Late Night Update, April 12th, 2011

As I mentioned on Sunday, $TRAN, $CYC, and IYR were oversold and could bounce based on the RSI 14 in the 60min time frame. Only $TRAN has bounced, up 16pts today and 11pts for the week. If you look at the 60min chart, you will notice that $TRAN closed slightly above the 20MA which, according to the 60 minute trading strategy, would be a ‘buy’ signal. However, that 20MA is still pointing down so this could easily turn into a false signal.

Chart of $BPSPX showing that the 14,3,3 stochastic started dropping today. This set up has worked well in the past as a warning to would-be dip buyers to hold off adding to existing long positions or entering new long positions. The red line in February shows the kind of misery you would have been spared had you just sat tight until the dust settled.

Chart courtesy of StockCharts.com

Zweig Breadth Thrust dropped to 43 today when <40 is the better oversold signal. ZBT could continue to drop despite a bounce tomorrow. I’d feel better waiting for ZBT to drop below 40 before adding to any existing longs.

4wk New High/Low Ratio dropped to 32.51 today when 20 or less is starting to show extreme oversold so there is still quite a bit of room to go on this.

Something I forgot to mention over the weekend is the absence of a 90% up day to mark the bottom of this most recent rally leg. This rally leg did not start with a climax signal from either $NYUPV  or $NYUD:$NYUPV and it climbed higher on light volume without a 90% up day. All the work I’ve done studying the market since the 09′ lows tells me that this is not right and that this little rally leg lacks credibility and could be little more than a big fat distribution pump. This rally leg almost makes you believe that the market is ignoring high oil prices. Wrong!! It is not. It seems to me that the climax sell signal that is missing from this particular rally leg may come in the days ahead at some time and price point yet to be determined.

GL

Weekend Update April 10th, 2011

$NDX/$RITEC:

With AAPL being reduced to 12% of the $NDX, it won’t be as easy as it used to be to manipulate the price of the Q’s. $NDX may start to move more like $RITEC, which has been underperforming.

Zweig Breadth Thrust signaled a consolidation period ahead and so far that’s all it’s been with most major indexes essentially flat on the week. Exceptions would have to be $CYC, down 1.68%, and $TRAN, down 2.65%. So, is that it? Is the consolidation over? I have absolutely no idea. If oil were to suddenly drop then maybe.

Bulls vs Bears

Bullish:

P/C Ratio at .87 is slightly bullish for Monday.

$NYHGH slight positive divergence last Friday.

$BPSPX +.20 last Friday. At 82.60 this is back in the mid-80 range that, prior to this latest move, has been a cautionary level meaning that one has to be careful adding to longs as this is showing overboughtness.  Back in December, when $BPSPX first entered this mid-80 zone, $SPX was trading at around 1250.

RSI 14 on 60min charts of $TRAN, $CYC, and IYR dipped below 30 in Friday’s session with each rising above the 30 line by late in the session.

Bearish:

Zweig Breadt Thrust  at 51.58 is dropping quickly.

$SPXA50R at 70.20 has lost the important 75 level.

Sell signals in the 60min time frame for $TRAN, $CYC, IWM,  & IYR with judgement call sell signals for $SPX and other key sectors. By that I mean that these have closed below the 20MA in the 60min time frame and are either just above or just below the most recent trend line. They could go either way.

Sell signals using the 3EMA/10MA method for $TRAN, IYR, $CYC and others. Be careful using this set up because it will whip saw you to death.

$NYSI & $NASI had negative ticks last Friday. They started losing momentum early in the week so this was expected. At this time, these are showing indecision so even though I’ve put these in the Bearish section, they aren’t really that bearish, yet.

$VIX with 5EMA is bearish and potentially very bearish. But as you can see from the linked chart, it can also be very early.

Oil.

ECB rate hike this past week which raises the possibility of rate hikes here.

Neutral:

Just about everything else I watch, from the cumulative $NYUD to the cumulative $NYAD, is giving neutral or confirming signals. In other words they are moving in sync with the latest move. Since they are moving down with the markets, then it will be important to watch for a positive divergence in these and others.

*  *  *

The markets can move up without some key sectors, but they’re not going anywhere without $TRAN. Usually about the time one or more key sectors become obviously weak, then The Buyer shows up and we’re off again.

