Thursday, May 21, 2015

TLT Dual Time Frame Long Set Up and Nasdaq Doji At Resistance Implicating a Possible Top

Click on Chart to Enlarge

This chart is TLT which is the US long term bond ETF.  For the first time in the current decline since the January high, there is a dual time frame long set-up.  The chart shown here is a daily chart which shows stochastics bullish divergence in the oversold region.  If you click to a weekly chart, the weekly stochastics is oversold also.

Now the last 2 days we have seen 2 successive potential bullish reversal candlesticks.  The first is an inverted hammer, the second is a doji.  A gap up open above the high of today's doji would be a solid signal for bullish reversal.  Now I don't really think that bonds are likely to remain in a long term bull market, but for the short term it seems like the set-up is ripe for at least a multi day rally.

And part of the significance here is that bonds are once again trading largely inversely to stocks since the high in bonds this winter.  This would suggest the potential for a bond rally and stock decline in coming days or weeks.

Click on Chart to Enlarge

The total put/call ratio has given a combination of signals which is certainly more bearish than bullish.  The recent 5 day average close below the 126 day 1 period deviation band last week.  The last few instances of that were right near a point of pullback in the markets - short lived yes, but providing opportunity for recognition to take profits near the top and also to buy short term put options with 100%+ profit potential over the next few weeks.

The hourly chart of the VIX is showing non confirmation with the stock indexes the last 2 days creating another short term warning of pullback.  The hourly TICK averages show the same thing also indicating topping here.

There is a triple time frame weekly, daily, hourly MACD bearish divergence on SPY today which I have pointed out instances of before.  In any case the current high could be the end of a rising wedge or terminal pattern which would implicate a strong downtrend to come.  The alternate is probably that the current consolidation is still a basing from last fall's run up.  So a modest decline and break to new highs, would be a potentially significant bullish event.  

Click on Chart to Enlarge

This chart is the Nasdaq composite.  Today formed a doji candlestick on higher volume - which is often more significant than lower volume as it shows the struggle at hand with increasing activity but no progress in price.  The doji is forming in the region of the recent wide range bearish engulfing pattern which occurred just under the year 2000 all time highs.  A bearish candlestick at resistance should be respected.  A gap down below Wednesday low here would be a pretty solid bearish signal.  Any gap down Thursday with a lower close than open would also be a reasonable bearish confirmation of a doji.  Also notice the overbought stochastics, at a lower high placing this candlestick in a bearish technical position.

I think it would be a great piece of ironic market comedy for the bull market to top here with the COMPQ having reached within 0.2% of a new all time intraday high.  It just is so close that it seems like it has to go through.  And the more time spent right under the high, the more anticipating participants have time to join.....only to be disappointed.  

I am not saying that I have a definite opinion here.  What will be will be.  But make no mistake about it here....the market is giving basically every signal it can that a top is possibly at hand.  So profits should be taken.  Then if price does break to new highs in the Nasdaq, it would seem sensible to buy back into the market with expectation of some continuation on the euphoria and late coming dumb money.


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