S&P 500 - June 29, 2010

Saved by the bell?

How did you like the close at 1041, just about the level everybody’s watching?

I posted intraday and said:

“And here we are again, testing 1040.

Everybody and their dog are watching this level as if it is the border between heaven and hell.”

And

“Today's breadth is absolutely horrendous and that may help the bulls hold 1040 again due to market being oversold.”

Seems like it was not a bad call for the moment

It was very ugly day. It exerted more damage to the charts that I watch.

This is a weekly chart


We are at 1040 support but index is now below the lower blue line of the channel that had served me so well. Index failed to get above all of the MAs, and now it looks like the MAs are rolling over with the index below them. That said, bears have to take this below 1040 and keep it there to force as many long positions to give up as possible. The week is not over, but so far, it does not look very bull friendly.

We had picked a couple of clues: the failure to get above MAs and the RSI. On June 22, I said:

“Notice that RSI made a turn down halfway. I am not trying to read too much into it but slack momentum coming out of deeply oversold levels is not a typical sign of a raging bull.”

Now RSI is back to oversold threshold and, in addition, MACD is negative. These, of course, will not mean much unless bears break 1040 for good and turn it from support to resistance

This is a daily chart



We are at the bottom of the 1040-1100 box. The break out of the box to the upside was either fake or premature. We got our bearings right in time from a failure of the index at 55 EMA and at the underside of the dashed purple line. Can this now be a double (or triple) bottom around 1040? Anything is possible, and from the point of view of 1040 being a pivotal area, it may be a well-calculated, low-risk trade on the long side. So, for a lopsided casino crapshoot (some may call it calculated risk) at picking a bounce or a super lucky bottom, 1040 is the number to pull on the pit boss. That being said, there is a lot of overhead pressure, and the technicals, across multiple time frames, do not look very promising at this point. Bulls need to get above 1070 and stay there for a start. If I wanted to do the crapshoot, I would probably look at options.

For the day, volume expanded. Daily breadth was horrendous


In the same post of June 22, I said:

“Bulls wouldn’t not want a rolling A/D line. Bulls would not want a collapsing NYHL either.”

So far, bulls have done nothing to improve A/D and NYHL.

McClellan group of oscillators are all in negative territory, but there seems to be some positive divergences being built


Also, short term breadth seems to be oversold



Perhaps a bit too early to read much into divergences of McClellan Oscillators of the above chart. Bulls need to show up, and get above 1070, and then 1090. Still, holding 1040 and having some oversold and diverging breadth conditions may be good enough for a bounce to at least test 1070 – the key is holding 1040.

Short term stuff aside, broader view of breadth looks very dismal at this point


Urgent action (money on the bid side of the tape) is needed by the bulls

This is a 60-min chart


Let’s just simply say that bulls need to get above 1070 and stay there to deserve any attention. Bears need to break 1040.

OEW pivot support at 1041 and 1032. Pivot resistance at 1058 and 1090

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

Have a Nice Day!

S&P 500 - June 29, 2010 - Intraday

I laid down a scenario on the daily chart for the bulls and said:

"If they can’t do as required, they are as good as dead meat to me."

And here we are again, testing 1040.

Everybody and their dog are watching this level as if it is the border between heaven and hell.

It's being tested too frequently, it will more than likely try to create a bounce. It's not enough that bears just dip below it, they need to stay below.

As for the bulls, they need to take 1070 as a meager first step.

Weekly chart is now below the lower blue channel line that has been holding the index


The week is not over and a lot may happen to rescue the chart, but the case against the bulls is so damningly strong at this point

Here's the daily where we said the lower red line had to be held above a blue dashed line for starters.



Today's breadth is absolutely horrendous and that may help the bulls hold 1040 again due to market being oversold. But they really need a lot more than Yo-Yoing back to 1040. They need to show us the Money!

Now, back to watching the World Cup!

To read or Not to Read - June 26, 2010

I find myself spending more and more time on raw data and less and less reading reports and articles.

Still, friends send me bits and pieces that they think I would find interesting, and I am grateful to that.

This is a link to an article by Ambrose Evans-Pritchard of the Telegraph from UK. It was sent to me by a friend, but I had already read it. Mr. Pritchard is high on my reading list



Mr. Pritchard says:

“Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed's balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion”

Read the article for yourself. It’s, IMO, basically saying that there is no money to bid things up and Bernanke needs to print -- that's what I take from it, anyways

Mr. Pritchard wrote his piece on Jun 24 with markets already mired in some deep doo-doo, and ECRI indicator already negative.

