Stock Market Update 3-25-13

Stock Market Update 3-25-13

This video covers this past week's Commitment of Traders report data and discusses the technical situation in the Nasdaq and some possible technical triggers to enter short positions or exit long on the stock indexes.

"Smart Money" Continues to Increase Selling

This week's Commitment of Traders report shows that the commercial traders have continued to increase their net short position compared to last week.

This does not include this week's reaction and changes following the FOMC meeting, but with negligible price activity following announcement I would not anticipate that being a significant factor in the upcoming reporting period.

I plan to post a video update of the CoT charts this weekend, but the spread between the smart money and the speculative money is extreme.  When the smart money gets very heavily net short there are typically 2 outcomes.  The first is for an imminent topping process and for stocks to fall afterwards.  The second is for a low volatility and possibly persistent rise in the markets that leads the smart money to undergo a somewhat drawn out short covering process as prices rise.

For the intermediate term a trailing stop type of strategy out to be effective for long positions because the market is at high risk of correction based on the smart money's heavy short position.  But if the correction is not forth coming stocks may churn higher on low volatility allowing a smooth rise in the trailing stop.

FOMC Tomorrow

Tomorrow (Wednesday 3/20/13) is an FOMC announcement day.  Given the position of the general averages it may prove to be a pivotal day either pushing stocks to new highs and possibly creating some sharp bearish divergence, or if price fall substantially it could push the QQQ below its trend line of its rising wedge.

Currently the technical set-up got mildly oversold today given the current  uptrend.  Hourly chart MACD on the SPY is relatively oversold but has no bullish divergence so it could stand to see some further downside before offering a possible short-term long trade set-up.

Gap Trade Set-Up

This video details a gap up short trade set-up for Friday if the market opens above Thursday's highs.

AAPL Technical Analysis

Click on Chart to Enlarge

This is a daily chart of AAPL.  It has now filled the gap I suggested as a price target for this move down, and has fulfilled the measured move for a descending triangle that I projected in January.

Now it is in an interesting position I think.  There is a building bullish divergence on the MACD daily chart, but at the same time it is sloppy and not a classic divergence with confirmation.  This may suggest weakness.  From looking at the MACD below the price chart we can see that it is forming a triangle type of pattern which suggests it may be wise wait for the MACD line to rise above its recent 2-19-13 peak before considering a long position.

Given that the general market appears toppish and the QQQ is displaying a head and shoulders top, if the indexes top out, it would be interesting to see what happens with AAPL which is already down considerably.  It would be a little hard to imagine it able to make a major rebound in the face of a downtrend, but then again, it has sold off in the face of an uptrend.

Another strategy would be to await a higher bottom in AAPL on the daily chart followed by a technical buy signal or a price breakout to create a higher low and a higher high, giving some confirmation of an uptrend.

But above all I would suggest that history shows that the biggest winners of the bull market and the most heavily institutionally owned stocks in the bull market may often experience extensive and often very choppy downtrends when a bear market commences.

So understand that this price break in AAPL is of a serious nature compared to the corrections in the bull market, and it may be a harbinger that the bull is over for at least the time being.  So the question becomes whether it is worth looking for a buy in AAPL if we don't expect the bull to resume and make higher highs in the stock.

I think it is best to simply treat it on a trading basis now, as opposed to an investment candidate at the current time.

Harmonic Trading Stock Selection Video

Harmonic Trading Stock Selection Service

Earlier today I recorded a video for members of the Traders Crystal Ball mailing list that highlights several stocks that I consider to be ideal candidates for significant downside potential in the upcoming market correction complete with price and time projections for the next potential legs down in these stocks.

Click HERE to Watch the Video

Several of these stocks are experiencing significant non-confirmation and divergence patterns compared to the general market indexes.  Being that the market has not experienced much sustained downside yet, these stocks are still well within a high quality short-selling range.  If you are interested in learning more about selling stocks short, then the current video would be educational and will give you some real time candidates for your own analysis.

If you would like to get specific entries, exits and stop movement recommendations on stocks as they begin to fulfill expected projections, then I also am offering a discounted enrollment opportunity at this time to subscribe to the Harmonic Trading Stock Selection service which I offer based on the Integrative Harmonic Trading technique and mentoring that I have developed.

The course and subscription service integrate a number of independently valuable and successful analysis and trading techniques all into the context of OBJECTIVE pattern identification which can provide the most outstanding trading opportunities in individual stocks that I am aware of.

The video runs a bit over 30 minutes, almost all of which is timely and educational content.

Click HERE to Watch the Video

Stock Market Update 3-11-13

3-11-13 Stock Market Update

This video is a stock market update covering the S&P 500, QQQ, IWM, with technical indicator review, forecast projections, and analysis of the Commitment of Traders data relative to the current market action.

Possible Major Pattern Completion Today in Stocks - Look Out Below

Click on Chart to Enlarge

I will get a video out soon on this, but today was a possible major pattern completion for stocks, with the Dow holding out to make new highs and the other indexes failing to confirm.

Today was the ideal completion day for the upward pattern that began the first trading day of September if the pattern is an ABC with wave B ending in late December.  The C portion takes exactly 1/2 the time as A+B which is standard when the B wave takes a lot more time than wave A.

Given the correct technical picture of sharp bearish divergence, extreme bullish sentiment, and non-confirmation between major market averages, the context is right for a high as well.

Additionally today formed a shooting star top reversal candlestick in the Dow and DIA etf.  It pierced the upper bollinger band and reversed to close lower.  The other indexes failing to make new highs suggest they are weaker, with the Nasdaq 100 being the obvious laggard.  Given the rising wedge in the Nasdaq, if price breaks below this week's low, that would indicate extreme weakness and a failure to hold the rebound after the recent break of the wedge line and the accompanying large VIX spike.

With each and every possible break to lower lows once the lower boundary of such a pattern is broken, the probability of a breakaway move to the downside increases.  So this is a case where if unsure, you could sell short on a stop if prices break to new lows.

Given the pattern at play here, the expected initial confirmation that this outlook is correct would be for price to completely retrace the rebound since Tuesday in less time than it took to form.  So if we see prices back below this week's low by this coming Tuesday morning, then we have some solid evidence that a pattern is likely complete.  And the minimum target would be the Dec 31st low so the reward to risk on a short would still be excellent even if waiting for confirmation.