This chart shows that $TRAN has broken its most recent up trend line. From its swing low in mid-March to its most recent swing high, $TRAN moved about 10%. Since its April 2010 high, it has moved about 8% higher so this latest little rally leg was most definitely parabolic. I’m using Fibonacci fan lines on this chart because they seem to fit well and they give some kind of an idea about potential support levels. IMHO, support is pure Voodoo,  akin to ‘targets,’  so you don’t buy some phantom support level. You just sit tight and wait and see what happens when these levels are approached. Meanwhile, $XAL has been on a ‘sell’ signal since December and looks to be headed lower. On Friday, some of the airline stocks in the transportation index were down 6%,  but then The Buyer showed up and defended price and they closed off those lows, though not by that much.

Chart courtesy of StockCharts.com

It’s all about oil now as we remain hostage to this important commodity. Until the price of oil stabilizes and/or begins to drop, then pressure on transport stocks will persist.

AA reports Monday after the close of trading. Apparently there are high expectations for AA and they’re expected to earn .27 cents a share. Last year, on the 13th of April, AA dropped a little after the release of earnings on the 12th. Because AA has been pumped to the moon over the past three weeks, I would expect that, regardless of earnings, AA will get sold off on the 12th and maybe beyond. But I could be wrong.

Paranoia works well at times like these.

GL in the week ahead.

Quick Update April 6th, 2011

Even though the $SOX did a back flip based on the deal between TXN and NSM and then the rebalancing in the $NDX, I have not taken a position in either SOXL or USD. I am thinking about it but I do think $SOX needs to pause a little, but, of course, it need not.

So was that it for the ZBT consolidation? Three days of trading and the $INDU, $SPX,  & $COMPQ don’t have much to show for it while $TRAN & $CYC are slightly negative. That’s a consolidation and it could be over tomorrow, for all I know.

Couple of things I’m watching:

(Adding the following 8:45 A.M. April 7th:

I looked at the ISEE All Equities last night and for some reason it didn’t register, but that hit 302 yesterday. This used to give a pretty good signal when it got to the 260 area but it went into the mid-300’s back in December and early January and nothing.  It could mean nothing this time, too.)

P/C Ratio at .71 is lower than where it was on 2/17 when it closed at .72.

Index P/C Ratio at .96 is at its lowest point this year.

$NYHGH in slight negative divergence. Before September 2010, when $NYHGH would go into negative divergence it was a major red flag. But since then not so much. Still bears watching.

$TRAN down .49% for the week and they often start to exhibit weakness before the general markets. Not much to get excited about, but you just never know.

$BPTRAN dropped 5 points today which seems odd since $TRAN is only down 26pts on the week.

Since the September 2010 lows, 50% of the time in the days after Zweig Breadth Thrust has gone above 60 there has been a large one-day drop of around 100 pts in the $INDU. With the major indexes struggling to find buyers at current levels, a price adjustment lower may be just what the doctor ordered.  Just sayin’.

Weekend Update March 27th, 2011

All of the market breadth indicators that I follow are staying in sync with this move. While negative divergences did not work from the time they began to appear in late September of 2010, I do think a negative divergence or divergences at this stage of this nascent rally leg  could prove to be problematic.

$NYSI daily chart showing how the Summation Index has apparently bottomed and is now trying to right itself and move up. It will take most if not all of next week before $NYSI confirms the rally with a fresh buy signal indicated by one or more upward crosses of the MA’s. This is a  direct link to a weekly chart using a 5,3,3 sto, which is showing to be oversold at the moment. That sto should/could/better turn up next week, if you catch my drift.

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”     Donald Rumsfeld

$SPX daily chart that epitomizes the known unknown and the unknown unknowns. The unknown here is why the $SPX stopped at this falling trend line. Was it coincidence or perhaps alien intervention?  I just find it interesting that it stopped where it did but it does bring into question whether the last few days of up moves are anything more than a dead cat bounce. A close above this falling trend line on Monday is going to be important and since that is a falling trend line then $SPX could close flat on the day and still close above it. Then, of course, there’s the potential Bear Flag that would start to lose most of its credibility with a close above 1332. Until then, it will be important for $SPX to stay above the Pyscho/Voodoo level of 1300 because a failure to hold that level would mean that the short term MA’s on the chart would be breached to the down side and would then start to roll back over. IMHO, however, this is a bullish looking chart.