This is a trip down the memory lane of this blog starting May 8, 1.5 months before Mr. Pritchard’s article of the link above.

“You splash free money around and somebody will take a gamble. You stop it, and the fellow starts thinking about preserving his money – he becomes risk averse since it is now his risk not the risk of the benevolent fellow with free money.”

And

“For the sake of all of us, I hope I am wrong and I hope we have seen, at least for our times on Earth, the last of secular private credit contractions and the last of central bank liquidity infusions of the order we see on the charts above. I do not think so, but I surely hope so.”

May 13:

“Is the announcement of the previous weekend by Central Bankers for real or just smoke and mirror? With the FED, we could follow many acts of monetization and liquidity infusion. Mostly after the act but we are talking serious money with delayed effect lasting days (or weeks). Europeans have so far talked a good show on many occasions but the actual stage of the show had no actors -- No Actors, No Show!”

May 15:

“Throughout the Greek saga, Europeans have proved themselves to be really long on words and rather short on cash.”

May 18:

“Show me The Money!

And

“It all goes back to a very simple question: Where is the money that is supposed to bid the market up?

Bernanke stopped easing himself more than a month ago, and Europeans seem unable to really show us the money (Sarkozy pounding table or otherwise). And as everybody with some basic knowledge of accounting knows, many and many countries are bankrupt. As long as somebody printed it and handed it out, market players seem more than happy to play, and media was more than happy with endless, useless chatter about how good things were. Now, it seems like free money’s a bit harder to come by?”

And

“This downtrend has so far outperformed both June-July 2009 and Jan-Feb 2010. One key difference, that I have been repeating ad nauseam, is that Bernanke was delivering bags of money back then but not now.”

May 19:

“Seems like we have been reading the bigger picture alright and there really has been No Money!”

May 20:

“There is no money. Bernanke has stopped (allegedly) printing it. No money, no honey!”

My good friend Bill Zimmer at prudenttrader.com wrote a piece for his subscribed community asking this question

“Who Are You Reading?”

I take it further and ask:

Why are you reading what you are reading?

And

Why are you reading whom you are reading?

Does he/she give you a heads up in correct direction? Does he/she make you money? Is he/she early to a theme?

Bill goes on to say:

“I think what you as individual traders/investors need to do is simply prioritize your readings, get to know and understand the ulterior motives, if any, of the author, by experience. A very experienced individual may be wrong at any given time, hey they are human too, but they’ve hopefully learned a lot from the experience. It is one of the primary reasons I harp so often and sometimes so hard on risk and money management. That is what I took away from the last secular bear market.”

Right you are my friend! I do not know how many times I have told you that. I have lost count. Yet, right again you are.

I don’t know about you, but I think my time is better spent looking at the actual data – the rawer the better, and drive my own conclusions. After a while, you’ll gain enough insight to know whom to read and whom to ignore.

For the record, I never miss a piece written by Mr. Pritchard and think he is one of the best financial writers I have ever read. He is usually earlier, more thorough, and better balanced than many, and many others

Now, if and when Bernake starts easing himself again, I wonder:

1. will it be as successful propping the market as the last time?

2. how long will it take between the actual data showing us things and the first batch of mass media reports on things?

S&P 500 - June 25, 2010

Ugly candle alight for the week!


Friday’s action did not do anything to beautify the price candle. Regardless, the chart is not broken. It looks very vulnerable, but still hanging there – at support.

This is a daily chart


In the last post, I said that I wanted the bulls to hold the lower red line above the blue dashed line. On Friday, index just dropped slightly below my long standing 1070 level, hit the lower red line and bounced – perfect day trade, some 10 S&P points for the taking!

A quick trade is nice and dandy but I can’t really say whether this was only a technical bounce or the beginning of something more substantial. After all, I am not the only person on this planet who can draw a bunch of lines on a chart – any high school kid with a ruler can do that. So, I stick with the scenario I outlined in the previous post with regards to daily frame. As a first step towards that, let’s see if bulls can move and stay above 1090.

Daily price posture is not positive. MAs have rolled or are rolling over. Index is above the support of 1040 in a rather wide range of 1040-1100. Unless one is a very good trader, this is a perfect setup for the market to chop one’s capital into pieces.

