Be Alert for a Reversal Here

As of today, the maximum time I'd expect for this move up is upon us.  Additionally, the daily RSI has touched above 70 on the S&P 500 which is overbought, and in a range environment will typically give break signals.

The ADX is rising on the daily chart as the market is rising here, so we should respect that a new uptrend may be beginning, but it currently is at about 16, whereas 20 is the textbook level to define a new trend.  So again, we are either at an imminent reversal point, possibly even this afternoon, OR the market is likely to continue a tight trend higher for several weeks.

The NYSE is poking above the 8060 resistance level I had mentioned recently.  It is pretty common for price to go completely through a resistance zone, at least intraday, before reversing.  So we should watch to see how it reacts today and tomorrow.

Three Push Pattern Complete - Market at an Inflection Point

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The current move up since 8/2/12 is now nearly equal in time to the last 3 "waves" combined.  This is typically the time limit for any move of the same degree.  So 1 of 2 things is likely to happen, probably starting tomorrow.  Either a downside breakout of this tight range occurs and the market makes a significant high.  Or the market makes a decisive breakout above this consolidation, and confirms that a larger degree uptrend is in place.

I recently mentioned a three push pattern that could be forming on the hourly chart here.  With the recent push to slight higher highs, we now see a clear succession of 3 lower highs on the MACD since late July and 3 wedging higher highs in price.  This type of momentum pattern often shows up in rising wedges or terminal impulse patterns, which can both lead to strong reversals.

The next couple days should define the trend direction.  I'll update as this unfolds.

As of today the multiple time frame momentum set-up in stochastics is beautiful for a short/inverse trad opportunity at the next daily sell signal.

Stocks and Gold Video Update

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Major price highs likely near in stocks and gold.  Bearish divergences are all over the place, and volume is at multi year lows.  AAPL likely set to break down from a failed base pattern.

Market Is Likely Making a Top Here

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The current set-up on the stock indexes is nearly ideal for a short trade from my perspective.  The weekly stochastics on SPY is overbought.  The daily is overbought.  And the hourly MACD is overbought with bearish divergence.  The pattern is weakening, but may have another slight push to new highs to form a "3 push pattern" on the hourly chart.

We are now seeing lots of confirming evidence for a top in addition to the price indicators.  Of note
-very sharp bearish divergence in breadth/McClellan oscillator
-low put/call ratios this week consistent with prior intermediate highs
-2 of the lowest volume days in over 2 years excluding holiday trade.  This indicates waning demand or participation buy the big money.

This weekend we will get the data on the "smart" money action in response to the rally over the last week.  If we see another jump in smart money selling, then in combination we have a powerful case for initiating shorts or liquidating longs on any technical sell signal.

Longer Term Investment Outlook

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This video contains charts and some further details regarding stocks and bonds specifically.  The outlook and advice is pretty simple.  Sell all bonds and move to cash.  Understand that after the 2008 stock market decline, big money has flowed to bonds and that is the class of assets that your investment adviser or financial planner will currently feel safe recommending and be able to show you that has positive returns over the last few years.  But as investors, we have to be savvy and see the risk or potential BEFORE it actually happens, and be willing to act with little to no confirmation from FACT that we have chosen correctly.  THIS IS ONE OF THOSE TIMES.

Additionally the smart money commercial stock futures traders took a big jump in selling this according to the CoT data, and I think we will see that they sold even more heavily through this past week's jobs/unemployment data.  My suggestion is again to sell stocks and move to cash.  The pattern and real money data are becoming increasingly clear that a major market movement is about to take place to the downside.  If you need some initial PROOF, then I suggest that a daily close below 1310 on the S&P 500 be your signal that this current bull market is over, and we will see a rapid price decline.

Again this is investment time frame advice.  So understand that while I think that we truly are very close to seeing a major market shift to the downside and unwinding of some of the "bubble" activity in stocks and bonds, it may be 2-4 years for things to really play before possibly re-investing in a major way.

For the Short-Term Trader

Now that the market is at a new rally high, the pattern suggests that the time frame for the next tradable daily swing high will be between Tuesday and Friday next week.  I personally would suggest waiting for some further bearish divergence to form on the 30 min or hourly charts within this still young move up since Thursday afternoon.

The pattern also suggests a possible MAJOR pattern completion about to occur and would imply immense downside.  This is the type of move that can make the whole year's trading worthwhile.  I will go over specifics in an upcoming video, but any close below 131.28 on SPY would suggest to me that the upward pattern since Oct 2011 is complete, and we should see a sharp move back below the Oct 2011 low probably in less than 4 weeks time.

I am not planning on waiting for that level to break to initiate a trade, but for investment or longer term speculation, that is a sensible option.

Rally Into Next Week?

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The market reaction since the FOMC announcement yesterday has been an initial modest sell off.  Often times initial reactions to news items are reversed, and given the technical set-up, we may be set for that here.  The move up last week was more powerful than the move down over the last 4 days.  The hourly technical charts are now more oversold than overbought, and price is holding above the 7-26-12 gap up which is chart support underneath current prices.

The chart above is a 30 min chart of SPY.  The MACD is oversold, but the first cross up has not been a great signal over the last month.  However, if a bullish divergence develops over the next couple days, that would be a nice short term long trade set-up.  At this point it looks like the advance since June is running out of steam, but even if the market pulls back a bit more, the pattern and price logic are suggestive that the market will make another tradeable move up on the hourly charts.

There is no indication that the recent range type trade is over yet, so using oscillators for trading signals should be productive in the near term.