S&P 500 - February 26, 2010

S&P ended the week flat losing 5 points, -0.4%.

This is a weekly chart


There are a few things that I’d like to point out on the above chart.

First of all, there is no clear winner among a number of wave configurations that are active. I have 4 different alternates for January peak. Only one of them is extremely bearish and that one look extremely dubious at this time.

Another point is that the lows of July and Feb form a picture perfect channel (dashed black) around price action, with an actionary median line from November low (thin blue line)

Now, note that weekly corrected in Feb slightly below the area of a half range marker (1070) that I have had on the weekly chart as a median line of an actionary price zone for many months.

Notice that all weekly MAs are flattish and compressed around that area. As long as index remains in the channel, above its MAs, above the support zone, it has a positive technical profile.

This is clearly an area of strong technical support. It is, IMO, all a laid back, longer term player with mature positions need to know to assess risk and take risk mitigation actions.

It also can help a shorter term player in the sense that it was the area that squeezed the shorts and failed the bears after Feb 5 low.

A loss of this support area may embolden the battered bears and target 1000 as a somewhat weak support and 950 as a much stronger area of support

This is a daily chart of the index


This was a week of low volume action with what looks like 2 distribution days. Index is clearly not out of the woods, but it has firmed its technicals quite a bit. It’s resting above compressed, yet cradling MAs. It’s hitting against some short term resistance lines. It is in the lower range of our 1107 pivot.

Right after Feb 5 low, I said that the market had entered a state of equilibrium. That has changed and now we have a positive bias that favors the bulls. But situation is still tenuous. Bulls need to take the index strongly above all the short term resistance and put some distance between the price and its longer term MAs. If they do that, volume may appear as index puts pressure on bystanders and remaining shorts.

There has been a marked improvement in breadth



McClellan Oscillator made a new high after Feb low. In previous occasions during the rally off the March low, this led to further price gains. Summation Index has also registered a buy from close to neutral. That, as well, led to further price appreciations as market rallied in 2009. Same is true of MACD buy signal from below zero, Bullish Percent Index buy signal and a host of others.

Bears keep constantly telling us that sentiment is bullish – whatever the hell that might mean. They also say that volume is absent, but volume has been shrinking on aggregate since March 2009, and that has not kept the bears from being roasted alive as market marched on.

The short of it is that bulls have all the technicals lined up. Bears, well, I don’t know what they have.

Now, if all the technicals that bulls have lined up fail to deliver, and technicals roll over, and support fails to hold, then, we can interpret that as a change in inherent characteristics of the market and its price action.

Shorter term, I have been of the thinking that we had not seen the last of the current mid-term downtrend and further softness would be seen prior to more meaningful price gains. I still think so, but, first, as I have repeatedly said, it really does not matter what I think, we follow our charts; second, price action these past few days has made me doubt that line of thinking.

This is 60-min chart of the index


We have had a short term downtrend from Feb 20, but bears have not really capitalized on that. We have a well constructed channel on the chart above. Bulls need to take the price to the upper half of that channel. For now, 1080 – 1090 area seems to be good first zone of support. Further below, as long as price stays above 1061 pivot, it’s either consolidating or rallying.

Bears, if they are serious and have enough capital and conviction to make a difference, should break 1080 as a start and then take the index below 1061.

Support is at 1090 and 1061, resistance is 1107 and 1133.

Long term trend is up. Mid-term trend is down. I think short term trend is neutral (a move above 1110 may indicate a short term uptrend is underway).

Have a Nice week!

S&P 500 - January 25, 2010

Chop

Chop

Chop

you get the idea

In the previous post, I said

"the internals of the rise off the Feb 23 low look choppy and corrective."

That seemed to have been the case as index sold hard and made a new intraday low in the 1090 pivot area.

Index then did a sharp turn around and erased the early losses.

