Friday, October 26, 2012

Dow 30 Trendline Break

Dow 30 Trendline Break

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The Dow 30 has broken its Oct 2011-June 2012 uptrendline and held below it for 3 days.  This is early confirmation of a completed rising wedge TOP chart pattern.  The daily MACD lines are just crossing below 0 after a bearish divergence suggesting that the MACD could get significantly more oversold before it would be screaming for a rebound in prices.

Often after a wedge trendline breaks, price will back test the line.  So we may get a little more downside followed by a sharp rebound to test the broken trend line.

The S&P 500 is just hovering at its trendline today.  Over the intermediate term it still appears to me that more downside is in store, but be prepared for a possible rebound that may offer an outstanding short-selling opportunity.

Wednesday, October 24, 2012

Market Update Video

Stock Market Update 10-24-12

Check the video out for the current market position and trade set-ups!

Tuesday, October 23, 2012

Mild Panic Alert!

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While I am not going to go into any details on this indicator right now it is a "real money" indication that I've constructed to measure the amount of fear or panic taking place in the market.  Currently it is showing similar fear levels to 4-9-12, 3-6-12, and 8-1-12.  Those all led to rebounds in the market.

But you can see from the chart that it is possible for panic to move up quite a bit to reach even the levels in mid May of this year.  

Any bullish reversal bar at this point should be respected for an upside rebound, but it is a situation like I have mentioned before, where we are probably pretty close in time to a significant low, but we may see some rapid price changes in a few days before the low occurs.

Given the pattern at play in the market right now, I've mentioned that we may see a rapid move back below the June 2012 lows.  So unless we see a real nice set-up develop on the long side here, I would play this by tightening stops on short positions, and then using any rebound as a possible re-shorting opportunity.

Volatility Breakout

Friday, October 19, 2012

Death Knell for Bull Market??

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This chart shows the green support line of the cup w/ handle breakout on AAPL clearly violated today and on heavy volume.  As I mentioned before, this set-up has the potential to quickly take AAPL back to the $525 level which is the low of the recent base.  It would not be unreasonable for that to happen next week, since earnings is AMC on Thursday.

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Notice the strong bearish divergence on the weekly MACD, which has already crossed into a sell signal.  At the last 2 bull market highs in AAPL we never even saw a divergence like this.  So it will be interesting to see what happens.  But a weekly major divergence after a 4 year price rise is suggestive of more than a minor correction set to occur here.

While the market may feel oversold here, and the daily RSI is not far off from oversold, both the weekly and monthly currents are overbought, divergent, and turning down.  So the market may have substantial price losses before a sustained rally here.  Also, at just 1 month, this correction is still even young for a bull market correction.  If it is the first move down in a bear market, they usually last for a few months, so we may expect a good ways to go.

Also, I have talked about the fact that after a pattern completes, the market will confirm it by completely wiping out the most recent move in LESS time than it took to form.  So that means that if we are completing a major high, then we will see the market back below the June low by December.

If short, my suggestion is to stay short.  Don't be long the market right now IMHO.

AAPL Alert!

Just a quick heads up here that AAPL has broken its recent support and appears set to make a weekly close today BELOW the $620 cup with handle breakout point I've mentioned.  Given the massive weekly MACD bearish divergence and earnings next week on AAPL, I think this is a good signal to apply to the general market as a GET OUT OF LONGS signal.

Daily uptrend lines since June are being broken today also in the S&P and Nasdaq  Given the fact that we had a brief rally just prior to the break, that probably tilts the odds in favor of continuation after the break rather than a rally to test the underside of the trend line.  But that remains to be seen.

Thursday, October 18, 2012

Short-Term Overbought - Nice Short Trade Set-Up

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The hourly MACD on SPY has now moved back up to overbought and the move has been somewhat weaker than the recent decline thus far.  The deep retracement of the recent move down in stocks, suggests that the upward price pattern has not completed yet, but the slower upward moves suggest it is weakening.  Combined with overbought technicals and bearish divergence, I think the best option is to sell the highs with expectation of further correction in stocks, or a failed breakout of the recent highs.

The MACD may need to make some bearish divergence before price turns down, but a trade opportunity is probably close at hand.