The rather negative bias of the daily frame makes it hard to wholeheartedly side with the bulls at this point. Bears seem to have more control over the technicals. Nothing definitive: bulls have to take and hold 1090. Bears have to break 1040.

Daily volume expanded. Daily breadth was good.

More comprehensive measures of breadth, however, are threatening a relapse


Bulls need to show up soon or this baby may roll over into the arms of emboldened bears.

McClellan group of oscillators are all in negative territory


This is a 60-min chart


Index seems to be trying to mount a bounce (a rally?) off short term oversold and positive divergences. As long as it is below 1090, any bounces are suspect and may better be left to traders.

------------------------------------------------

There was a good first thrust as price bounced from the 1040 area. But price ran into problem around 55 EMA and breadth slackened. This situation, in conjunction with daily down-sloping MAs, is not conducive to bullish aspirations. It can be repaired. It just needs money on the bid side of the tape.

OEW pivot support is at 1058 and 1041. Pivot resistance at 1090 and 1107.


Long term trend is up. Mid-term trend is down. Short term trend is down (a move above 1090 may change that)


Have a Nice Weekend!

S&P 500 - June 24, 2010

Another ugly day, another ugly candle!

Sometimes we get our timings right and either switch sides, or sidestep before a market turn. On June 22, S&P seemed like it had a hard time getting past 55 EMA. I posted intraday and said that I had set some levels: 1110, 1100, 1090

S&P has managed to break through all three.

Today it dropped into the neighborhood of 1070 that has been another reliable marker for quite a while.

This is a weekly chart


Remember that I said this week’s candle looked ugly? Now it looks even uglier. Week’s not over and things may change dramatically tomorrow, but, so far, that is one truly ugly candle.

Still, the weekly chart is not broken, not yet anyways. That being said, I do not like it when index has difficulty getting above MAs. Nor do I like it when a level like 1070 gets tested multiple times in a short span of time.

Remember I mentioned RSI turning half way and said that it was “not a typical sign of a raging bull”? That was a good clue that there was something fishy about upside momentum.

There is not much to say about the weekly frame that I have not already said many times. It is not broken, but it is being stretched to its limits.

This is a daily chart


I have a dashed purple line that, in conjunction with 55 EMA, gave me a heads up about the possibility of a turn on June 22. I have a solid purple line that the index cut below, rose to retest, and failed to take around 1090. Good line studies so far. Now, I have added two red parallel lines. I would require the bulls to hold the lower red line, preferably above the blue dashed line, and then get above both the solid purple and the upper red line, and then stay above the solid purple line. If they can’t do as required, they are as good as dead meat to me.

Daily volume expanded. Daily breadth was bad


Index is below the famed 200 MA – again. This does not look good folks, things are rolling over and unless there is some massive amount of money urgently hitting the tape on the bid side, things will roll over.

McClellan Oscillators are back in negative territory.



The Summation Index looks like it is rolling over.

This is a 60-min chart


There are some divergence on massively oversold RSI. If the bull is dead, oversold and positive divergences mean little. If the bull is just sick but alive, a first step will be to get back above 1090. After that, I have my requirements around daily line studies mentioned above.

OEW pivot support is at 1058 and 1041. Pivot resistance at 1090 and 1107.

Long term trend is up. Mid-term trend is down. Short term trend may have turned down

Have a Nice Evening!

S&P 500 - June 24, 2010 - Intraday

Now is the time for buyers to start showing us if they are still in the game.

1090 is the level to recapture for now.

Bulls failed at 55 Daily EMA, and daily MAs threaten to roll over.

60-min chart is very oversold, failure to mount a bounce from oversold is not characteristics of a bull.

The decline from the test of 55 daily EMA loos like a 5-wave decline so far with the 5th ongoing. If so, I shall look for a diverging intraday to perhaps signal an end to the 5th wave.

Regardless of intraday waves, these are the levels for bulls to take: 1090, 1100, 1110. And these are the levels for bears to break: 1070, 1040.

From a larger frame's point of view, there seems to be a battle in a rather large range of 1040-1110. caught in range, you may be chopped to pieces unless the position is from the top or the bottom of the range.

I have a 107-108 support for SPY.

Now, back to watching the World Cup :-)

S&P 500 - June 22, 2010

Boxy Market!

Is market going to frustrate bulls and bears alike by moving from one range to another?