As my friend Bill at http://thinklikeacriminal.blogspot.com/ aptly notes, this is a pattern that we have seen many times, lure the shorts in, then ride them all up, whipping them all the way into a rally.

despite the dramatic turnaround, yesterday can technically be viewed as a distribution day based on the fact that volume expanded and index closed lower than the day before.


McClellan Oscillator maybe showing the signs of a short term top in breadth


I still think we have not seen the last of the mid-term down trend currently in place.

We also have a short term down trend as you can see from the 60-min chart



All that being having been said, the super bearish scenario of a wave 3 down is seriously in doubt at this time.

There are positive divergences appearing on the 60-min chart. We have buy signals on daily chart.

As I have said before, as long as index stays above 1061 pivot, it's either consolidating or rallying.

Bears really need to break the 1090 pivot. The pivot held and launched a power run yesterday.

Bulls are doing what they should: buying support and squeezing the bears. Yesterday's run was sharp and vertical. A pullback is possible, and we'll see what happens after that.

support is at 1090, and 1061. Resistance is at 1133 and 1168.

Have a Nice Day!

S&P 500 - February 24, 2010

The oversold levels in breadth and price got us a bounce. When an index bounces off a freshly registered oversold reading without lingering there, it is not acting very bearishly.

That having been said, the internals of the rise off the Feb 23 low look choppy and corrective. This is a 5-min chart of ES futures using 24-hr data


I can label it as impulsive if I try, but I think it is choppy. That does not necessarily mean market is going to collapse, but it can imply that index is just correcting the previous decline and more softness may follow soon.

This is a 60 min chart of ES futures


First off, this is 24-hr data, and, due to lack of volume is some ungodly hours of the dark, it may produce choppiness that may not exist on the cash index.

With that explained and out of the way, notice that I have 4 different labels at Jan peak.

They are all viable counts. That is how tricky market is at this juncture as bulls and bears are fighting it.

I am following the aftermath of Jan peak with 2 scenarios, but the other scenarios are as valid. Uber Bears, of course, have already decided the outcome and are projecting us in a massive down wave. I am not as certain and am just taking it one day at a time waiting for the market to tell me what it wants to do.

So far, bulls have had the upper hand. Bears had yet another chance to capitalize on Tuesday’s selloff and but could not do much with it and we bounced.

The bounce today came at less volume than the selloff of Tuesday. Breadth was good


Some shorter term oversold measures of breadth have been relieved somewhat


ARMS Index is also back to neutral


This may mean that majority of the shorts are already roasted and we may be getting into a situation where bulls need to bid on their own.

This is the daily I showed yesterday


Not much has changed. Index is still sitting on its shorter MAs and needs to clear the congestion zone one way or the other.

I still think that we have not seen the last of our mid-term downtrend. Regardless of what I think, traders may need to take it based on pivots and support/resistance levels. Longer term holders may want to keep an eye on the bigger picture


I think the weekly chart is quite clear as to what levels bears have to break to turn things around to their favor.

Support is at 1090 and 1061 (shorter term, bears should break these pivots to stand a chance). Resistance is at 1107 and 1133.

Long term trend is up. Mid-term trend is down, short term trend is up.

Have a Nice Day!

S&P 500 - February 24, 2010 - Intraday

The rally this morning puts more pressure on uber bears wave 3 scenario. Every time they get excited about the possibility of a wave 3, index halts and either rallies or retraces or goes nowhere.

Wave 3's typically unfold in a hurry with a lot of urgency. So, if bears are serious, they should attack the tape now and sell like there is no tomorrow.

let's see how they do!

S&P 500 - February 23, 2010

In the weekend post, I said

""I think our mid-term downtrend is not done yet, and expect another leg down. But I am not forever married to that idea. Index will pullback, and that pullback will tell me how right or wrong I am.""

So far, it appears that I was not wrong. But, although we have had a pullback as expected, it is soon to say whether we are to, at least, retest Feb 5 low or not.

