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.

Market Update Video

Stock Market Update 10-24-12

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

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

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.

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.