S&P 500 - October 1, 2010

Flat Week!

Market ignored the supposed mover stats, GDP, Job Number and Personal Income, and decided to just stay pat for the week.

This is a weekly chart


The thick blue line and the dashed mid-line of the blue channel capped the index. Because they are slanted, index can rise along their underside, but it constitutes rising the same price channel, and portends the risk of falling to support below it which is the MAs and the lower line of the blue channel. Technical support is around 1090-1110, and then 1060-1070. A 30-40-point drop, or more, can easily happen and still be technically seen as a normal correction.

This is a daily


So far, it seems like the breakout at 1130 has been successful. Index has stalled at the level of Jan 2010 peak (1150 area). It can be viewed as a range-bound consolidation, and it stays that way as long as it stays above the breakout area of 1130. Going sideways, or slanting down a bit for days is a very good and healthy thing. It shakes out weak hands and frustrates shorters. It cools off breadth and momentum excesses. It does all the things that consolidations should do. If 1130 cannot hold, then, I would like the index to stay above the upper purple line and inside the blue channel.

As mentioned a few posts ago, seeing that bulls were having a tough time getting into the upper half of the blue channel, I divided the lower half into thirds. If index were to do a pop and meet the mid-line of the blue channel, it would visit the 1160 area, it could then drop to 1140 and still be in the upper third.

Daily volume shrank. Daily breadth was good.


Notice that index is at the peak of Jan 2010. Also notice that the Jan 2010 peak of 1150 was a flat top. I am not predicting this move follows Jan 2010 top, just pointing it out to make sure that I keep track of possibilities. There are differences. Jan 2010 came after multiple negative divergences on momentum. The Jan 2010 price was a wide distance from longer MAs. Here we are coming out of a nasty correction, we have just made one RSI high, and we are close to all our MAs, with longer ones looking flattish. Of course, one can reason all one wants, it is the price that does the final ruling. As long as 1130 is held, there’s not a whole lot to do but wait. Failing 1130 is not the end of the world, but may have to be treated with caution because it can give the appearance of a failed breakout. It also can give the appearance of having completed the right shoulder of a H&S.

McClellan Oscillator is just around neutral


Summation’s positive, and that’s good. One condition I set a few posts ago was for breadth to expand, which seems to have a hard time to get going, we can that see from McClellan above and from the measures of the chart below


So, we wait to see what next week brings in terms of resolving the 1130-1150 range. One quick note: sometimes, a range is first resolved one way, and that later to proves to be a fake, and the range coils back and expands the other way. We had a push to 1155 on Thursday that was quickly reversed. Is that the fake that could break the range below 1130? Worth being mindful of that, I think.

This is a 60-min chart


This is the count that I showed intraday on Thursday. I have been saying that a move above 1145 would enhance the chances of the count. I also said that I would have like to see an expansion in momentum. Index closed above 1145, but price structure for Friday’s move looks corrective. Also, momentum has not expanded either – MACD’s still below it downtrend line.

Maybe we are seeing this


With minute wave 2 (green) yet to finish. A move below 1120 would toss this count into the trash can.

It is also possible that we are dealing with a large triangle or diagonal.

There are many possibilities, and, as always, don’t let the minutiae of small waves distract you from the price and important levels. 1140 and 1120 are still important levels for the short term. As long as index is above 1120, the above count has a fighting chance. That said, price had moved in very choppy-looking fashion as you can see from this 10-min chart


Sometimes, cash moves may look bad, but within the broader context of 24-hr future data things may have happened that cash market may not show. So, I checked the future data, but that looks choppy as well


It can be due to a number of different counts: Maybe the bear is coming back, and the bullish count is just crap; maybe we are dealing with a complex correction; maybe it all is part of a triangle or ending diagonal; maybe minor (dark blue) 2 is not finished yet; maybe we still have not finished minute (green) wave 2 – Maybe waves are not very useful here at this moment, and we should pay more attention to important levels than the minutiae of intraday waves until things become clearer

So, I shall pay attention to the bigger picture, and the levels I have discussed. If I am uncertain and exposed, I can reduce exposure using some risk mitigation tool/technique that would fit my personality and risk tolerance.

We have been keeping an eye on USD


That does not look good, does it?

As long as this broken thing breaks further, market‘s cash may end up in things, whatever, anything that can avoid getting crushed under the avalanche of currency dumped down the chart.

So, keep an eye on the Bucky.

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 sideways and choppy (keep an eye on 1140 and 1120)

Enjoy the Rest of Your Weekend!