This is a daily chart


In earlier posts, I had a circle around the area of intersection of short term MAs and some trend lines. S&P peaked in that area and turned around.

Notice that, although price has had a peek above 55 EMA, the 21 EMA is rounding just beneath it like a hook. That is an early warning of possible short term softness in price. Also, notice that 21, 55, 89 EMAs have contracted and are flattish. Both bulls and bears have to cause expansion in the MAs to have a trending move in their favor. Also, notice the rising longer term MAs. With the MAs and a number of trend lines and support/resistance lines that I have in the chart as well as my pivots, I think, I have a good road map for monitoring further price development.

Today can be counted as a distribution day. Volume was below average but expanded. Breadth was poor.




Index was overbought and has duly pulled back.

Now, it is getting short term oversold


60-min chart is already oversold


Notice that bulls took the index through a number of levels when they went from oversold to overbought. So far, bears have only brought it down to some first level of support. They need to do better, much better than this.

Yes, the drop today looked scary


5 clean waves down

Everything in this market happens at a supercharged pace.

Sailors among you should know what free surface effect is. This market is like a super tanker with some dangerous, partially filled tanks, a little push and it rolls crazily to one side or the other. The money printing, POMO pumping, and liquidity drainage act like reserve buoyancy that's needed to upright the ship


Sailors among you should also know that rolling makes some seasick and vomit. Those who don't get sick feel a gentle buzz like the one drinkers get from alcohol.

In this market, we are all either clutching the gunwale vomiting overboard or drunk like a sailor :-)

Support is at 1090 (held nicely today), and 1061 (a must break for the bears). Resistance is at 1107 and 1133.

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

Have a Nice Evening!

S&P 500 - February 19, 2010

Market chops shaky participants into pieces.

On Thursday market drifts sideways most of the day. It then finds flashes of bids for a ramp up


Shorts are whipped all the way into close after 2:00 pm. Then there is some selling into close.

Future markets continue after 4:00. There is some selling after the close


At 4:30 or so the Fed delivers a rate cut news and as that is taking place some people are selling fast and furious while the rest of the world is either oblivious or scratching their head as to what might be happening

Selling continues till well past midnight


Then some volume (By 2 AM standard) appears and prices start climbing. The climb continues into regular trading hours of Friday, which, by the way, is an option expiration day


The best course of action, of course, would have been to do nothing as S&P changed only 2 points from Thursday’s close to Friday’s. But, with a well-timed announcement, many and many shorts and longs are forced into action because a lot depends on the closing strike of the OpEx day and many cannot take the chance and have to react fast – their hands are forced, plain and simple.

This is good, fun stuff if you are an observer. It’s a thriller!. For those who are interested in fiction thrillers with a lot of high finance involved and good info to gain, I humbly recommend books of Paul Emil Erdman, look him up, you may enjoy them.

I am sure all sorts of conspiracy theories have emerged and will emerge, but I can see why an announcement like that should come when equity markets are closed. That would give a time window for members of the FED to explain matters if they deem necessary. It also gives players time to examine the situation on their own and in the quietude of closed markets as opposed to the mayhem of a trading day.

As to why the announcement has to be before OpEx day, well, I can see no reason other than being snide, but hey, in matters of money and markets, everybody’s a self-serving player, so, to those who were hurt, grow up and take it!

One thing we should keep in mind is the power bulls have demonstrated since March 2009 in squeezing the shorts into rallies.

And here, again, index rallied to another rally high before settling back into the close.

This is a weekly chart



As I have been saying repeatedly, all bears could do with that drop into Feb low was some 10% or so correction, and a test of support. That is, plain and simple, pathetic given all the sky is falling and Greece is burning and China’s bursting hoopla the news had been feeding us. It all may change on Monday, but, seriously, if bears are so cool and mighty how come they can’t break a weekly chart when it is at the point of breaking. They need to do more than just a correction to support. It’s just that simple.

