S&P 500 - October 29, 2010

All awaiting the Fed-Release! Or is that the Fed-Ease?

With S&P chopping the days away and closing in a series of dojis, one can’t help but think that everybody’s just standing pat waiting for the much talked-about announcement that everybody and their dog expects from the Fed this coming week.

The question seems not to be if all structural problems are solved or not. Nor does it seems to be if economy is recovering or not. It seems to revolve around the amount of bond purchases and the schedule of such purchases by the Fed.

So, with all pretenses of, and desires for a recovering economy forgotten for now, the game is charged on the size of the bags of money that may be injected into the system. If you think that this is a healthy environment and will end in a benign prosperous way for all, I have the tower of Pisa to sell to you.

(Kidding, of course!)

But what matters to us is the short to intermediate course of events and the presence and sustainability of an intermediate trend.

So, we join the rest of the crowd and await the wisdom of the currency makers ;-)

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“In the middle of the journey of our life, I came to myself within a dark wood where the straight way was lost.”

– From The Divine Comedy by Dante Alighieri

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To try and perhaps avoid being lost and perma-clueless – chasing top after top (or bottom after bottom) against a prevailing trend, I have set myself on two primary tools. A study of money at macro level and a utilization of technical analysis

On the macro level, I can give pages and pages of text and graph, but why bother when I can give you two quotes

“First, the FOMC will strongly resist deviations from price stability in the downward direction.”

– Ben Bernanke, August 27, 2010

“We are going to continue to try to strengthen the recovery under way so we can dig out of this as quickly as we can”

– Tim Geithner, Oct 23, 2010

It is up to the individual player to take these esteemed officials at their words or not. It is also up to the individual player to believe if these esteemed characters can succeed or not.

It is my thinking that at some point all efforts to inflate the debt away with more debt will fail. But I have no idea how near or how far that point is. I can stay to the basics and say that for as long debt is issued in a currency that can be created by the debtor, and accepted by the creditor (or the vendor), the game is on.

That is macro-level fundamentals for you in a nutshell, let’s get down to technicals

This is a weekly chart of S&P


S&P looks overbought. That, in itself does not mean a collapse or even a correction. Markets can stay overbought for longer than we have patience or capital to fight them. Index is in an 1175-1200 band that we have had on the weekly chart for a long time. The resolution of this band may set the wheels in motion for the next trending move. That said, as long as index stays above 2007-2010 trend line, it is either advancing or consolidating.

Other indexes like the Dow and NDX, and some other markets like TSX have already matched or exceeded their April peak. Expectation is for S&P to finally join that club. A failure by S&P over the coming weeks may be a serious inter-market divergence warning.

This is a daily


I can count 9 days in a row with S&P closing around the same area. Sure it has chopped a lot of traders into pieces, but, for a longer term player, not much has changes as far as price is concerned. Mid-line of the blue channel has held every spike and 13 EMA has held every dip – so far.

Momentum seems to be rolling over. It would be good if momentum could cool off without price giving much to bears. Regardless, as long as index stays above 2007-2010 downtrend line, it’s either advancing or consolidating.

Daily volume shrank. Daily breadth was positive


McClellan set of oscillators keep pussy-footing around the neutral level




We have a contraction going on. The break out of this may be sharp and scary to those trapped on the opposite side.

If I were a bull with conviction, I would hope for a break to the downside to drag the bears in and then reverse and ride the shorts up.

If I were a bear with conviction, I would hope for a break to upside to juice the bulls and then reverse and crush the longs on the way down.

I am neither, and as such, I stay hedged and happy :-)

Broader measures of breadth are still OK


I just need to see if the short term divergences in breadth can be resolved without damaging the broader picture.

This is a 60-min chart


The choppy price action has made it hard to choose a short term count over the others. The above is one count out of many possible.

This is another


This is another


I am not trying to confuse you, or me, by presenting multiple count alternates. I am just trying to show why I think relying solely on waves can, at times, be a dangerous proposition. To me if the picture is murky, I should stay open and adaptive. I should also take larger frames into consideration, and that's why I religiously go through weekly and daily charts.

I have been having a lot of success with raising my levels. In many occasions, market came close, but not close enough to take my top level. That meant profit was being built in as levels were raised. This chop, took my top level of 1175 and any portion that might have marked for it. For the rest, hedged and happy -- for now ;-)

A move below 1170-1175 may indicate a possible change in short term trend.