Charts courtesy of StockCharts.com

That potential Bear Flag pattern on the daily chart is the rising trend channel on the 60min chart. Based on what I’m seeing in the market breadth indicators, I have to give the benefit of the doubt to the bullish rising trend channel rather than to the potential Bear Flag, but a paranoid trader has to consider all options and escape routes.

The $INDU, XLB, IWM, $MID, XLI, $TRAN, $CYC, and I’m sure others, have already had bullish DI X’s and with this kind of leadership you have to expect other key sectors will follow, or famous last words.

I’m not sure to whom the following should be attributed, but there’s an old Wall Street saw that goes like this:

“The market is all about taking the most amount of money from the most amount of people in the least amount of time.”

GL in the week ahead.

Weekend Update February 26th, 2011

The pull back that happened last week is not the pull back I’ve been waiting for for several weeks and the way I see it the pull back that should come from way too much euphoria has now been postponed. The market is quickly repairing the damage that was done this past Tuesday and Wednesday with $SPXA50R back to 70.40% after having dropped to 63% mid week. Thanks to our buds in Libya we may never know if the $SPX would have reversed off the fib confluence area of around 1350. Of course, it may yet.

$TRAN and $CYC took the biggest hits on the week with both being down more than 4%. Clearly the rise in oil put a lot of pressure on the transports and this may continue. Big problem is that oil is not likely to drop in price anywhere near as fast as it rose in price so pressure on the transports may linger. An even larger problem is that increased oil prices have been a precipitating element in every recession we’ve had going back to the 70’s. Not saying we’re on the brink of a double dip but the revised GDP # this week suggests that the recovery may be cooling off and higher oil prices are not going to help.

It’s deja vu all over again for the transports. They came under distribution starting around the 19th of January and didn’t put in a new high until the 16th of February. And now you have to wonder if the action this past Thursday and Friday wasn’t just an oversold bounce. If we don’t put in a new high on the $TRAN before we put in a new low, then there’s your answer.

Chart of $SPX showing that the trend remains valid, though under some pressure. The 9EMA is still above the 20MA so that is good. $SPX is about 24pts away from making a new high and in a robust market that should easily be achieved by the end of next week’s trading, or famous last words, which ever comes first.

Chart courtesy of StockCharts.com

$NYADV showing overbought.

$NAAD also showing overbought.

I usually discount readings on Monday’s, but pay more attention to readings that come in on other days of the week.

Weekend Update January 23rd, 2011

$CPC/$CPCE: If this signal is going to play out, then it’s going to either play out starting in the week ahead or at least give better hints as to whether it’s going to play out at all. We’ve had a sign of overt distribution and the broader markets could be just going through a dead cat bounce. The key will be last Thursday’s swing low, which was 1271 for $SPX. If we close below 1271 before closing above $SPX 1296, then $SPX could easily drop to the 50MA about 50pts below Friday’s close. That would take $SPX down into the break out area of 1230.

$TRAN, $CYC, $RUT, $XAL, XLB, $DJUSCX, to name a few, are under pressure, but more importantly so is the $NDX.

AAPL/GOOG, or live by the sword, die by the sword: AAPL is now trading in the same range that it has been trading in since it released earnings back in mid-October. The recent news from Steve Jobs is creating uncertainty and for the moment the market is selling this uncertainty. If this is just a knee-jerk reaction, then no problem and AAPL to the moon, but if selling persists then this will bleed over into other stocks and sectors as AAPL is too important and influential. GOOG is now right back where it was on its October earnings release, also as a result of uncertainty about changes within leadership. AAPL/GOOG make up almost 25% of the $NDX and so there is no way that the $NDX can hold up to further selling in these two.

Chart of $NDX showing break of trend line, though I don’t consider it a decisive break for now. $NDX formed a nice bull flag back in mid-November and if $NDX doesn’t right itself early next week, then we could see another such pattern develop. There is an important swing low of 2209 from 12/31/10 right where the current 50MA sits so if $NDX flags off then that looks to be a good and important level to watch.

Chart courtesy of StockCharts.com

$TRAN is just a hare’s breath away from tagging or perhaps breaking its 50MA and pressure in this leader will not help the markets. $SPX and $NDX could also be getting ready for a drop to their respective 50’s  and with weakness apparent in $NYSI/$NASI then such a move can’t be ruled out. For the moment things don’t look too bad with  the majors just pausing but if a pull back does get underway then one can never know just how extensive that pull back might be especially since support is not support until after the fact.

Never forget that paranoia is just a higher form of awareness.

