some charts courtesy of stockcharts.comr
A new uptrend high as Benny self-appoints himself the saviour of the world. It must have been a world in tatters for Brownie of England had already appointed himself a saviour. How many more saviours do we need? Who’s next? Who were the clowns in charge when the world was being shredded to pieces in the first place?
Aaaah, it’s weekend, and I never understand these things
On Friday, I posted way early in the morning with some trades I was doing.
Other than having to be awake in the ungodly hours of the morning, and the usual doubts and what-if questions that I always have, the decision to initiate trades was very objective. We have been talking about the important factors many times, but let me summarise them here.
-- Mid-term uptrend
-- A new short term uptrend
-- Positive mid-term and short term MA alignment on both daily and 60-minute charts
-- A market that does not want to give back much no matter what the news or economists might say
-- Vicinity of a key pivot 990, that would make defining entry/exit points objective
-- Three days of rise on expanding volume.
-- Having enough waves for a probable wave B or wave 2 bottom
Now, with the above, especially with the trends and MAs, going short is like going against the tide. The shorter may get lucky and pick the exact moment of tide turn, or not.
Having a frequently tested pivot in the vicinity of the trade made the job of going with the tide relatively simple because
-- Stops could be defined nearby
-- One could always switch to the short side with minor loss on the long trade
In the same posts, I also said that I had taken some profit. It was not because I did not like the trade. In fact, I was very comfortable with the 990 pivot. It was because the position I started with was quite large and I decided to make the trade nicely profitable even if I stopped. I have previously said that when I get what I deem is a high probability setup, I do what I call a double dip. I usually buy double, sometimes more than the amount I would want, if the trade works, I let the extra portion go, and then monitor the rest.
It all feels like being inside a Jackson Pollock painting, and I am not kidding.
Take a look at a post I made before market open on August 17It seemed like we were on our way to a more meaningful correction. But then up volume returned, price firmed up, and bears gave up. All in 3-4 days.
OK, what now? Before looking at charts, let me say that I am not a bull, not at all. I suspect everything about this market and I distrust every noise that comes out of every market participant everywhere.
One main reason behind my distrust of bulls is that I see no hard-core blue-collar, non-governmental, unmassaged, honest-to-goodness data that even remotely suggest the economy is on the road to recovery. It, so far, has been driven by hype, liquidity, political exigency, and an assumption that less bad is good because it is better than less bad, and definitely better than the worst – so Giddy Up, and Buy!
One reason behind my distrust of bears is that they are weak and cornered. Those with money to impact the market have to change side for the market to drop. Another reason is that I really do not see what short and mid-term market action may have to do with economy. Market lives its own life and it may diverge at times from the economy.
Most important reason for my lack of trust of anybody is that this is a zero-sum game. Everybody’s after everybody’s money. It is not a hold-hand-sing-kumbaya-feel-good type of place. Remember that, especially when you read me, and apply your own objectivity, and analysis style.
Last week we had extreme bullish sentiment data. What did it do? A sharp day down, and a new high by the end of the week. Now, the sentiment data gauge of last week has eased off towards the middle
let's look at some charts
This is a weekly chart of the index
There should be strong support between 990 and 1000. After that, 930-950 area is very obvious in the chart above. Last week saw some dramatic price action but weekly volume was poor. Are the big boys still lazing the summer away in The Hamptons?
I have calculated some theoretical targets. Longer term 89 Wk EMA is in the vicinity of our 1041 pivot and (C= 0.62 * A) theoretical target price calculation, and 50% of the length of major C of Primary A. I expect to see some resistance there.
Index is getting overbought on the weekly chart. Just being overbought does not mean an automatic sell, but it can mean that late buyers are assuming more risk, especially the risk of profit taking by others.
There is a nasty-looking downtrend line that is around 1100 or so. If price advances, it may meet it somewhere between 1041 and 1107 pivot. If price advances without any cooling off and gets to that downtrend line, I will be extremely paranoid holding uninsured/unhedged long positions. If price cools off but does not collapse, then, we will have to reassess the situation.
This is a daily chart
We had said that the behaviour of Stochastics around 50 was worthy of monitoring.
Stochastics turned up and past 50 without getting into oversold. Notice that last time it did that was in mid May, when we were coming out of another intermediate degree B wave. Within a few days, price topped. Another similarity is how price played as it went into its 21 EMA and then bounced.
Will a top happen again in a few days? I don’t know. I am just an aspiring Elliottician, I try pay attention to fractals and symmetry, and here I see both. It may play out the same way, or not. I just think it is worth my attention. That’s all.