A bit wider, the 1168 and 1187 pivot seem to have been containing the recent chop. It may take a move beyond any of these pivots to give us some sort of a trending wave.

OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.

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

Have a Nice Weekend!

S&P 500 - October 28, 2010

Against a backdrop of lagging momentum and breadth, S&P is chopping up and down a 20-25-point range

This is a weekly chart of S&P


Inside the 1175-1200 band. It’s overbought. It’s a bit of distance from its MAs, but as long as it stays in range, it can move sideways cool off a bit

This is a daily


13 EMA provided support again today. it’s 6 days that index has been closing around the same spot. It looks like S&P is making a small rounding pattern, but looks can be deceiving and we need a good move below immediate support to perhaps get a sustained move on the downside.

McClellan Oscillator continues its downtrend


Daily breadth was neutral and somewhat mixed for a second day in row. Declining volume slightly trumped advancing volume while advancing price was better that declining price.


Keep in mind that index can go sideways and work off its momentum and breadth divergences.

This is a weekly chart of NDX


Overbought and at the upper channel line.

This is a daily


Riding the same short term trend line higher for days.

Notice that volume has been expanding these past few days. Meanwhile, McClellan Volume Oscillator does not indicate any expansion of volume on the upside – not yet, anyways


This is a 60-min chart of S&P


The chop-chop can be counted in different ways. This is just one count out of many.

A move below 1170 may indicate a change in short term trend. As long as index stays above 1180, it has a chance at maintaining a positive posture.

A bit wider, the 1168 and 1187 pivot seem to have been containing the recent chop. It may take a move beyond any of these pivots to give us some sort of a trending wave.

OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.

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

Have a Nice Day!

S&P 500 - October 28, 2010 - Intraday 2

Hope you are not adversely affected by the chop-chop market

We had another day of an early weakness followed by a strengthening afternoon.

S&P is bouncing between 1168 and 1187 pivot and, as discussed, a move beyond one of the two may give us some trending market fore a while.

Intraday breadth was neutral to negative. We'll see how it ended when all numbers are out

Despite all the chop-chop-crap, nothing's really changed for those who hold position from lower levels and with longer holding time

NDX - October 28, 2010 - Intraday

Yet another early drop to trend line followed by another recovery.

The NDX chart is a work of beauty



Momentum divergences are there, and I will see after the close if there has been any expansion in McClellan. I think not, but what matters is that there are bids that come in and lift prices. For NDX, bids have been coming in on a touch of the trend line -- looks kind of automated, but so what?

S&P 500 - October 27, 2010

Early morning sell off and late afternoon recovery

We had another day with breadth and momentum weakness. But bounces from the support brought S&P close to flat and sent NDX to green finish.

I posted a daily chart of NDX today and pointed to index being at support of its steep uptrend line. Shortly after index started its rise towards a green finish


Price action on NDX since Sep low has been a work of beauty. It rose a sharp uptrend to late Sep, corrected and started rising with practically the same angle of ascent.

We have lagging momentum. Now we have another similarity with April’s uptrend. Back then RSI made three distinct peaks while MACD flat lined before a correction. I am not predicting anything, just stating the obvious from the chart.

The steep blue uptrend has been support. After that we have the 13 EMA, and the breakout point around April’s high. To the upside, there is resistance around 2150.

This is a daily S&P


Compared to NDX, S&P has been weak. Today it dropped midway down it lower half of the blue channel. MACD looks like it has rolled over. Latest price peak had a rather limp RSI. Not particularly strong, but still hanging in there. Support seems to be 13 EMA. Below that, as long as it stays above the 2007-2010 downtrend line, it’s either advancing or consolidating.

Daily breadth was poor


McClellan dipped further


NDX’s McClellan dipped also


So, while there is no denying that there is money that comes to bid the tape from short term support, a small player like me has to ask if the risk of a new position with a backdrop of lagging breadth and momentum is justified or not.

This is a 60-min chart


The recent choppy price action has made it hard for me to count the smaller waves. There are many different ways I can think of counting. This is another variation


The 1175-1180 level gave way in the morning. I said a move above 1182 might indicate a change in short term trend, and index managed to move above 1182 – very choppy action. It all maybe part of big sideways correction or a short term topping pattern.

So, once again, a move below 1170 may indicate a change in short term trend. As long as index says above 1182, it has a chance at establishing a positive posture.

A bit wider, the 1168 and 1187 pivot seem to have been containing the recent chop. It may take a move beyond any of these pivots to give us some sort of a trending wave.

OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.

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

Have a Nice Evening!

S&P 500 - October 27, 2010 - Intraday 3

You know, I hope S&P makes another high soon and not roll into a lengthy correction.

No, it's not because I am long and exposed and am praying for an out. It's because the price structure this past few days has been very choppy and that may make it very hard to decide on smaller waves, and if so, it may make it hard to speculate the end of the correction.

Intraday breadth has been poor all day.

As things stand now, S&P needs a move above 1182 to indicate a potential short term trend change.

S&P 500 - October 27, 2010 - Intraday 2

NDX is at the uptrend line that has so far provided bounces on pullbacks. Let's see how it does

As for levels, it takes a move below 2090 to perhaps indicate a change of short term trend for NDX.

S&P 500 - October 27, 2010 - Intraday

Market seems to be under early pressure.

I have a 1175-1180 area for S&P. Index is in that area and loos kind of neutral to negative.

It would take a move above 1184 to give the index a short term positive posture.


It's become very choppy lately. Choppy make it hard to use tight levels as they are better suited for trending markets.

S&P 500, NDX - October 26, 2010

Market gaps down at open and then recovers.

On a weekly basis, index is in the 1175-1200 band that we talked about days ago


Index has had one attempt at 1200. As long as it stays in range, it can gather energy and have another go at it. I would like corrections to not violate the 2007-2010 downtrend line.

Weekly RSI is quite overbought and resembles the April time frame. There are differences between now and April. April was a peak after many months of a relentless run, this is just a few month after a vicious correction. April was the month after QE ended and, as we mentioned numerous times, money seemed not to be available to bid things up. Now, is a time of bond purchases by the Fed and never-ending talks of QE2. April, we still would hear a large number of pundits talk about the economy and whether they thought it was recovering or not. Now, most, if not all, seem to have given up on economy and taken up the analysis of Fed money and whether or not Fed can inject a large enough stimulus to maintain prices

There are some similarities like lagging short term momentum and breadth. Lagging indicators are warning signs. Price may ignore them forever. It is up to the individual player to decide whether it is justified to take a risk when market is overbought and some indicators lag.

This is a daily


Index came close to 13 EMA before moving back up to end the day flat. The mid-line of the blue channel and 13 EMA have been guiding this run higher in a narrow channel that must have been devastating to those bears who actually short using their own money

As long as index stays above 2007-2010 downtrend line, it’s either advancing or consolidating.

Daily volume shrank. Daily breadth was mixed

Down volume exceeded up volume


But advancers outpaced decliners


Notice that NYSE McClellan dipped.

Same story with S&P’s McClellan


Breadth oscillators have been having a tough time expanding.

This is something that is very similar to April: price rose and rose and McClellans lagged and lagged.

There is a slight pullback in the %’ge of stocks above 50 MA


Broader picture of breadth is still good. Without a correction, we can’t really say how firm and supportive of the market's longer term breath really is

S&P has been lagging the price performance of NDX

This is a weekly chart of NDX


Remember I said index could just walk up the upper channel line? Well, so far, it’s been doing that.

Daily price just keeps bouncing off a somewhat steep uptrend line on every pullback


NDX has risen so sharp and so far that even the 2007-2010 downtrend line does not seem like reasonable risk. The sharp uptrend line and the 13 EMA seem like short term support. After that, not much else until the 2060 area of April high. To the upside, there is some technical resistance in the 2150 area as can be seen from the weekly chart above.

NDX has negatively diverging momentum. It also has lagging McClellan oscillators

This is a 60-min chart of S&P


This is becoming a rather interesting wave structure. It keeps throwing curve balls at me :-D

There’s been quite a bit of chop going on these past days. I would pay more attention to price levels than minutiae of wave counts. As long as index stays above 1175-1180, it has a positive posture. A move below 1175 may indicate a change in short term trend.

OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.

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

Have a Nice Evening!

S&P 500 - October 26, 2010 - Intraday 2

Market has recovered from its early malaise.

Short term, as long as S&P stays above 1175-1180, it maintains a positive posture.

Early on, index moved inside that range but moved out and above.

NDX - October 26, 2010 - Intraday

Exciting open, was it not?

Wonder how many shorts got crushed in the bounce that happened after the open.

Wonder how many shorted because yesterday was a shooting star reversal candle stick. Now, you know why I say I don't take decisions solely based on some candle shape

Look how NDX bounced again from its short term uptrend line.

