Monday, April 29, 2013

Stock Market Update 4-29-13 - Bearish Divergence

Click on Chart to Enlarge

This chart is of the SPY etf and is an hourly chart with a MACD and an ADX study underneath the chart.  What we have seen since the April 5th low in SPY resembles an upward "flat" pattern in both price and time relations and indicator behavior.

In the ideal flat wave B should take longer than wave A, and also wave C should take longer than A.  The price legs are often nearly equal creating horizontal or "flat" trendlines - hence the name "flat."

Looking at the indicators we can see that currently the MACD chart is displaying a pretty classic bearish divergence pattern as prices have made higher highs the last two sessions, but the MACD peaked on 4-25-13.  So that is the type of indicator set-up that is typical at a high point in the markets.  Not all divergences lead to pullbacks, but they are the hallmark of the end of price trends.

Also, the ADX can be used in conjunction with the MACD in order to better gauge whether the price movement is likely trending or corrective.  The ADX is a measure of trending activity, and when it is rising, that indicates trending price behavior.  So if the ADX and MACD rise together, that indicates a stable uptrend.  That is what we saw from April 5th through 11th.  Then as the MACD fell and prices corrected back to the April 5th low, the ADX remained above 20 but not rising.  This indicates a relatively strong correction against the prior trend.  Now, since the April 19th low, we have seen the MACD rise, but the ADX trend down.  This indicates a probable counter trend or terminal type of move.

If an upward flat pattern is forming and is completing the current leg up in stocks, then we should require that prices move back below the April 19th low in less time than the C portion of the pattern took to form.  That would shift the price logic to the downside, and suggest that we would see further price declines.  But until that April 19th low is breached, then the price trend is clearly up.

Thursday, April 25, 2013

Stock Market Update 4-24-13

4-24-13 Stock Market Update

This video covers multiple time frame technical analysis of the stock market, with focus on how to gauge whether the uptrend is still in force, and what point likely solidifies that a correction will occur.  Additionally I show you a few different real money gauges of how various smart and "dumb" traders are positioned in the current market.

Comments related to the rebound rally in gold are made as well.

Tuesday, April 23, 2013

SPY Update 4-23-13

Click on Chart to Enlarge

The 15 min chart of SPY shows that the MACD got as extended to the upside as it has been in the last month.  Now with the consolidation and pullback this afternoon, it is setting the stage for a divergence if price makes a higher high than Tuesday, but the MACD stays below today's peak.

Price has been advancing at pace to completely retrace the recent decline in less time than it took to form, but would need to be back at a new all time high before Friday morning to confirm the upward price dominance.

AAPL reported earnings after the bell on Tuesday, but did not move significantly in the after hours trading.  The structural sentiment back drop is not favorable for a major upside reversal or move on this announcement in my opinion.  Call open interest dominates compared to put, and there is very little short interest to create forced buying on a gap up.  Additionally, the weekly momentum is still strongly down with no divergence or basing present to create an ideal chart formation for a bottoming pattern.

At this point, the market is stretched to the upside in the short-term, but there is no clear confirmation that a downtrend has begun.  However, a break of last week's low without making a new all time high would be probable confirmation of a downtrend.

Monday, April 22, 2013

SPY Technical Analysis

Click on Chart to Enlarge

This is an hourly chart of SPY which is the S&P 500 ETF.  The daily chart is not shown but has triggered a parabolic SAR sell signal, so price is below the SAR point.  Also not shown is the weekly chart which also triggered the SAR sell signal last week, so price could be considered to now be in a downtrend on those larger time frames.  Of note on this chart though, we can see that price is above the SAR point on the hourly chart and has some room below it before triggering.

So here is my take away from the multiple time frame set up.  When you see a stock or market trending in one direction on the larger time frames, you can then use your indicator set-ups and triggers on smaller time frames to trade in the direction of the larger trend.  So in this case, for a short sell swing trade on SPY, I would suggest waiting for the hourly SAR to trigger, and if it does so AT A LOWER HIGH than the recent all time high, then that could be a nice short entry.  Also, possible is that the first SAR sell signal fails and leads to a higher price high and possibly some technical divergence.  In that case, then we could again take the next SAR sell signal to trigger.

Similar comments could apply for the MACD indicator set up.  The daily is down and coming off a sharp bearish divergence.   The weekly is flat.  The hourly is up, and if the hourly MACD turns into a sell at a lower high than the recent all time high, then it could offer an opportunity to short.

We will want to pay attention to whether this move up is able to retrace the recent decline in less time than it took to form or not.  That will help us objectively gauge the direction of trend strength in the market.

Currently the 153.60 level on SPY has been tested 3 times and held.  If prices move below that level, it could offer a continuation entry for additional downside, and be probable confirmation that we are in a correction.  The daily bollinger band is currently at that level as well, and prices rebounded after touching the lower band.  That is to be expected in an uptrend.  And in the initial move down off of a high, it often will occur as well.  But if prices break below that low again, then it indicates weakness and will probably lead to downside follow through in my opinion.

Monday, April 15, 2013

Stock Market Update - Gold and Silver Bear Market

4-15-13 Stock Market Update

This video is accidentally split into 2 parts.  It covers stocks, bonds, gold, silver, oil, and the US dollar index.

Wednesday, April 3, 2013

Stock Market Update 4-3-13

Click on Chart to Enlarge

As noted in the recent video, it is possible that the S&P 500 is forming an ending diagonal type pattern on the hourly chart with implications of sharp downside in the short term.

As of this morning, the trendline of the diagonal is now broken and the MACD is in a confirmed sell coming off of a mild bearish divergence which is typical of the momentum loss at the end of a price pattern.

In order to provide solid confirmation that we have seen a pattern of some degree complete with this ending diagonal, we will need to see SPY trade back below the March 19th low by April 9th.

Also continue to watch the QQQ for a break of the uptrend line since coming off the Nov 2012 low.  That would be a first indication that a possible head and shoulders top pattern may have completed the right shoulder.

Monday, April 1, 2013

Stock Market Update 4-1-13

This stock market update covers the recent CoT report as well as technical triggers that could be used for protecting long positions or entering short positions in stock indexes.

Brief comments are made on gold as well which is coming off of historically bearish sentiment and may be set for a significant rally.  A break of the February lows in gold would be a significant technical failure in gold and  may result in continuation to the downside.

Bearish Divergence Suggests Pullback Ahead 4-1-13

Click on Chart to Enlarge

There is currently a sharp bearish divergence on the 4 hour MACD chart of SPY.  This occurred with a failed breakout (so far) of the earlier March highs.  This is the first bearish divergence of this scale since late February after which there was a sharp 1 week correction.

The green lines on the chart indicate unfilled gap ups from the uptrend.  The most recent unfilled gap up at 152.92 is just under the consolidation lows of the last couple weeks.  An undercut of the 3/19/13 low may be a likely minimum target for this pullback, and could offer a first profit target and partial exit if shorting indexes at these levels and hoping to catch a lager decline.

I will review the Commitment of Traders report probably later today with a video update.  This will help us keep track of what the large market moving players are doing.