This is a daily chart


The chart has improved a lot. It so far looks so eerily similar to June-July correction. Look at the shape of the correction. Look at the RSI, and MACD.

I, personally, think that there is another leg down, maybe testing and cutting Feb low, or maybe getting deeper, or whatever, but what I think is of no significance to the market. What market does matters.

With the inability of bears to break the index where and when it mattered, on February 7, the weekend after the low, I said

I think market went into weekend with a state of technical equilibrium, both bulls and bears have to prove themselves in coming days.

Now, I like to know how many pundits, or bloggers or analysts said something like that in such a timely fashion

Am I bragging? Of course, I am :-)

That equilibrium seems to have gone away and index seems, yet again, tilted favorably for the bulls.

There has been a lot of improvement where breadth is concerned. NYSE McClellan Oscillator (MO) has registered a fresh high reading


On the way up MO spent no time in neutral territory. It just cut through it.

Net new highs that had dipped below zero has come back strong.


There is lots of improvement on the following


What do bears have to show other than a failed attempt at support?

They tell us that sentiment is bullish.

First, they have been telling us that forever.

Second, what is this sentiment? What was the sample size questioned? How important were those questioned in terms of amount of capital at their disposal? How do we verify the actual market positions of the respondents? Who did the survey? It’s at best he-said-she-said and won’t stand up to the rigors of a market jury, let alone the judge.

Third, even if it is a true survey, and the respondents were 100% truthful with their opinions and positions, sentiment is a lousy indicator when it comes to timing and trade signals. It’s at best a background theme like a curtain to a window. Price can move against published sentiment readings for a long, long time. Stop admiring the curtain! Look through the window! Watch the Price!

One who builds on sentiment alone builds on words, and one who builds on words builds on nothing – Watch the Price!

Bears, also tell us that volume has been lacking from the rally. That is true. But, as I have said before, with an index or a composite, volume may follow price, especially if the move is not believed at first and then starts showing resilience and momentum.

The jury’s still out on that

Since Feb low, bulls have done everything right, they have whipped the bears into rallies, they have mopped up the dips, they have expanded breadth, and they have, according to financial media, shrugged off the rate cut.

But did they really shrug off the rates? Maybe, but so far what we have seen is knee jerk reaction into option expiration with no material effect in terms of point gains. And let us not forget that S&P closed up every day of the last week on below average volume.

With options out of the way, next week should show us the true reaction of the market.

Index has entered overbought areas of the daily frame. It has been over bought on the 60-min chart for a few days


It sure has taken its time being short term overbought as gauged by RSI. My first range target of 1105 was hit with ease. Let’s see if index can hit 1120 or not. I usually don’t risk much on second targets.

I think our mid-term downtrend is not done yet, and expect another leg down. But I am not forever married to that idea. Index will pullback, and that pullback will tell me how right or wrong I am.

That pullback will also tell us what the bears are really made of.

Some are following a super bearish count like this


If that is the case, then we should see a wave 3 unfold, and if so, prices should impulse down in a hurry with rapid deterioration in breadth and momentum. Only time will tell, of course, but, based on technical evidence before me, bears have a lot to prove, and they need more than words of mouth and sentiment surveys – they need to sell, break the price, and resist the short squeezes. It’s just that simple!

Let’s Wrap Up:

The state of equilibrium that we correctly identified after the low of Friday, February 5, has shifted into a positive bias towards the bulls.

The move from Feb Lows looks very similar to the one from July lows. While future will tell us how similar they will in fact be. I shall remember that the July move destroyed the bears, and also kept a lot of bulls out waiting for a retest or pullback or whatever.

Bears have failed on many occasions to inflict lasting damage. Feb 5 was another such occasion. If they are serious players, they should at least cause a series of short term lower lows and lower highs.

Bulls need to keep the index above 1061 pivot. For now, as long as 1061 holds, market is either trending up or consolidating.