GL in the week ahead.

 

Weekend Update January 9th, 2011

Fibonacci mystery solved.  The 1277 Fib target came by calculating the July low, the August high, and the September low. Note that 1350 appears in this projection, as it does in the others. Just scroll down to find my most recent post on Fib targets.

Just a couple of things to keep in mind for the week ahead. If you go back to 2000, you will see that January’s, due to the impact of earnings, I’m sure, are split about 50/50 with regard to how the month turns out. Last year the markets took off like a rocket and didn’t stop until the 11th, burped, ran for a few more days, then rolled over into early February.  With $TRAN up 1.7% , $CYC up 2.57%, $OEX up 1.31%, $COMPQ up 1.9%,  & $SOX up 3.38% so far it could be that the market will just rally on. After all, wouldn’t it be too convenient for the market to follow last year’s pattern? Well, it’s never that easy.

IWM was only up 0.36%, $XTC was only up .21%  while IYR was  down .41%, XLB was down .25%,  RTH was down 1.51%, XRT was down 2.95%, and the $CRB Index was down 2.66%,  due to a 2.59% rise in the value of the $USD. $CRB Index may also be feeling some of the effects of the Chinese rate hike and if so then expect more weakness in this key area.

Is the market starting to split or is this weakness just a one week wonder? I don’t have an answer, but what I do know is that bullishness is reaching mega froth levels not seen in quite some time.

ISEE All Equities Only closed at 283 on Friday and has closed above 300 six times since the first of December with two of those six instances coming last week. Is a reading of 300 the new 200 for this index?

$NYSI & $NASI both produced negative ticks on Friday which pushed their respective McClellan Oscillators below zero, something that is supposed happen only in down trends. This further implies that $COMPQ and $NYA are getting oversold even as they rise and this idea is reinforced  because $NAMO is very close to tagging or pushing through its lower BB. A new paradigm here, as well?

$BPSPX has pushed up to 87, it’s highest point so far in this rally. In the past, which is certainly no indication of future performance, $BPSPX has only been able to stay in the mid-80 area for about three weeks before rolling over. It’s now been four weeks and $BPSPX still rising. $BPSPX has only climbed higher on three previous occasions going back to 1998. It went to 88.8% in January of 04‘, it went to 88.6% in September of 09′, and it went to 87.20% in April of 2010.

When $BPSPX topped out in January 04′, the $SPX rose another 20pts over the next several weeks to the 1160 area. It then rolled over and dropped 100pts,  finally bottoming in August. The September 09’ high in $BPSPX led to an approximately 70pt drop in $SPX over the course of two weeks.  And we all know what happened in April of 2010 after the $BPSPX peaked in the middle of the month.

But $BPSPX isn’t the only Bullish % Index that has climbed into nosebleed territory.

$BPMATE is now at 90% after having reached 96.88% in the second week of December. This 96.88% reading is the highest for this index going back 10 years. It’s previous high over the last ten years came in January of 04′, when it hit 93.79%.  $DJUSBM consists of 66 stocks, two of which, AA & DD, are in the Dow. But what may be more important is that $BPMATE and $BPINDY appear to move in tandem.

$BPINDY is now at 94.8%, its highest reading going back 10 years. It’s previous high reading came in February of 07′ when it hit 92.31%. Prior to that it rose to 89.83% in January of 04‘. $DJUSIN consist of 246 stocks, many of  which are heavy hitters in the Dow, including UTX & GE, to name a few.  I don’t know if $BPINDY is peaking or if it has peaked but there is no way the Dow can stay aloft once $BPINDY stalls or starts to roll.

Add RTH to this mix and you get two more Dow stocks, HD and WMT.

Over the past month or so, Bullish Sentiment has gone to multi-year highs and this is evidenced by multi-year highs in these Bullish % Indexes. Why, I don’t know. Is it all the Fed and the Fed’s POMO $$? Has the Fed created a bubble? Given that GDP is not expected to rebound in 2011 and may not rebound until 2012 or later, it certainly does appear that equities markets have gotten way ahead of themselves.  But bubbles can go on and on, especially with Bernanke suggesting there will be QE3, QE4, etc.