Sunday, October 14, 2012

LONG TERM MARKET OUTLOOK UPDATE - Larger Currents Turning Down, But Short-Term Oversold

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The monthly stochastics on the SPY is now in a bearish divergence in overbought territory suggesting a possible major high completing.  In addition to the weekly MACD bearish divergence, the stage is certainly set for a possible major correction of the bull market, or an outright bear market.  IF a bear market is beginning, then there are two distinct possibilities for future price action to logically CONFIRM that is the case.  

1.  The first would be for the entire move up since the June 2012 low to be completely retraced in less time than it took to form.  
2.  The second would be for a decline, then a rally to a lower high, followed by a move that completely retraces THAT rally in less time than it took to form.

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The weekly stochastics on SPY is now pointing down from overbought and has triggered a 1 bar trailing low sell signal on the weekly time frame.  See the recent video for further detail on that set-up.  This again suggests that we may see several more weeks of downside before the selling pressure is overdone.

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The hourly MACD chart is oversold with mild BULLish divergence at this point suggesting a short-term (multi-day) rally may be likely.  HOWEVER, with the larger currents turning down, my guess is that the rally may be dampened, and be more of a sideways chop or consolidation for a few days before a break to lower corrective lows.  Also, apparent on the hourly chart is logical confirmation of a downward pattern beginning because the recent rally was completely retraced in less time than it took to form.  It will take a move basically to new highs in 5-6 days to shift the price logic back to upwards on the daily time frame.

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A 7 legged pattern may be completing to finalize this bull market.  CoT major sell signals are noted at the major highs of the pattern along the way.  Again confirmation is needed by a move below the June lows in less time than the rally took to offer logical PROOF that the bull market is likely complete.

Of note on this chart are the red trendlines which were the prevailing uptrend lines for the bull market at the time of the intermediate highs in this bull market.  Notice that in both 2010 and 2011, the initial break was somewhat sharp but short-lived, followed by a test of the trendline from the underside before continuing down to lower lows.  In the current case, the trendline is less steep, and there is more room underneath the market before the trendline is touched or exceeded.  So, it is possible that the current decline is relatively large and sharp and does undercut the June low on the initial trendline break.  Then that may be followed by a back test of the current uptrend line before continuation downward.

Click on Chart to Enlarge

The is a quarterly chart of the Dow 30 going back to 1915.  A couple points of note here.

1.  The stochastics is overbought AT A LOWER HIGH currently, which has only happened 2 times in the 100 years seen on the chart.  Both times the market underwent substantial downside with a down/sideways market for 5-6 years before sustained upward momentum again.

2.  The dark red upper boundary line from the highs of the 1930's and 1960's highs, acted as support at the 2002 lows, then once it was breached after an initial mild rebound attempt in Sept 2008, the major "crash of 2008" occurred.  Since then, price has rallied to touch the underside of the trendline twice in 2012 both times leading to corrections.  And price is currently just underneath the line at the recent high.  So this may be a broken support that is now resistance and lead to a major correction.

3.  Notice the general "head and shoulders" top formation on the chart from 2000 to 2012 if the rally were to complete here.  The S&P 500 is similar with a triple top look.  While it would be hard to imagine the fulfillment of such a pattern on an arithmetic basis, especially given the downsloping neckline, completion of the chart-based target on a logarithmic projection would put the Dow at about 2600 several years down the road.

Click on Chart to Enlarge

This is a monthly chart of the S&P 500 going back to the 1970's.  There are a couple interesting features here.

1.  The green lines represent projections of the well know 4 year "presidential" cycle lows in stocks aligning at the 2002 and 1998 lows, then projected both forward and backward (1 is missing at the fall 1990 low).  Of note by the blue circle around the current time frame, in Oct 2012 we are exactly half way between the projected lows, suggesting we are entering the downside portion of the cycle now.

2.  The next cycle low projects to fall of 2014.  My study of this cycle suggests a tendency for the final 1/5 of the cycle (roughly) to be the most bearish portion of the cycle.  That would be from the beginning of 2014 until the projected low in this case.  So we may be topping here, but still a ways away from the worst of it if a bear market is beginning.

