Update November 15th, 2010

On the evening news tonight they’ll say that the Dow closed up 9pts and everyone will be happy, but anyone who was watching the market today has to be concerned that the Dow closed almost 80pts off its early morning high.

[Adding this much later that same night: Cumulative $NAAD rose today even as the $COMPQ fell by 4pts in a sign of positive divergence. There was also positive divergence in $NYHGH and $NAHGH.  If you take a look at IYR using a 5,3,3 Sto and BB’s, you’ll notice that IYR is getting very oversold and is about to tag the lower BB. Just sayin’.]

Retail numbers were better than expected and yet RTH got hammered thanks in part to AMZN. Here’s the problem: Ceridian came out with their latest report last week which showed another drop in diesel fuel consumption by over-the-road truckers and this, of course, means that product is not headed for the shelves of a mall near you because retailers are worried about Xmas season sales. Ceridian also indicated that Industrial Production will be down again and this probably means that IP won’t meet the estimate, which is .30%. Last month IP was ignored by the market. Will it be ignored tomorrow if it comes in under estimates? IP will be released at 9:15 AM.

$INDU rose up in the bear flag pattern that I showed on Friday, but then failed. It pulled way back and closed below the 20MA, which in my mind negates the flag pattern completely and sets up the down trending channel that I have drawn on this chart.
Click here to open chart in new window.

I did something almost every day last week to see if I could get one of you, besides Chris,  to take the time to make a comment about it.  Not too late.

I may add some stuff later if I see anything important. Otherwise what I said over the weekend about potentially having two more days of selling remains valid. However, I am concerned about what happened to GOOG today because obviously this rally is going nowhere without big tech.

Click here for updated $SPX daily chart. 1180 is going to be an important support level and the flag pattern is aimed right at it now while the 20MA is rolling over.

Weekend Update, January 30th, 2010

Here are some of the things that warned that the markets were putting in a top during and before the week of January 11th.

The SG had stalled out from the first of the year. You can see on the spreadsheet or any of the charts I’ve put up that daily increases and decreases were in the range of 2-3pts or so. The momentum indicator began dropping on 12/31/2009 and continues to drop to this day. On Friday, January 15th, the SG broke the uptrend line.

All throughout December and early January, Cobra kept putting up charts showing how Bullishness had reached multi-year highs. During this time, Bearishness was at multi-year lows.

Tom Drake’s 2CS began dropping into the 70’s and then into the 60’s during early January. On January 11th, it hit 60.

January 11th is also significant because on that date the $VIX gapped down and outside its lower Bollinger Band. This is an extremely rare event. Looking at a daily chart going back 3 years, it appears that gaps up above the BB’s, though rare, are more common and that this gap below the BB’s is a first going back 3 years.

January 11th is also significant because on that day the Intra-day P/C ratio dropped to .53, a sign of major complacency. But it gets better. On Monday, January 19th, when the $SPX hit its current rally high of 1150.45, the Intra-day P/C ratio dropped to .47: complacency in spades.

Also during the week of January 11th through the 15th, Lowry’s Selling Pressure Index hit an all time low.

Those COT #’s that I went on and on about, especially during December, proved to be a non-factor in this top/pullback. Those big players appear to have gamed each other forcing the shorts to cover. What’s interesting now is that those same big commercial players are building up their long side exposure. Are these big players ahead of the curve this time?

So now the markets have topped. Is this pull back going to be like so many of the others since March 09′ in that it will provide a good buying opportunity? Is it different this time? Are the perma-bears finally going to get there due? I don’t know. There are things happening now that haven’t happened in other pull backs, even the June/July pull back.

Volume is one of the factors that is troubling. During the June/July pull back, the markets came down on lighter and lighter volume for three weeks and then the pull back culminated with a volume, capitulation event during the first week of July. Even though this was a high volume down week, the volume was still lower compared to the highest volume of the pull back. In this current pull back, volume is increasing and this suggests that there could be more downside ahead.