Also notice divergences


With shorts being crushed and Fed at the ready to buy bonds, let's see what market does and if delivers another high or not.

Have a Nice Day!

S&P 500 - October 26, 2010 - BMO

A quick glance at some issues, shows a weakening of some currencies and gold against US Dollar

Canadian Dollar: see how the headline-grabbing parity has so far been the top of the move of this petro (and gold and other stuff) currency


Euro: well they have started filling the headlines with new rounds of worries and stuff


Gold: I view this as a correction


and, of course, S&P futures are weak


1175-1180 cash is my first level. 1168 pivot is after that. This has been a choppy market lately and if it stays like that, tight levels may become traps. A player can hedge or stay out, or give a wider berth to swings

And since everybody and their dog is talking nothing but POMO these days, there is a FED open market operation (bond purchase) on tab for today. What market does as reaction to an action by Fed, or whoever, may be more important than the actual whatever that is done by the whoever.

Have a Nice Morning!

S&P 500 - October 25, 2010

Market opens strong, goes soft into close, and after close!

After spiking the day at the open and making a new high, S&P gradually retreated into the close. Futures went further down after close.

This is a 20-min chart of S&P futures with 24-hr data


This is a 60-min chart of the index


The selling may be a test of the range breakout and the gap up at the open. It may be the beginning of something more serious. To me, as long as index stays above 1175-1180, it has a positive posture. A move below 1175 can indicate a potential short term trend change. A loss of 1168 (+/-7) pivot may, I repeat, MAY cement the high of today as an important swing pivot (I am tentatively looking for an intermediate (purple) wave 3).

I need to remember that index is operating on a series of unfilled gaps and a set of lagging momentum and breadth oscillators. I also need to remember that I do not hear much about a recovering economy and that all the talks is about Fed purchasing treasury notes and providing liquidity.

This is a daily


I posted this chart intraday and mentioned that the high of the day coincided with a hit on mid-line of the blue channel.

Did we have a shooting start candle today? I am not really a candlestick practitioner, I take no decision based on them – just mentioning it

We have negative momentum divergences. 13 EMA seems to have been the immediate support.

As long as index stays above 2007-2009 downtrend line, it’s either advancing or consolidating.

McClellan rose, but we continue to have lagging breadth oscillators


USD recovered from early weakness


So, short term, 1175-1180, and the range of the 60-min chart is the focus. A bit longer, 2007-2010 downtrend line.

OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.

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

Have a Nice Evening!

S&P 500 - October 25 - 2010 - Intraday

The strength of the future market created the opening gap I mentioned.

Index has made a new high and that is good.

The high of the day, so far, was hit at the mid-line of the blue channel. This mid-line has been a hell of line for me :-)) No fancy indicator, no muli-thousand subscription, no forever-curve-fit-system -- JUST A SIMPL LINE!



The 13 EMA remains the immediate support -- really folks, can TA get simpler than this?

shorter term, the new high open the door to a number of wave count



In addition to waves, I pay attention to price levels and as long as S&P stays above 1175-1180, it maintains a positive posture short term.

S&P 500 - October 25 - 2010 - BMO

Future markets have been at it over night.

The G-20 thing came and went. One quote that I found interesting was this by the US Secretary of Treasury:

“We are going to continue to try to strengthen the recovery under way so we can dig out of this as quickly as we can”

I saw it here

http://www.bloomberg.com/news/2010-10-23/germany-says-u-s-federal-reserve-heading-wrong-way-with-monetary-easing.html

Let’s add that to what Mr. Bernanke said:

“First, the FOMC will strongly resist deviations from price stability in the downward direction.”

Do you also get a sense of harmony of intent? Or am I mistaken?

Anyhow, it’s still a few hours to the open of the cash market, but, if things stay at they are, we will have another gap up at the open.


That, if it were to happen, would get us a new high on S&P.

As of close of Friday, it would take a move below 1175 to perhaps indicate a change in short term trend. A gap up at the open and strength into the day could lift that level higher.

Dollar does not seem to have been getting a lot of love overnight


Gold has been doing well overnight


Again, it’s still a couple of hours to the open and a lot can happen to reverse the course, But were market to open and continue firm on the back of ten future market, US market would establish a new high for this uptrend and a unfilled 6th gap up


That would make a breakout from a range that I presented over the weekend, a succesful breakout of that range could theoretically target 1200 and 1220 on the cash S&P as first and second targets

Have a Nice Morning!