Even with POMO free money injections we now have four key Dow stocks in indexes that are currently under pressure and we have several  Bullish % indexes at or near all-time highs, with one of those indexes already rolling over. If $BPINDY moves in tandem with $BPMATE, like it has in the past, then this simply means that fewer and fewer of these important stocks will be rated ‘buy’s’ per P&F charting.  Well, if they’re not ‘buy’s’ then what are they? The answer to that question will depend on who holds those stocks and their particular goals or objectives. The bottom line here is that $BPINDY needs to be watched like a hawk in the days and/or weeks ahead and you can get a hint as to changes in $BPINDY by following XLI. If/when XLI starts to show any signs of weakness then this weakness will become immediately apparent in the Dow, and if the Dow starts to falter then, of course, the other major indexes will  follow.

This is a chart of $CPC I’ve been watching, along with another one that I posted here a week or so ago. Hard to know if these MA’s have bottomed  because they can go much lower. Also, Cobra has a great chart of $CPC, CPCI, & $CPCE in his public charts section over at Stock Charts that is worth checking on a daily basis.

Chart of $SPX  showing it more or less struggling at the current level which happens to be the Fib target level. Back in November, when $SPX approached the previous Fib target, it rolled over, which is what is supposed to happen when these targets get hit. After a consolidation period, which allowed $SPX to build strength, it pushed on up and through the Fib level. I don’t know if the same thing will happen this time.

Charts courtesy of StockCharts.com

Good luck in the week ahead.

Weekend Update December 4th, 2010

Just want to start with something I’ve said in the past but that bears repeating. The stock market and the economy are two separate animals and have nothing to do with each other. At times these two animals appear to be moving in sync with each other but this is pure coincidence. On Friday you saw this in action. While shortz were expecting the market to sell off big time due to the hike in the unemployment #, the market instead went up. This is because the market moves the way the big players want it to move and if THEY want the market to go up, it will go up. When the mad men at the helm want the market to go down, the market will go down and will probably do so during periods when there are good economic reports. Our #1 job as traders is to try to identify what the mad men are doing and to ride their coattails. Fortunately the mad men at the helm leave large footprints and right now those footprints are headed north.

Another thing that’s important to keep in mind is that when the market goes down it’s under accumulation and when it goes up it’s under distribution. I have shown several charts over the last few months where, in the 15min time frame, there were huge red candles and warned to never short such a candle or even a series of such candles because those candles are signs of manipulation by the big players. First, these big players are selling longs into the previous price increase and then going short. Next, these big players start to dump their remaining longs ‘at the market’ which causes others to do the same. This selling pushes the market down and as it’s going down the big players are covering their shorts and picking up shares on the long side at bargain basement prices. Then, once the big players have covered most of their shorts and have added most of the longs they want, they’ll start to buy ‘at the market’ which then pushes stocks up creating excitement and retail traders who don’t want to miss the gains jump on board which keeps the move going. When retail traders start to jump on board, the large players sell their longs to the retail traders and the cycle repeats. I believe that the computer systems that the mad men at the helm use trigger off overbought and/or oversold readings in the RSI 14 in the 15min and 60min time frames which is the basis for the 60 minute trading strategy.

******

Bulls vs Bearz

Wild cards: Groupon has rejected GOOG’s huge offer. I don’t follow GOOG that closely, but GOOG did move 20$ off it weekly low and if this was due to expectations of the Groupon buy, then GOOG could get hit pretty hard on Monday which would impact the $NDX and $COMPQ directly. POMO $$ as usual and no way to tell how this $$ is being used though it is intended to prop up equities.

Bearz:

$TRIN & 5 Day Arm’s Index: Well, $TRIN closed at .68 on Friday and this dropped the 5 Day Arm’s to 3.03. (Please see my November 27th post.) Last weekend, the 5 Day Arm’s Index had a reading of 8.32, which was showing oversold. This week’s 3.03 reading is showing the exact opposite. A reading around 5 is neutral and a reading near 4 would be considered somewhat bearish so this low 3.03 reading is cause for concern and you have to wonder if everybody’s in. Also, on Wednesday, the $TRIN closed at .27 which was telling me that there was a lot of forced buying going on. In other words, short covering, IMHO. So if the shortz have covered and all the longs are in, what’s next?

ISEE All Equities: Two very high readings this week of 327 & 296 which is telling me that the long side is getting very crowded. When we started to get very high ISEE readings back in April, the market ignored these for a couple of weeks, then fell off a cliff.

P/C Ratio: P/C Ratio closed at .79 on Friday which is bearish, though not extremely so. It closed at .70 on Thursday which didn’t seem to impact the market one bit. I think two days of readings in this area may be a little too much, but the market will make the call.