Good news, which has been so important during this long rally, isn’t having a positive impact anymore. AAPL’s earnings were pretty strong, and they hammered the stock. MSFT reports stellar earnings, and kaboom. AMZN reports great earnings and they pump the stock to the moon in the early going and then….wait for it… kaboom. GDP comes in ‘much better than expected, and kaboom. During this rally off the March lows, the market has ignored all the bad news, and now it is ignoring good news. What’s with that?

The Summation Index put in a high back in mid-September and has not confirmed this current rally leg. It is now barreling toward the critical 500 area at high speed.

To illustrate one other thing that is different this time, here are a couple of charts, one of XLF and one of everybody’s favorite financial stock, GS.

Since I’ve been going on about XLF lately, I wanted to put up this daily chart with the 52,0.618 BB’s and the 250EMA. Why have I been focusing on the 250EMA lately? Because XLF and the general market indexes broke below the 250EMA back in October of 2007. It’s taken a long time to get back above the 250 and it appears that XLF may break through it soon. But maybe it won’t. XLF, IYF, and IYG have been bouncing off the 250 since August of 09’ and they certainly could continue to do so. In fact on the chart below you could easily argue that XLF is just putting in a base above the 250 and that, like so many other times in the past, XLF is getting ready for another move up. This is a good argument as long as the 250 holds. But if the 250 doesn’t hold, then that is a whole new animal, and that animal may be waiting in the wings.

Here’s the animal. You can see on the chart that the Aroon Down red line on this weekly chart began to drop in November of 2008 at the time that GS put in its bottom. Even so, it still took almost 6 months for the Aroon Up green line to cross above the Aroon Down line. And now there is a bearish cross of the Aroon lines. This is about as bearish as it gets and this will put pressure on all the financial ETF’s, including XLF. Unless GS and the others listed on the chart begin to reverse soon, then XLF will break the 250EMA opening a trap door. The general markets need the financials and if the financials finally do give up the ghost, then that will just put more pressure on the current pull back.

Your assignment in the week ahead, should you choose to accept it, is to watch GS and the others mentioned on this chart and to pay close attention to XLF, IYF, and IYG and their relation to the 250EMA in the daily time frame. This also includes $RIFIN but because this is a new index its relation to the 250EMA is skewed.

Charts courtesy of StockCharts.com

Lowry’s data is updated.

Update October 22nd, 2009

4:20pm

I need a sign of strength. You would think it would happen easily considering the rally today, but none of the rallies off the 10/2 bottom ever produced a sign of strength. It took the entire day for the $TRAN to be able to tack on 1.75pts. For the first time in I don’t know how long AAPL did not participate in the rally.

But none of this important as long as the trend is up. As we’ve seen in the past, the market can go up even while it’s weak.

They sure seem to love AMZN, AXP, & COF after the bell.

I did get out of DRV early in the session but I did give back quite a bit of profit. If I get a sign of strength, then I’ll look to get into a long position in the AH.
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5:45pm

Nothing has changed. Each of the four indicators had down ticks today. The down ticks in the most sensitive A Indicators for the $SPX and the $COMPQ were not as powerful today as they were yesterday, but the SG still produced down ticks in all indicators.

The D Indicator for the $COMPQ, which was still in bullish territory yesterday, dropped out of bullish territory today.

Based on the SG’s, this rally must be eyed cautiously, but it remains a rally, never the less. I think it’s going to be very simple. If the $SPX can get above and close above yesterday’s high of 1101.36 before it drops below or closes below today’s low of 1074.31, then the $SPX just might be setting up for another rally leg. On the other hand, should the $SPX go the other way, then this pull back may continue.

From the look of the AH markets, it appears in all likelihood that the rally is about to start another leg up.

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Current SG status for the $SPX:

Weakening, confirmed, Phase IV sell signal.
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Current SG status for the $COMPQ:

Weakening, confirmed, Phase IV sell signal.
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