Non-Confirmation in Major Stock Indexes - What to Expect Next

Stock Market Update 12-12-13  Non-Confirmation in Major Stock Indexes - What to Expect Next This stock market update video covers the DIA etf abd shows a bollinger band set-up that indicates that the market is likely to experience at least another day or so to the downside before reaching its nearby fibonacci support level. However, there is a significant non-confirmation between the market indexes in that only the Nasdaq reached a higher high for the rally into Dec 9th. The Dow, S&P 500, Russell 2000, and NYSE all topped lower than there Nov 29th highs. This may be an indication that the stock market is topping on the current leg up, and that stock may experience a correction from these levels. A typical correction is ~10-11% and 6 weeks duration based on historical corrections in the S&P 500.

How to Move Stop Losses to Stay With the Major Trend - Stock Market Update 11-25-13

  Stock Market Update 11-25-13 How to Move Stop Losses to Stay With the Major Trend

 This stock market update video covers multiple time frame analysis of the S&P 500 tacking ETF, SPY.  The MACD indicator is analyzed at the 15 min, 1 hr, 2 hr, 4 hr, 1 day, 1 week, and 1 month time frame.  Bearish divergence is present on the MACD on the lower time frames, warning that the stock market could potentially be ending an uptrend of varying degrees.

However, price is the final say, and divergence patterns can fail to lead to meaningful reversals.  Given that we are currently in the seasonally strong time for stocks and the market is at all time highs with no overhead resistance, this is a distinct possibility.

I also show you a simple, yet very effective way to trail stops using the MACD indicator  relative to price action.  This method will allow you to stay in most large trends and failed divergence patterns until the trend is done or nearly done.

Multiple Time Frame MACD Divergence in S&P 500

Multiple Time Frame MACD Divergence in S&P 500 
This stock market video looks at the S&P 500 across multiple time frames and notes a bearish divergence in the MACD at weekly, daily, and 30 min time frames.  This type of multiple time frame MACD bearish divergence can signal significant turning points as happened in bonds in July 2012.
We review a low-low-high time cycle that suggests a possible time symmetry for Nov 19th as a high point.  Also, we look at bollinger bands and the current action relative to the upper bollinger band.
Stock indexes formed bearish reversal candlesticks (bearish engulfing patterns) today with both technical and sentiment divergences present.  I discuss trading tactics to take aggressive short entries in the market and discuss how to quickly reduce risk, while still maintaining the potential for a large gain.

A New Video Is Available

Yesterday I recorded a new video for members of StockMarketAlchemy.com.  The video covers analysis of the S&P 500, and looks at how to trade individual stocks using the analysis criteria taught in the Trader's Crystal Ball eCourse.

A detailed example analysis is done on UPL in relation to stocks and oil prices in the overall context.

If you have not created your free membership at my site, then you can do so and access the members videos by creating a password and login here.

I hope the video content is beneficial to your trading and ongoing market education.

Pete

How to Trade Bearish Engulfing Patterns - DIA Bearish Engulfing Pattern 11-7-13

How to Trade Bearish Engulfing Patterns
This stock market video update looks at the DIA etf of the Dow Jones Industrial Average.  Today formed a bearish engulfing pattern in the stock indexes which is a top reversal candlestick pattern in Japanese candlestick analysis.  Given that the market are in a short term overbought condition on technical indicators and there is a relatively large potential bearish divergence in the weekly MACD indicator on the stock indexes, this reversal could be significant.  Additionally, DIA only just poked above its September high on the charts and now has immediately reversed.  Failed breakouts are a general rule at major market highs, so we should be wary of that here.
In order to give you a more comprehensive picture of the markets I also discuss bearish divergences and non confirmations in the VIX and total put/call ratio which further suggest that stocks are at risk of some continued pullback here.  The October low is key support in my view.  A break of that low may mark a significant high in stocks.

Long Term US Bond Market Technical Analysis - TLT ETF

Long Term Bond Technical Analysis
This bond market analysis video covers the US long term treasury bond fund TLT.  Technical analysis of the bond market suggests that bond prices have made a measured correction off the August 2013 low and that the rally is mature and may be near a peak.  Ideas for short selling TLT are given based on trend lines and technical indicators.  The momentum indicator is reviewed and the weekly chart head and shoulders pattern target is also reviewed.
Additionally, if this is a bear market in bonds, which I do believe it to be on many counts, I would expect a weekly time frame bullish divergence pattern to develop in the technical analysis before a possible bottom in bonds.  That has not occurred to this point, and so with a measured correction against the downward trend, this appears to be a time to be looking at possible short set-ups.

Stock Market Update 10-29-13 and Energy Stock Commentary

Click on Chart to Enlarge

This chart is a 2 hour chart of SPY with a MACD underneath.  Prices are making new highs here but with the MACD developing a divergence pattern which is suggestive that we may soon be in store for a minor sell off.  The initial big thrust off the October low may be about over, so it may be more sensible to wait for a sell off of a couple days prior to looking at establishing new long positions.

In the larger context here I want to note that the stock market could be in a very bullish position at this point.  The weekly time frame bearish divergence pattern on the technical indicators that we saw at the September highs has now been invalidated with a breakout to yet higher highs.  And markets at new all time highs tend to perform very well for the most part.  There is no overhead resistance and so momentum can continue upwards for a considerable time on low or declining volatility.

Additionally keep in mind that the annual cycle for stocks historically is most bullish from November through April.  So we are just entering the time of year that typically provides a tailwind for stocks.  Certainly at this point a break of the October low would be a negative technical factor and not at all in line with what I think would be a typical longer term bullish scenario.

What my suggestion is here is that we remain intermediate to long term bullish here on stocks until there is a NEW weekly time frame bearish divergence pattern that develops on the technical analysis of the stock indexes.  Also, clearly the Nasdaq has been the leader on the rally and I don't see any great reason why we shouldn't expect that it will remain so as long as stocks are advancing.

Click on Chart to Enlarge

I would also suggest that energy and commodity stocks may be ready to get going to the upside here as well.  Crude oil has corrected in line with historically normal corrections in a bull market and from a charting standpoint has made a very interesting flush below multiple highs from the past year.  This has the looks of a major stop running point on the chart and I would not be surprised if the correction has bottomed already or maybe has one more slight lower low before marking a major low that will hold for months and probably kick off a big rally.  The chart above shows a green line at the lowest of about 5 breakout points around the $100 level over the last year.  Price has now come back below that in essence stopping out standing sell orders at or above all those minor breakout points, and in doing so has formed a very nice dual time frame stochastics buying set-up which has already triggered on the daily chart.  I have talked about this stop clearing tendency several times over the years and it doesn't get much more apparent than this on the charts.

If you want specific stock recommendations for potential energy/commodity plays, I would suggest subscribing to my Harmonic Trading Stock Selection service.  Already we have some nice paper profits in FSLR, EXK, and BAS which are currently active trades.

Additionally you are welcome to review the video I posted on YouTube on 8-23-13 detailing FTI, X, FSLR, PWE, SPN, APA, BAS, and CENX as buying set-ups and you can look at where they are now overall.  And I believe that some of these are just getting warmed up seeing as oil has been correcting for nearly 2 months.  If/when oil turns up, I'll bet you a dollar and ten cents that we see these types of stocks move up very nicely on average.

If you are more interested in learning the multi layered analysis behind these types of trades so that you can make selections on your own, then I would suggest taking my stock trading and mentoring course which is the best way I can personally help you become a better trader at this time.

All the best

Pete Birchler