Also, notice that the broadening top pattern is still active. It is being stretched to its seams, but still in play.
Multiple levels of support exist on the chart, just pick your spots and play accordingly.
Speaking of symmetry
The previous uptrend from the March low made a daily cycle high and two more up cycle peaks that negatively diverged. This uptrend has so far made a cycle high that is lower than the cycle peak of the last uptrend. That may be a sign of aggregate momentum loss from one uptrend to another. If the fractals and symmetry play out, we may see more cycle peaks at divergence before price rolls over into a correction.
For the day volume came in above average. In fact, that’s what you want to see as a lead up to a new high: increasing volume and then the above average breakout.
Daily breadth was awesome
I have been saying that for the market to go down in a meaningful way, we need bears from among the ranks of well-fed bulls. For that we should pay attention to signs of distribution. I see no such sign in the chart above. There was a heavy red day on August 17, but it had no follow through, and is now technically invalidated as a distribution day.
It is yet again back to the bulls, and they need to show us some follow through.
Another area of attention for me in the chart above is the mid point of the channel, I would like to see how price behaves when it gets there, if it gets there.
McClellan Oscillator is back up. I have drawn a longer term uptrend line for it. Barring a catastrophe, I would expect to see it reach the downtrend line around 75.
Take a look at this favourite chart of mine
There is some short term divergence. Mid-term, it is stretched to levels not seen for long while.
I read somewhere that bullish percent index is at a height not sustainable for long. That may be true, but take a look at a period between October 2006 and June 2007. Price just rose, which brings me to what I have repeated many times. Price is the most important indicator, every other thing comes after. and, yes, we are overbought
I want you do something for me as a favor, please. Forget about what anybody says, bull or bear. Forget about what celebrity economists of the day say, bull or bear. Just look at the chart above, and tell me what you see that you do not like. Tell me what you see that tells you should go and short it.
I have been pointing out to the downtrend on MACD of the 60-minute chart for quite some time. It gave us the early signal that bulls (or whoever it is that bids the market up) maight be back to drive this higher and that we might have a wave b/2 bottom.
That was another reason for my trades early Friday. There was yet one more technical reason. Look at 34 and 89 EMAs, touch and go, hug and release - nice and tidy.
Now what? If you are in position, pick your levels and plan your moves. If you are not in position, I really don’t know. It is overbought short term, but go back to mid July when index made a fresh RSI high on the 60-minute chart, it just kept going. I am not saying it will do that again, just that I do not see a low risk long entry here. If I really wanted to enter long, I would set two stops one around 1018, and one around 1000 . But that's a freshly captured pivot and may see some chops up and down.
I have laid down a price channel in black. There is also a larger channel that I have drawn in purple. Price is just at the intersection of the two. It looks like we may get a very interesting Monday.
This is a 15-minute chart
Price structure from August 18 looks impulsive. Index has to stay above 1000 to maintain a bullish wave structure.
Lets’ Wrap Up:The Index makes new uptrend high.
Bulls own the market. It is their ball to drop. Market needs new bears with conviction and capital to start a meaningful correction. Watch for signs of distribution.
Short term trend is up. Mid-term trend is up. Long term trend is down.
Mid-term, index appears in opposing technical patterns, an Inv H&S and a megaphone, broadening top, attention to support and resistance levels, and price action with respect to MA alignment is advised.
Resistance is 1041. Support is 1018, 990, 984, 961 pivot (a long term level from 2003), 955 (top of the 875-955 range), 935 (Jan 2009 top, July 1 peak), 923-928 (tested multiple times), 910-915, 908 (55 EMA), 875-885 (base of a W bottom) and the frequently contested 850.
It is a very tough market to trade, especially for someone like me who has no strong conviction bullish or bearish, and especially since a lot of major moves happen in the future market when regular US markets are closed.
This is not a run substantiated by hard-core, blue-collar, non-governmental, honest-to-goodness econo-data. So far, it’s been a run made by printing money, bloated-and-bloating national balance sheets, constant propaganda, and super computer purchases of ETFs and Future contracts at critical junctures. The intent seems to be to get every saved dollar either invested or destroyed. The run may go on forever, or cease any moment. Having large, unheged/uninsured positions (long or short) is, IMO, playing fast and loose with cash.
Nas100 is still lagging S&P
In fact S&P has been doing a lot better than a host of other high beta indexes including South Asian markets. Why is that? I am not sure. I just don't like it that much.
As a final note: Don’t let the bias of others (present company included) become the determining factor of your market activities. Do your own analysis, make your own mistakes, be the master of your own trades!
Enjoy the rest of your weekend!
Here’s the daily
Here’s the daily
Posts
