I have been updating S&P fairly regularly. How about I do a post on NDX for a change?
This is a weekly chart of NDX
There are quite a few things to like about the above chart. Moving averages are nicely aligned. Price is in a very obvious uptrend. It has recently made a new high. There is the shadow of a MACD cross.
NDX, however, looks somewhat overbought and has pulled back from a first line of resistance around 1970. It has put a bit of distance between itself and it MAs and that always increases the probability of a correction/consolidation. It’s about 17% away from it 89 week EMA. Since 2001, there has been only one period when NDX was farther apart from it 89 week EMA and that happened in the period between Oct 5–Nov 2, 2007, which marked the top before THE Tumble. I am not saying NDX will crash because of some distance from some MA. I am just saying that it looks a bit extended by measures that have caused pullbacks/slowdowns/corrections in the past 10 years. A heated chart does not necessarily have to correct sharply to come closer to its MAs, it can ascend at a lower rate, or consolidate sideways allowing the MAs to catch up. So, price is the key, especially what it does at first resistance around 1980-2000.
North of 1970, we have 2050 area. After that, there is quite a bit of blue sky.
To the downside, immediate support is 1940 and then the 1910-1920 area (more clearly seen on intraday charts)
After that, first line of solid support is the 1890-1900 area. This is a must hold in my opinion, and depending on how things unfold, it is the area that I might consider for possible reload.
Below 1890, things may get shaky. We have the now-rising 55 EMA and 144 MA, and then the 1820-1830 area. Below that, bulls may be in deep doo-doo, and we’ll examine if we see conditions deteriorating rapidly.
This is a daily chart
Notice the area between the red and blue lines. I like that area to offer a buffer zone and absorb any possible selling bouts. That area contains the support levels 1890 and higher that I discussed above.
Same comment about MAs in here as well. They are fanning a bit wide, and I like at least the fast one(s) to catch up to price before thinking about a new position
NDX breadth, as measured by McClellan group of oscillators, has pulled back a bit
Breadth is not oversold enough to entice me into a new position. It’s somewhat neutral.
This is a 60-min chart
First off, don’t get caught in the minutiae of intraday wave count. There is a messy price action between Feb 8 and Feb 12 that opens the door for other counts and that’s why I am split between a minor 3 and an intermediate 1 at the recent high.
Most important thing is to see if index corrects and, if so, how it corrects. The softness of the past few days has made the 60-min chart oversold enough for a bounce.
There is a line that passes through quite a few peaks and valleys. I have pointed them out with blue arrows. I have used the line to form a few parallels. There is nothing magical or earth shattering about this technique, but, in tandem with MAs and price levels we have discussed, the parallel lines may offer a road map for price and act as actionary lines.
So, we have a strong trend that looks a bit extended and in need of some cooling down. That does not mean that market will give it, so pay attention to what market does, and not what I or anybody thinks the market needs.
I am personally wary of new long positions unless I get a better entry after some sort of correction/consolidation. For existing positions, not much to do other than evaluating for stops/hedge/insurance/profit taking based on personal risk parameters.
A somewhat sideways consolidation that would allow all, or some, of the MAs to tighten up, or catch up is always the best sign of a healthy trend unwinding its excesses, and energizing before another run. The key would be to wait the start of the run, like we did in the period prior to Dec 2009 takeoff.
On the other hand, a sharp correction that scares the pants off headline pushers and babble-heads, and gets bears into a shorting mode can potentially offer the best entries. Potentially is, of course, the defining phrase. The key is to get the index nicely oversold in lower time frames without damaging the technical profile of higher time frames. Best would be daily oversold while weekly stays positive, flattens or holds support. The period of the correction of Jan-Feb 2010 can give you an example of that.
Long term trend is up. Mid-term trend is up. Short term trend is up (a move below 1920 may change the short term tend).
Have a Nice Week!
S&P 500 – May 15, 2012 - Bottom Line: Long term trend is up. Mid-term trend is down. Short-term trend is down Weekly S&P stage is Late Advance (2-C) Daily S&P stage is Strong Decli...
1 year ago