It’s early to say.

1090 seems to be the area to watch for support now.

This is a weekly chart


The current candle does not look very pretty. The week is not over and it all may change by the end of the week but, so far, it seems like the index has a bit of difficulty getting above the weekly MAs.

Notice that RSI made a turn down halfway. I am not trying to read too much into it but slack momentum coming out of deeply oversold levels is not a typical sign of a raging bull. Again, not trying to read things – just an observation

We want the bulls to stay above MAs. If they can do that, we will then want them to get us a MACD cross and an overbought RSI.

This is a daily chart



Two very ugly candles! And right after three dojis of last week that led the market flat into expiration Friday. I am not that fanatic about Japanese candle plays but I think bulls should get it together soon or this baby may roll over into the arms of emboldened bears.

On June 19, I said

“I would have really liked it for the bulls to get through all the MAs and the dashed purple trend line while they had the shorts on the run”

Seems like that is exactly the area market ran into sellers. Now, we are back testing the purple solid actionary line and the 1090 area, not to mention 233 EMA.

Bulls should get above MAs and prevent them from rolling over. It is as simple as that.

As I mentioned intraday, these past two days, breadth has been weak. Today’s intraday weakness just exacerbated into close


Bulls wouldn not want a rolling A/D line. Bulls would not want a collapsing NYHL either.

McClellan Oscillator has dropped back to neutral. The Summation Index looks like it is rolling.


Bulls need urgent action to prevent a relapse in breadth.

I mentioned in the afternoon post that intraday breadth might get oversold enough to increase the odds of a bounce. Well, short term breadth did become oversold and we have the FED blah-blah-blah. Let’s see if bulls can use the opportunity to do something


This is a 60-min chart


The intraday count is open to a few scenarios. Let’s not get caught in the intricacies of intraday counts and instead pay attention to price behavior with respect to important levels and MAs.

60-min frame got oversold very fast. This, combined with short term oversold breadth, the vicinity of the 1090 area, and the FED matinee gives a good opportunity to the bulls to harry some shorts into a squeeze. A true bull buys the oversold.

I posted during the day mentioning 1110, 1100, 1090 as my levels. They are very obvious and everybody and their grandpa sees them, but that is no excuse for bulls to lose them. Today was a fast sell down the range. Bulls need to maintain these levels and need to get above the moving averages.

OEW pivot support is at 1090 and 1058. Pivot resistance at 1107 and 1136.

------------------------------------------------

There is news of a rift between Germans and Americans -- like Americans want to print until whenever and Germans saying not now and not ever.


This is a link to the Story

http://www.bloomberg.com/news/2010-06-21/u-s-urgently-needs-to-reduce-deficit-economy-minister-bruederle-says.html

Who knows? I certainly don’t know what politicians may or may not truly think. But, as an aside, do you know when it was that we had another famous disagreement over monetary policy between Americans and Germans? It was in 1987. I leave it to you to find out what was said, what was done and what happened.

Have a Nice Evening!

S&P 500 - June 22, 2010 - Intraday - 2

Earlier message seems to have been just in time as 1110 was lost shortly after.

Now, it is 1100 and 1090. These are, of course, areas and not exact levels, regardless, as long as S&P Yo-Yo's in 1090-1110, from the view of a daily frame, it may be just consolidating in a box.

Yesterday breadth was poor. Today, also started and continued with poor breadth.

If it carries like this, intraday breadth will get oversold enough to increase the odds of a bounce.


I always remind me that if a bull is a bull, he should should act like one and buy into oversold levels (the reverse goes for a bear)

Don't forget that we are still in a mid-term downtrend. Conditions have improved a lot but much more is needed as I have detailed in previous posts.

S&P 500 - June 22, 2010 - Intraday

S&P looks caught in between 55 EMA and 144 daily EMA.

After a calm OpEx Friday, we had a hectic Monday with an outside reversal bar. I don't much read into all this intraday reversal things and prefer to concentrate on price with respect to my levels and MAs.

I have been saying that bulls must hold 1100 and 1090.

I am going to split my levels into 3 now: 1110, 1100, 1090, and use those levels at guidance for possible stops. These are the intraday levels (areas) that bulls need to maintain. I can also look at it as a small box 1090-1110 with 110 as a median.

This week FED does its blah-blah-blah, so, I shall be prepared for some volatility.


