Market broke out above a level that many were treating like yet another line in the sand, retested the breakout, shook out a whole bunch of people by a fake move, and advanced.
In a post of September 23, the day market did the fake move, I showed this chart of NQ futures
And said:
“Notice that NQ did not fully retrace. It may have ended its correction. I am not making a statement, just that it has enough waves for a correction, and the rocket this morning can very well be a wave 1.”
Was I absolutely sure that it would become a shakeout and a fake move? Absolutely not! I am not psychic, and, that’s just that ;-(
Before market open on Friday, I made a quick post, and said:
“Future market has been at it again, ramming it ahead of some econo-news at 08:30
NQ's been the leader and it may be important to see how it behaves, especially if market masters ram a spike up through shorts to a new high”
This is how NQ looked then
This is what happened after the econo-news and into Friday’s close
I started with just simply asking myself what if the correction was complete. After all, we were in a larger uptrend, the move down appeared corrective, and we had enough waves for a complete correction.
First step into a new position is hard to take sometimes. If one’s lucky and things work out, it becomes a relatively easier case of position management and defining exit levels and stops
One final note about the chart above, the current move higher can very well be an ABC wave up to be followed by another wave down. We’ll see on Monday.
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This is a weekly chart of S&P
Looking good! The only thing that concerns me on the chart at this moment it that it price has not been able to get above the mid-line of the blue channel. Other than that, the chart looks good. A MACD cross that is expanding, nicely aligned MAs, a higher high, RSI getting into overbought areas – good technicals.
This is a daily
As mentioned with the weekly chart, price is still at the mid-line of the blue channel. I would have liked it to be in the upper half of the channel.
Overall, the chart looks good. The 3-day drop looks like a test of the breakout. If that is the case, the low of Thursday should hold.
Daily volume came about average. Daily breadth was excellent.
Notice that index is at the same level of January 2010 peak. It needs to advance and take that peak or it may give the appearance of setting the right shoulder of a large H&S. I would worry about that if index cannot hold Thursday’s low.
Lots of improvement on the breadth measures of this chart
Hard to argue with breadth! While many have been constantly complaining about low levels of volume as reported by NYSE, we have time and time again seen that breadth has been the harbinger of all moves.
I had mentioned that with McClellan being neutral, I could have been on the lookout for a possible turn. Well’ McClellan turned, now it should rise, if not, we may have a problem
Yesterday, as I was seeing the market rising, I said that I might have to look for negative divergences building again. So, here’s the thing: with end of quarter coming, bears and shorts hammered, faked out, and slaughtered, market breaking out, and Bernanke saying: “First, the FOMC will strongly resist deviations from price stability in the downward direction.”, market should just rise, right? If it does not, then we may have a problem. If it does rise, and if this is a really bullish setup, then we should see breadth and momentum expanding, if not, we may have a problem.
One more note about the chart above: Yesterday, I talked about 1100 being the level of 55 EMA and a level that would be widely watched. It’s not uncommon for many to expect widely watched MAs to act as support/resistance. I also said:
“Before 1100, I would like to see how 1110-1120 performs. That is an area formed by two VWAPs that have done well as resistance and may now become support”
And that’s what market did on Thursday and Friday!
This is 60-min chart
I had said that as long as index stayed below 1135, the short term downtrend would be in force. Friday, index quickly moved above 1135 and aborted the short term downtrend. Market can be cruel and unfair very often. But this time, it played it fairy, we knew 1130-1135 was a defining range for the short term, and market played around it and gave everybody a chance to assess and re-assess.
As I mentioned after close yesterday, 1120 on S&P cash is the risk of being bullish, or having gone bullish. A move below 1120 can turn the short term trend back down again.
If we really have a bullish wave structure
Then 1120 or so should hold for quite some time. Otherwise, we may have a problem.
A move below 1135 may indicate the potential of a short term trend change. A move below 1120 will change the short term trend.
The rather untidy end of the low of August, opens the door for another possibility even if one counts the whole thing bullishly
Failure to expand momentum may indicate that the wave up that started from the low of August has not peaked yet. So, again, 1135, and 1120 are very important technical levels in the coming hours and days.
I would like short term momentum to get really overbought. I would like MACD to rise higher. If not, we may have a problem.
OEW pivot support at 1146 and 1136. Pivot resistance at 1168 and 1176
Long term trend is up. Mid-term trend is up. Short term trend is up (a move below 1120 may change that).
Have a Nice Weekend!
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