Index holds support!
This is a weekly chart
It was a hectic week with lots of intraday ups and downs. To a weekly player, however, index just ended flat and at support. So far, it seems like we have had a week of consolidation (indecision?) above immediate support of MAs and actionary lines.
This is a daily chart
A few days ago, I wrote:
“S&P has closed above the much ballyhooed 200 SMA. Many watch that moving average, many more discuss it, so I guess they should think that it is a bull market and rush to buy stocks with all they've got and all they can borrow”
Anybody who jumped on the index because the close above 200 SMA had to sit through a week of beatings.
I think it is better to pay attention to the whole technical package of price posture and breadth and momentum than just jumping the tape on only an arbitrary cross of an MA
All the moving averages on the daily chart are either flat or rising. They are not positively aligned but they should provide support if market decides to keep chopping and consolidating in the coming week.
I noted the hit on the center line of the blue channel and that was to be the high.
In addition to tests of 55 EMA and 21 EMA, notice that index bounced from the purple line on Friday.
The whole week may be viewed as a week of consolidation and testing support.
There are some improvements that I would like to see as soon as possible: I like RSI to turn around next week and make a new high in the overbought region
I would also like some expanding volume on up days.
1090 area provided support last week and I would be very disappointed with bulls if they could not hold it in the coming week.
Breadth, as measured by McClellan group of oscillators, worked off it overbought conditions and is back near neutral.
There has been improvement and short term buy signals from the overall breadth picture
There is more to do. For starters, I would like the percentage of stocks above 200 MA to expand.
This is a 60-min chart
During the week, I made intraday posts and noted that I thought the decline’s wave structure looked corrective. It appears, at this point, that it was a correct observation. Still, market decided to do more correction on Friday. Sometimes, market tricks us with a setting and changes its course to do something else, and then changes again to tell us that we might have been right all along. One needs to be flexible and adapt to the situation as it develops within the time frame of one’s choice. I see no point in arguing with the market.
So, the decline of last week looked corrective. But there is no guarantee that is over. The lows of Friday occurred around a significant support area across multiple time frames and bulls must be able to hold it.
I am still keeping with the bullish count (no reason to ditch it yet) but I am concerned about the inability of bulls to get seriously overbought and staying overbought. I would like them to do that this week.
OEW pivot support at 1090 and 1061. Pivot resistance at 1107 and 1136
Long term trend is up. Mid-term trend is down. Short term trend may have turned up.
Do you think that equities would collapse in an environment where market perceives corporation’s balance sheets as being healthy and capable of maintaining ongoing obligations?
Do you think that market would not punish corporate bonds if it perceived corporation as being credit risks?
Do you think these are charts of a market perceiving corporate obligations froth with heightened levels of risk?
Do you think this is a chart of market’s urgent concern about immediate liquidity risks?
Just food for thought
On May 22, I made a post and wrote:
“There are all sorts of stories from disintegration of Europe and dismantling of Euro to this piece that says US will be unrecognizable by the end of the year”
In that post, linked to a piece about some Guru (Sullivan) joining some other Guru (Russell) going cash and calling the end of the world or some grandstanding of that ilk
This is a link to a piece of May 18, 2010 that talks about Russell predicting HARD RAIN and indistinguishable country by the end of the year
In there, Russell told the world to sell everything, his advice was to tell your friends to sell everything
This is quote from the article saying what Russell said
OK, the guy has a high opinion of himself and the world should listen and ask no questions and demand no reasons (I am happy he is not my Prime Minister). All he says is that he tells you because market told him. Maybe he gets into details in his letter which is available for some fee that I am not willing to pay.
Flash forward a couple of months: Mr. Russell is now bullish according to this piece of July 26, 2010
What happened to HARD RAIN? Someone actually asks him about the flip and the quick flop
Now, he’s good enough to eat crow as soon as there is crow to eat, and that’s maybe why he’s lasted so long.
But can you imagine some poor chap selling his livelihood on his flip only to be left slack jawed to his flop?
Now, what if he gets it wrong again? What if we actually get a HARD RAIN? Better to ask if he knows what conditions would make him flip again, and if cares to share them ahead of time.
The issue, you see, is that many of these Gurus, never tell us what would make their forecast wrong when they make the forecast. It is like not having an exit strategy. That may be fine for someone who sells letters and advisory (or economic forecast), but is it fine for someone who deploys capital based on such advisory?
We all need to be able to analyze the basic tenets of the market on our own. We all need to make the analysis and the ensuing decisions our own. Only then we can objectively view the opinions of others and take them for what they really are: opinions.
If there is a mistake to be made about a market move, I’d rather that mistake to be mine and no one else’s
Have a Nice Weekend!
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