Click on Chart to Enlarge

Now this last chart may be the most telling, the most "beautiful" in cyclical terms, and may be one of the least know types of analysis you will hear in technical analysis circles.  See the chart for notes....but here is a summary.

-Since 2000 there is the potential for a continuing 7 year HIGH-HIGH-LOW cycle which also projects the next 7 year low in fall (October) 2014.
-There is a potential 5 year LOW-HIGH-HIGH cycle topping this month (Oct 2012), suggesting downside from here.
-There are 1/2 harmonic sub-components of both cycles present in the intervening bear and bull markets with a 3.5 year bull market from March 2009 to Sept 2012, and a 2.5 year bear market from March 2000 to Oct 2002.

I hope this post has been instructive for the larger picture going on here.  My take is decidedly bearish from this point forward in stocks for the next couple years given all the evidence presented here.

Wednesday, October 10, 2012

Stock Market and AAPL Update

10-9-12 Market Update

Check out the video for detailed analysis on AAPL and the general markets.  I expect further correction in stocks from these levels, with a possibly major topping process in the works.

Sunday, October 7, 2012

AAPL Close To Trendline and 50 Day MA Break

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This is a daily chart of AAPL.  There are several points of note here.  It is in a probable set-up for a break of its up trendline, which would likely lead to break of the recent base breakout at $620.  I have noted before that a failure of that breakout to hold is potentially longer term bearish.

First, look at the daily MACD.  It is showing bearish divergence between the spring highs and the current high.  The weekly chart also shows a sharp bearish divergence between those points.  Also, there is bearish divergence within the end of the recent leg up between August and Sept.  So there is a multiple time frame bearish divergence indicating waning momentum on a large scale.  I have already noted the volume divergence in a recent video.  The volume divergence is also present on multiple time frames.

Secondly, look at the pink uptrend line.  It has already been touched 4 times for support.  If it is broken that could signal a correction of the major uptrend for the last year.

Third, look at the 50 day moving average.  I have noted this type of occurrence before, but I will review it again as I believe it is an advanced chart reading concept.  At key moving averages like the 50 and 200 day MA's I believe program trading often leads to support and near immediate reversals when price touches them.  In a stable uptrend price will typically not come back down below the low of the moving average test area.  Also, the rebound off the moving average will often be strong with a gap up and increased volume.  However, as a trend is beginning to weaken, price may test the moving average and lead to an apparent reversal as program trading comes into the stock.  However, the rebound is often relatively weak compared to prior rebounds, and volume is often lower.  Then, if price fails to hold the 50 day average or the low of the recent test of the average, it can create a "breakaway" type point where the program trading support is gone and price falls rapidly.

So that is possible here as AAPL recently tested the 50 day MA and reversed off it creating a reversal candlestick.  However, the initial rebound has been relatively weak.  And price has now come back down to the 50 day MA and is threatening to close below it and below the low of the recent reversal bar.  Combined with the uptrend line in the same area, I think a close below the 10/2/12 low could lead to a breakaway move to the downside taking AAPL down probably to the recent base low around $520-530.

If that occurs, then it is obvious that the broad market is likely to experience a substantial correction as well.  So keep AAPL on your radar on Monday.

Thursday, October 4, 2012

QQQ Short Trade Set-Up

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QQQ (Nasdaq 100) is setting up for a nice short-selling opportunity.  The move down off the Sept high made a minor shift of the price logic to down.  Now the correction back toward the highs has been slow relative to the decline keeping the price logic down.

The chart above highlights a probable rally high area in which technical sell signals could be taken for entry with a minimum target below the recent Sept. lows.

The set-up is very similar to what occurred at the spring high this year which I highlighted in this post and  in this follow-up post as the entry was completed.

In the current set-up, wait for 30 min or 60 min bearish divergence to show up on the technicals.  Then wait for a sell signal for entry.  The stop must be above the rally high.  If the high is broken the pattern is invalid and the rally may be very likely to continue.  For exit, half could be sold if the recent Sept low is broken.  Then exit the other half on a technical buy signal (i.e. MACD bullish cross from below the zero line).

Monday, October 1, 2012

Multi Market Update

9-29-12 Market Update

The video covers stocks, bonds, gold, oil, CoT data, AAPL.  Tighten stop or exit long equity holdings.