Regardless, as I have mentioned, I would like the bulls to take 55 daily EMA and hold it, any sustained price action above 1110 increases the chance of that. Any action in the 1090-1110 box can be viewed as consolidation.

Now, back to watching the World Cup :-)

S&P 500 – June 19, 2010

An anti-climactic OpEx week!

After a lot of excitement and volatility in the market, the OpEx week was rather disappointing. Market rose earlier in the week and then went flat. On Friday, S&P did absolutely nothing, ensuring losses for all those who had positioned based a variety of statistical data like Max Pain for expiration day.

Perma bears sure talk a good game. If they could have only half matched their actions with their talks, the market would have collapsed a long time ago.

Pushing the market to its limits is stuff of corrections. The jury’s still out on whether bears are about to get their wishes this time or not, but why can’t they just break the market at support? Why can’t they keep the market below MAs forcing MAs to roll over for good?

I am sure they can always find some culprit like PPT or algo traders or whatever, but my question is: if they are right and yet not strong enough to overcome the PPT or some algo trading machine, then what are they good for?

Because if they are right about all the conspiracy stuff that they bandy when they fail at support, then why bother talk about credit destruction, economic weakness or wave 3 of 3 of 3 of whatever to the depths of hell? It would be better for them to try to understand the mechanics of PPT intervention and Algo trading machines.

I digress

This is a weekly chart


This is a frame that never broke. The area between 1070 and the lower blue line got tested 4 times in a row and held. Index is now nicely above flat 34 and 89 EMAs and trying to push through 13 EMA.

Bulls should not let index relapse below the moving averages. RSI is neutral, and the last couple of days of the week were flat. A good push up from the bulls early next week may resolve the situation from neutral into positive.

This is a daily chart


I would have really liked it for the bulls to get through all the MAs and the dashed purple trend line while they had the shorts on the run. The daily chart is a much damaged chart and some serious work is needed to correct things. As long as bulls can keep the index above the 233 MA (I have a purple actionary line that passes through that area), they will have adequate time and space to set up for their next move.

There has been a lot of improvement in breadth


Bullish Percent Index has already issued a buy. A/D line is rising. Stocks are getting back above MAs. This is all good stuff, but I shall not forget that, to me, price is the most important indicator and as long as bulls have not repaired the damages of the daily, the jury’s out on them. They have done alright, but need to do more.

This is a 60-min chart


There has been some loss of momentum the past few days. Index is at an area of short term resistance which also corresponds to the underside of 55 EMA from the daily chart. A blast through this resistance may force some more shorts to give up and send the index for a test of 1136-1140 area.

Meanwhile, 1100, and 1090 are must hold areas for the bulls.

Long term trend is up. Mid-term is down, it may have turned up (Pending Confirmation). Short term trend is up.

OEW pivot support is at 1107 and 1090. Pivot resistance at 1136 and 1146

Enjoy the Rest of Your Weekend!

S&P 500 – June 16, 2010

Out of The Box!

S&P finally managed to ease itself out of the 1040-1100 box that I have been writing about since even before the last test of 1040.

So, congratulation to all who saw the test, the bounce, and the rally! We did well!

Not much has changed for what I require of the bulls. I wanted them to take 1090 and 1100 and hold them. They did the taking. They should now do the holding.

For those who have positions from further below, this may mean stops below 1100 and below 1090, or maybe puts with strikes matching those levels. There are many different ways of reducing risk, choose one that suits your trading style and your personality.

To me, it’s a position in the green and my job is manage it.

This is a weekly chart



Things are looking good so far. Index is now pushing against 13 EMA. As we noted a few times during the bouts of selling, the weekly chart never broke. Bears pushed it to the limits but stopped right there. Whether this is going to be another bear failure will be known in time, but, so far, the weekly looks like a chart that got stretched, but defended at the seams.

Bulls need to get above all MAs and stay there.

You can clearly see that in my chart setup, as far as weekly frame is concerned, 1070 is the level to break for the bears. So far, it’s been level that has helped us make some really good calls on the market during corrections.

this is a Daily chart


Good work by the bulls!

Bulls have managed to get out of the box, above long term MA, and above short term MA. The best I like is that they took the purple actionary line. They should now stay above that line.

Today, index met the underside of 55 EMA and sold back. That is OK and routine action. What is important is for the bulls not to lose what they have captured.

Daily chart still needs a lot of work (money on the bid side of the tape) to correct the damages it has endured

Despite a flat-to-up market today, daily breadth was poor.