Support is at 1107 and 1090. Resistance is at 1131 and 1168.

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

Have a Nice Week.

S&P 500 - February 18, 2010

Just a quick post.

This is an OpEx week. The FED gang decided to announce a rate hike after regular market hours before the OpEx day. Surely, there will be many blogs and articles written about the fairness of actions like that like thee has been many written in the past.

We leave venting and cries of foul to others.

Fundamentally, maybe the FED thinks the economy is strong. Or maybe they don't care and are just trying to steady their own ship. We will only know later.

Technically, we know we are in a mid-term downtrend. We have just had a good bounce off the lows of early February, and the index was short term oversold into yesterday's close



we also see buy signals on the daily chart and an index that has gone through neutral momentum zone and approached oversold areas


As I have mentioned before, what index does and amount of time it spends in oversold tells us a great deal about its strength.

While breadth has been very good, volume of these past few days have been shrinking.

All I can say from a technical point of view is that we have an index that sold off, held support and is now bouncing smartly.

Given that, given that today is OpEx day, and given the FED news yesterday, and given the short term oversold reading, I wouldn't personally want to be involved in a big way. I'd rather let the dust settle.

If I wanted to short, I would have give it a lot of room, like a new high, or above 1133 pivot. If I wanted to long, I still would have given it a lot of room, like a new low. Since we seem to be in the middle with uncertainty on an expiration day, I think maybe it's better to leave the market to traders.

Have a Nice Day!

S&P 500 - February 16, 2010

Just a quick post:

It seems we had sensed bears’ lack of might correctly. First the selling stooped at support. Then, there came a bounce. Now, the super bearish count which I said had become some sort of consensus among uber bears is seriously challenged now.


It is still a valid count but it may have lost its luster because TSX, RUT and NDX have already invalidated it (those I follow, there may be others). On S&P, it has retraced deeply and strongly

So, I will continue with these two counts



The ramifications of the two counts above are rather significant. They mean that market may not have topped yet and it is just correcting. I still think that we have more downside (or at least a retest) to have. But, as we all know, what I think does not matter. I am neutral and am waiting to see how market deals with short term overbought conditions, and how the price structure evolves.

Today, NYSE saw huge breadth on the upside


Overall volume shrank from the previous day. It apparently was a broad-based rally, but I can’t count it as an accumulation day. This is OpEx week. All sorts of things happen that may or may not have lasting effects. One thing I am certain is taking place is that market is having fun getting rid of as many shorts as possible.

McClellan has short straight up through neutral. That is another indication of the broad based rally.



There is quite a bit of technical improvement on the charts. S&P has got into 1090 pivot range and is hitting against resistance from shorter MAs.

So far, the market has bounced off of support and oversold conditions of price and breadth


How market behaves when it gets overbought should give us some clue as to the underlying strength of this rally.

Support is 1090 and 1060. Resistance is at 1107 and 1133.

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

Have a Nice Day!

S&P 500 - February 12, 2010

Markets finish the week on a slightly positive note.

S&P was a downer on Friday but gained a bit for the week. NDX was stronger for Friday and for the week.

If I were a super bear with dreams (nightmares?) of a collapse of US markets into abject depths DOW 400 or something like that, I would be a bit concerned about the shorter term implications of my uber bear position seeing risk indexes like NDX and RUT outperforming the so-called blue chips of S&P.

This is how RUT has been doing against S&P on a short term basis


Comparatively, it led the way down, and then rocketed the way up.

And this is NDX


Are risk and high-beta back and was what we saw from 2nd half of January into early February just another meaningless correction meant to kill a bear or two?

Maybe, but junk bonds, which acted like champions in 2009, were not doing all that great last week.


I think the jury’s still out on whether we have had the entire correction or there is more to come. But time is running short on uber bears and a bit more positive action from indexes and the technical profile of the market may start turning up.

