S&P 500 - July 1, 2009

chart courtesy of stockcharts.com
news flash pics courtesy of MarketWatch and Bloomberg

A bit of gain on contracting volume.

Index started the day strongly

After an hour or so of squeezing the squeezable, index peaked for the day and gave back most of the gains. The opening gap held the decline at the close.

For the day, volume contracted. That is not really good for the bulls when positive closes happen on contracting volume. Breadth was positive

McClellan Oscillator finally made it to the downtrend line that we have been discussing for a few days. What it does here is now important. Markets need volume, breadth and momentum to back the price. I know, I know, many, many freshly created billions can help as well by buying ETFs and futures, but, a healthy market needs volume and breadth for the actual shares of actual companies. These past days has seen a bit of volume increase in down days. Momentum has not been very strong either. Let’s see how breadth behaves at resistance.

This is 60-minute chart of the index

I have discussed the potential H&S and said that everybody who can pronounce the word chart in any language is avidly watching this and scheming a trade or two.

I have also said that I think the low of Wednesday June 30 is more important for the short term than the H&S. I have not changed my view on that, especially since today’s high served as a continuation of short term uptrend of the index.

This is a 15-minute chart

There are quite a few short term wave possibilities at this point. So, I will mainly concentrate on the rising channel of the chart above and see how the index behaves when and if it gets to the lower boundary. Notice that price is getting oversold on 15-minute frame, and in two prior occasions, when it got oversold, it bounced off the channel’s lower line. Also, notice that momentum is rolling down on 60-minute frame. So, it is important to see how the smaller frame behaves given that the larger frame is showing signs of weakness.

Once more, a break of June 30, low is essential for short term prospect of any bearish case. In case price bounces back, the mid-channel becomes important as possible resistance.

Two more things about the 15-minute chart above: First, the narrow band of I have depicted in purple which has so far rejected price advances. The more a level gets tested the weaker it gets. Let’s see what price does with respect to the band. Second, today’s high came around 62% retracement of the drop from June 11 and sold off immediately. Today’s high can/could provide an objective short spot for a speculator with discipline and tight stops.

Let’s Wrap Up:

Early rally sold off into the close. Buyers of ETFs did not show up before the close.

There is a wide range (885 – 965) that has the potential of containing index action in coming days, and frustrating the hell out of bulls and bears alike. A break above 935 may be the first indication that index may be gunning for the top of the range.

McClellan Oscillator is now at resistance against a downtrend line that has been in play since March

Short term trend is up. Mid-term trend is up. Long term trend is down.

Resistance is 923-928 (tested three times already), 935 (Jan 2009 top), 950 (pierced and lost three times), and 961 pivot (a long term level from 2003). Support is 912, 905, 893 (55 EMA), 875-885 (neckline and base of a W bottom) and the frequently contested 850

Market needs new bears with capital and conviction. Let’s look for signs of distribution to determine if new bears have emerged or not. Also, let’s keep an eye on volume and wave structure

There are ongoing momentum and cyclical divergences on the index.

The high beta, reflation trade that has defined this rally has been weakening with only the techies still holding. Can SPY, SSO, and ES buyers buy long, and hard enough to hold the index and wait for materials, industrial, and discretionary to correct and come roaring back, or are we going to see a rotation into defensive sectors typical of an end to a rally?

All intermediate sell signals are still intact. Bulls need a break above 930-935 to stand a chance of turning the tide.

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Yesterday, I displayed some flash headlines that tried to explained the drop in the morning session. Let’s see what they said today


Now stocks rise and the reason cited by them is S&P performance. So market rises because it has risen. But yesterday they said – who cares what they said? I don’t care, you check on your own if you do

And this


See what they say: “investors inclined to think bullishly to start the third quarter”. But same investors dumped yesterday to end the second quarter.

And then we have a picture of a bull on top of the ADP report, and some verbiage to boot. What is the message? Are they saying that those whose jobs are being shed should ride the bull? Does it matter what they are trying to say, I mean, since they seem change the message uotick to downtick and back?

This was all at the open when ETF buyers were hard at work squeezing the squeezable shorts, who might have and held because the same outlets said, as I depicted yesterday, things were suddenly bad.

So, what is the difference between verbiage from outlets like above and the noise that comes from the like of bubble-crook-in-chief-creamer? To me, they are equally useless.