Market analysis is like detective work. We piece clues together, make a case and send it to the judge (The Market). We do not frame the case. We do not tamper with evidence. We do not tell the judge what it should do. Those are things Perma Creatures do ((The more of them, the better the chances of success for objective players -- May God Help them multiply!)). We just objectively make our case, and perhaps make a wager on the outcome. The verdict comes later from the Market.

Two such clues were McClellan Oscillator and the Summation Index


We correctly interpreted the changes and divergences in McClellan Oscillator, and rightly pointed out the flattening and, later on, rounding of the Summation Index.

McClellan looks overbought. But, as I pointed out, we would have wanted the bulls to push it into overbought levels while getting the price higher -- so far, so good for the bulls.

Now, we have to see how market behaves on any pullbacks/corrections.


There has been a lot of improvement in other measures of breadth as you can see from this favorite chart of mine



The above chart strongly indicates that the mid-term downtrend might be over. I do not have OEW confirmation for that, but that is what the evidence is suggesting at this time.

That having been speculated, what I think my charts indicate does not relieve me from my responsibility to manage my affairs and mitigate risk in case I am wrong

There are many different ways that the intraday waves can be counted.

This is one possible count



A few days ago, I said that we might have had enough waves for the correction to be over. We might have a Primay 2 wave in place. If so, price should impulse on cleanly and get overbought time and time again frustrating the hell out of those who try to pick top after top just because MACD has such and such value or some nonsense like that.

This is another way to count the beast



The latest low might have been just a pause in an ongoing larger correction like major A, or even the C of a double abc-x-abc of a larger triple correction, or part of what perma bears have dreamed all their natural lives: wave 3 of 3 of 3 of whatever to the depths of hell.

How do we know which is which for certain? There are no certainties where I am concerned – only probabilities!

So, I pay attention to how price behaves around important levels and with respect to my MAs and take it one analysis at a time, and, if need be, one adjustment at a time.

Long term trend is up. Mid-term is down, it may have turned up (Pending Confirmation). Short term trend is up.

OEW pivot support is at 1107 and 1090. Pivot resistance at 1136 and 1146

This is an OpEx week. All sorts of crazy stuff can happen.

Play it Safe, and Have a Nice Evening!

S&P 500 - June 14, 2010

Back to 1090!

Index pushed to the top of the 1040-1100 box I have been writing about, made a brief attempt at 1105 and dropped back to 1090, which is the top of an inside box of 1070-1090.

In the previous post, I said:

“Index is out of the inside box and close to the top of the outside box. It is close to the top of the big box. It is at the underside of 21 EMA. It is at the underside of 233 EMA. It is close to the underside of the purple actionary line.”

Seems like all that resistance was a bit too much for the bulls to handle today.

This is a daily chart


Not much changed really. Bulls had a go at it and it did not take.

Daily volume was below average. Daily breadth was OK.


This really was a day to two halves. An enthusiastic start that slowed and fizzled to a limp finish

McClellan Oscillator is entering overbought areas


I think it is important for the bulls to get above the 1100 level and to push the oscillator firmly into overbought areas. If they can’t, the move from 1040 may have been nothing other than a counter move from deeply oversold conditions.

This is a 60-min chart


The chart got overbought but bulls could not push through stiff resistance.

As I have mentioned before my parameters are very simple: 1090 and 1100 for the bulls to take and 1040 for the bears to break. Right now, bulls need to hold 1090 and launch another attack at 1100.

OEW pivot support is at 1058 and 1041. Pivot resistance at 1090 and 1107


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

We are in an OpEx week. Things may get really rough

Have a Good Day!

S&P 500 - June 12, 2010

A late first step for the bulls!

We had said that bulls had no say into matters below 1090 and that capturing 1090 would be a first step in the right direction. Friday, late in the afternoon, after a snore-fest of a day, the bid side ramped up and pushed the index above 1090.

Now, they have to hold it.

This is a weekly chart


Back above 1070 and coming against a series of resistance levels.

So far, our weekly setup has performed very well identifying boundaries of support and resistance. I have not changed any lines on the chart above for a very long time.

A well laid out weekly chart can be of great help in times when the whole world goes mad and media bombards us with rapidly changing, highly conflicting noise of so-called experts of all shapes.

We have had a bounce off support and coming against resistance.