This is a weekly chart of S&P


From a technical point of view, all that has happened so far is a correction that stopped at support. Index is still at support. We need to remember that throughout the rally of 2009, every dip or correction stopped at some sort of technical support. In other words, bears consistently failed at breaking support and inflicting more lasting damage. This is their moment, yet again, and they have done nothing for a week of sitting at support.

Granted market was short term oversold in terms of price and breadth and a bounce was due. But everyday that index stays at support or rises away from it gives more confidence to bulls that this was just another correction and that would not be a good thing for failure-prone bears.

Nothing is broken on the weekly chart, wounded but not broken. The challenge is for the bears to break it, and that takes action and not just talk.

This is a weekly chart of NDX


Stopped and bounce off of its 34 EMA, did not even reach the support shelf of 1660-1673 below.

So, for all the commotion about Greece, as well as a host of other indebted nations that are, according to news, in line for credit problems, markets have just corrected and tested support .

This is a daily chart of S&P


After the miraculous hard bounce reversal of last week, index has been crawling up its 144 MA. It faces resistance from a host of shorter MAs and some broken short term trend lines.

If the outperformance of NDX and RUT is for real and not just a dead-cat response to the vague and rather empty Greece announcement, then S&P should hold support and start rallying.

There has been some improvement in breadth measures


The gauges on the chart above are still in correction mode, but none have fall deep enough to substantiate an uber bear outlook, not yet anyways

McClellan Oscillator has been bouncing as well


As you can see from short term momentum and McClellan Oscillator, index seems to be in a state of neutral, or equilibrium. This is also evident from the way index is sandwiched between shorter MAs and the 144 MA that held it decline.

Short term price structure does not offer a lot of clues either

This is a super bearish count that has become a consensus among bearish bloggers


The count is technically valid. It shall not be invalidated as long as it stays below 1107. I have some doubts about it because NDX has retraced the minor 1 (blue) wave rather deeply



Also, the commodity-rich Canadian TSX has completely invalidated that count


One of the things that uber bears keep telling us is that what we have all the same market rising and dropping together. Well, right now, TSX cannot have the same super bearish count as SPX

Therefore, I think the following two counts should be taken seriously as well at least till the situation clears a bit more


What matters most at this moment is that as long as index stays above 1061, and especially above 1041, it has every chance of repairing the existing technical damage and rally. A move above 1105 may cast real doubts on uber bears dreams of a collapse for the history books, at least, for now.

To Wrap Up:

Bears’s performance so far has been disappointing – a meager 10% correction that stopped at support

There is some serious short term technical damage on the charts, but the weekly chart is still OK. Bulls can easily take their market back. They have had their short squeeze parties. They have stabilized the index. Now, they just need to spend money, and bid things up into technical recovery.

As I have mentioned many times, a good downtrend should spend a lot of time in oversold than overbought areas. If the bears are right, we should see the short term picture top soon and roll over

The two pivot areas of 1061 and 1090 seem to be the battle ground of bulls and bears. Bulls must take the index above 1090 and hold it there. Bears need to break the 1061 pivot (it held firm this past week) and keep it there.

On January 24, I wrote

""Barring a new high, I am operating under the assumption that we have a top. The challenge is for the bulls to prove their worth and negate that scenario. It’s just an assumption and not a closed-mindedness. If the situation turns, I shall turn as well.""

I have not changed my mind yet. But I have become neutral now as I have detected a situation of tenuous balance between bulls and bears. Because we recognized the peak early, we have the luxury bringing our cutoff point lower. I still think there is more downside to have. But it does not matter what I think. What market does matters. If bears are serious, they should break the market. It is that simple!

Support is at 1061 and 1041. Resistance is 1090 and 1133.

Long term trend is up. Mid-term trend is down. Short trend is weakly up (sideways, really, but slanting upward).

Next week is an OpEx week. I expect all sorts of price gymnastics.

Keep an eye on the techies and the juniors!