold stocks look to have completed false breakdowns with nice reversals higher. So let's exit the trade and put this idea on pause.

Trade Action:

Exit the open GLL trade today with a market order. Blog exit price is 41.10.

Friday, July 16, 2010

For now, I'm going to post a limit order for a new SPXU buy.

New Trade:

Place a "day only" limit order to buy SPXU at 31.75.

Thursday, July 15, 2010

Pullback Ahead I Think

Click on Chart to Enlarge

There a few reasons to expect a pullback very soon. The hourly chart on the S&P is now overbought with bearish divergence. Any push to new highs will create a nice divergence sell signal on the MACD shown above. If there is a gap up tomorrow, it is probably worth selling into for a short term trade. I will probably post a trade if there are new rally highs tomorrow.

Click on Chart to Enlarge

This chart shows that the time same amount of time has now elapsed on this rally as it took for the preceding decline. And the rally did not completely retrace the move down. This is another reason to still either consider a larger downtrend, or at least expect the market to pullback a bit.

Friday, July 9, 2010

Short Term Overbought, but Possible New Uptrend

Click on Chart to Enlarge

The 60 min chart of SPY and SPX is showing the most overbought levels since the April highs. This is happening well under resistance, however today marked a bullish MACD cross on the daily chart after a strong bullish divergence and many signs of pessimism good enough for a rally. Also the gap at 107.50 on SPY was closed above today. Ideally if the downtrend were to continue I would prefer to see the gap filled and then reverse to close below it.

Click on Chart to Enlarge

The 30 minute chart shows a glaring bearish divergence on the MACD. Also measures of market breadth like TICK, advancing issues, etc are showing divergence on today's new rally highs. All this I take to suggest a pullback will happen soon. However, I don't know how big to expect it to be.

Click on Chart to Enlarge

The daily chart shows the MACD bullish cross here. Bulls have to like the way this looks for a rally. And the price reversal pattern is nice as well

The weekly chart however is not showing a classic candlestick reversal, and the MACD is not even in oversold territory, so I don't know that this decline is over yet.

I may post a short-term bearish trade early next week based on this set-up, but I would be willing to exit on weakness and immediately reverse to a bullish trade if there is not a sharp sell off the suggests we will see new lows.

Thursday, July 8, 2010

Exit FXY Trade

Based on the way FXY has traded and the daily technicals, and a short term island top now, I am going to post an exit on the trade.

It looks like stocks are likely to rebound, and I think that FXY will act opposite stocks for the most part.

Trade Action:

Exit the open FXY trade today with a market order. Blog exit is 111.86.

Sunday, July 4, 2010

A Couple Targets on the S&P 500

Click on Chart to Enlarge

There could be a head and shoulders top forming and confirmed in the S&P now. In the clean patterns you will not see any closes back above the neckline, so that is something to watch for on this one.

In this case the decline from the head to the neckline is 180 pts. A decline of 180 pts down from 1040 which is the break of the neckline, would target 860 as the textbook minimum decline. If you use percentage decline rather than points decline, that would put it around 885.

Also, when looking at the decline of the first leg down, it was 13%. If the decline of the second leg is 1.618 (fibonacci ratio) of the first, then that would be 21%. Down from 1130, that would target 860 also.

There has not been much increase in the put/call ratio indicative of an imminent low as of yet on this decline. So, it is not unreasonable to expect to see some more pessimism before a lasting rebound.

Saturday, July 3, 2010

S&P Update

Click on Chart to Enlarge

Looking at the major stock indexes, the daily bollinger bands are expanding with prices riding the lower band. If you look at a lot of charts and study the bollinger band configurations, what usually is the case is that the market will sharply decline until the top band turns down. Then when the bottom band turns up, you almost always have stabilization and some form of bottom.
So until we see the top band turn down, this decline may continue and may even accelerate as the wider the bands get, the more volatile the action is.

On the bullish side, the daily MACD shown on the chart has a nice bullish divergence as prices have made new correction lows but the indicator has not. So if price do stabilize, then the set-up looks pretty nice for a short to intermediate term bullish trade. But beware, because if price falls below 980 on the S&P then I think we will certainly see 950 in short order and maybe even 870 rather quickly.

Keep in mind that on weekly charts there are no indications of oversold technicals yet. Based on the bollinger band configuration I think we will see fireworks :) next week, but it could be either direction. A strong and overdue rebound, or a continuation/acceleration of the decline.

Thursday, July 1, 2010

Intermarket Update

I don't have time for charts right now, but here is my take on some markets with the time frame of the next few weeks or more.......Overall I think we are nearing a period where some markets break the usual correlations, so we need to look at them individually.

Gold - down
US Bonds - Topping
US Dollar - moving up soon
Stocks - ? rebound then down ?
Wheat - Up
Natural Gas - Up

New Intermediate Term Trade - GLL

I am going to post a trade on GLL which is a double inverse of gold prices basically. As I mentioned the mutli time frame divergence before, today's break looks like it starts a new move down.

New Trade:

Buy GLL today with a market order. Blog entry is 40.75.

Place a GTC sell stop at 36.85 after entry.

SPXU Trade Exit

This may be the wrong move, but the S&P looks to be forming a hammer reversal today that cleaned out a couple support levels, so let's exit the current trade on SPXU. The daily chart MACD shows a bullish divergence if the market to were to bottom in this area.

More to follow later today or tomorrow.

SPXU Trade Exit

Sell any open SPXU with a market order today. Blog exit price is 39.50.

Expect a Big Move Tomorrow

I expect a big move tomorrow in the markets. But I'm not sure what it will be. Obviously we are oversold. But we are also in a crash type set-up I think in that we have broken support and we should have rallied a few days ago already. With debt related problems surfacing more and more, I would expect moves into the weekend to be volatile as people either pile in or rush out ahead of the weekend.

I don't blame anyone for exiting the SPXU trade now. But I will hold, and then acutually consider adding another bearish trade on a rebound if one comes into next week.

Also, UNG has retested the breakout from a rectangle trading range, and now would be a time to buy or add for those who want to do so sensibly. If there are questions on stop areas or indicators, then ask in the comments area.