Take a look again at the chart above. In July and February, bears took the index to the black dashed line and failed there, and got massacred by the bulls.

This time, they have brought the index down to the lower blue line but have not been able to break it there. Not yet, anyways. If they fail, they may find themselves in another massacre of a rally leading to another relentless run up. Too soon to talk about such things perhaps, but I like to keep that in mind.

This is a daily chart


As some of you know, I have a box from 1040 to 1100. Within that box, I have a smaller box from 1070 to 1090.

Index is out of the inside box and close to the top of the outside box. It is close to the top of the big box. It is at the underside of 21 EMA. It is at the underside of 233 EMA. It is close to the underside of the purple actionary line. And, we are entering an OpEx week. I am not trying to predict anything but I would not be surprised if we see some really interesting price gymnastics this coming week.

Unless one is a truly good trader, a box like we have now can really chop one’s capital into pieces.

My interests are mainly from a spectator’s point of view. I have long positions backed by options. I have some lottery ticket option plays for volatility and I have no intention, at this moment, to do anything else.

This is a breadth chart of S&P


We had mentioned that the Summation Index looked like it was flattening. Now it looks like it is rounding up. Faster McClellan gauges have now risen into positive territory. This is good action. Now that price is coming against some interesting resistance, it is for the bulls to either ram through resistance or do not allow a total collapse of breadth on any bout of selling from the bears.

Bulls are not out of the woods. For one thing they are coming against resistance. For another thing, as you can see from McClellan gauges, they have spent quite a bit of fire power but that has only got them to resistance. It is important that they can maintain a positive picture for breadth.

This is a 60-min chart


As usual, I remind you not to get caught in the minutiae of the small waves and instead pay attention to price behavior around important levels and MAs.

I have added a pinkish actionary line to the chart. As long as index stays above the area formed by this line and the shorter MAs, thing are OK for the bulls. That having been said, we want to see some free flowing impulsive moves and not chop-chop action. Any choppy action may indicate that what we are having is just a counter trend bounce.

You can clearly seeing how index is coming against resistance on all time frames.

Weekly chart is not broken, but daily and 60-min charts are. If the bulls are serious, they should maintain weekly posture and improve lower frames. Taking 1090 was OK. Now, they need to keep it and they need to take 1100. After that, they will have to move above 233 EMA and 200 MA and stay above them.

The onus is on the bulls to prove themselves. This is not a time to be complacent. Not with TED looking like this


And not with rates dropping like this


OEW pivot support at 1090 and 1058. Pivot support at 1107 and 1136.

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

Enjoy the Rest of Your Weekend!

GLD - June 11, 2010

On Target and on Time!

So far, that is :-)

In prior posts of May 9 and May 18, I set some theoretical price and time targets for GLD. Those target have been met.

This is a chart I have been using often


We have had a nominal high on the June timing extension that we discussed on May 9. We have our first timing cluster of 120 or so. We are just under an actionary line that goes through that timing and price projection.

Gold has been a rock solid beneficiary of the recent mayhem of a world drowning in paper assets (whatever that oxymoron might mean). There are all sorts of opinionated stories why gold should go to the moon and beyond. That is nice. But since the story tellers do not give me their money to play with, maybe I should assess the situation for myself.

This is a weekly chart of GLD


A beautiful chart but there is some worrisome loss of momentum and negative divergence now. Also, price has a rather wide distance from its longer MAs. That is not to say the current run is over (I don’t know that), but just to say that GLD can easily correct 10-15% without damaging its weekly chart.

This is a daily chart


There are negative divergences and price is in a technically congested zone. There is investment based on belief (or illusion) and there is trading based on price action.

As for trading, I need to ask myself what reward might be for the risk I take

As long as GLD is below the actionary lines that form around 120 area, the reward may not be much as those line are technically resistance. First level of risk is the 115 area.

If price forces above the congested zone, then I can raise my risk level but until then risk is first around 115

Do I think that this is a situation where I want to be openly exposed as a trader (as opposed to a believing or deluded investor)? Not really. So, I am thinking that it may not be bad idea to look into ways of mitigating my risk.

This is a 60-min chart


It looks OK, but I cannot be sure if I have seen the entirety of the wave 4 correction or not. As long as price and MA alignment are positive, I can hold, but I think I need to be watching this very cautiously.

Over all, things are OK for now, but I think I see enough red flags to start thinking about risk mitigating measures