RSI on 60min Charts: RSI’s on the 60min charts for all the market leaders, $TRAN, $SOX, $RUT/IWM, IYM, and even SPY, all closed above 70 and this indicates that the market is very overbought at the moment. This overboughtness can get worked off in one of two ways: The market can pull back or it can consolidate sideways for a few days.

This chart of $SOX index looks very much like the chart of the $RUT I put up on Friday, and they both say that buying has pulled in just about every last buyer out there and that to attract more buyers you have to adjust prices lower.

Click here to open chart in new window.

Chart courtesy of FreeStockCharts.com

Bullish:

Commitment of Traders Report: If you’ve been following Alex Roslin’s COT Blog, link to your right, you know that the commercials are still short the large contract ES futures. So far they’ve been fueling each and ever short squeeze but haven’t given up yet. Here’s what’s interesting or maybe coincident about that. Last year during this same period the commercials were getting heavily short. I chronicled it on this site and it was pretty amazing to watch. And then suddenly, during the last two weeks of December, perhaps to clear the books going into the new year, they cried uncle and got out of all most of their short positions. Interesting that about two weeks later, around January 11th, the market topped out. I have no idea if this kind of scenario will repeat again this year. Just throwing it out.

$VIX: $VIX tagged its upper BB on Monday, closed above it on Tuesday, and has pulled back since then creating a new buy signal in the process. As long as the $VIX keeps dropping, then the market should keep rising.

$USD: The dollar may have peaked, though it’s probably too soon to tell. POMO $$ is supposed to weaken the dollar but POMO injections didn’t stop the dollar from rallying over the past month. Meanwhile, the Euro is setting up to give a new buy signal, per the 5/10EMA method.

90% Up Day: 93% up day on December 1st which is what you want to see at market bottoms. We also had a 90% up day on November 24th, which followed a 92% down day on November 23rd.

SG for $SPX: Three of the four indicators that I use to calculate the SG have started to move up which indicates a change in trend.

$BPSPX: $BPSPX hit a new rally high on Friday of 79.80 and its stochastic has now moved above 80. This is good for now and confirms the rally but we need to be watching for readings in the mid-80 area. Based on past history, when $BPSPX gets up into the mid-80 area, assuming that it does, it can stay up there for about three weeks. After that, when $BPSPX starts to roll over, it’s time to take profits. Just sayin’.

$SPXA50R: This moved back above 75 on Thursday and went to 77.80 on Friday, which confirms the market is moving up with broad participation.

Breadth Indicators: Every single breadth indicator that I follow, from $NYMO, $NAMO, Zweig Breadth Thrust, Cumulative Volume Index, etc, is confirming the move up.

Chart of $NYSI w/ ADX showing that the +DI line is moving up and that $NYSI is getting close to pushing above the 5EMA. BTW, you can substitute RSI 14 for the ADX and you’ll get the same reading. I just happen to like the visual aspect of the ADX along with the ADX line, itself.

Click here to open chart in new window.

Chart courtesy of StockCharts.com

The bottom line is that the market is moving up with strength and on pretty good volume, but that it may have gotten a little ahead of itself and may need to cooling off period based on very low Arm’s Index and very high RSI readings in the intra-day time frames. We could either pull back for a session or two or just go sideways to work off some of this overboughtness. If the markets do pull back, I would really want to see the $SPX hold above 1200 as this is an important pycho round #.  On the other hand, if $SPX pushes above the November 5th high of 1227 and fails, then this truly could be a double top signal which would first be confirmed by a break of 1200 and then 1173.  I have my doubts about a break of 1200 mainly because I think the PPT will intercede and save the day, but I could be wrong.

It’s always the Yin & Yang, the double edged sword, the dangerous opportunity. One day the glass is half full and the next day it’s half empty. As any paranoid trader knows, holding a particular view for too long can be costly.

GL in the week ahead.

Update December 2nd, 2010

First, thanks for your comments. I really do appreciate them and I’m glad that visitors to this blog find value in the information that I post.

Meanwhile, I’m thinking April and that means that we can run for a while but that when trend lines break this next time, it could get serious.  Subject to change at any time, of course. And okay, so no pause day today but if I’m going to be wrong better to be wrong like I was yesterday. For tomorrow I think we have a set up for a pause day and maybe a red day, but we’ll see.

ISEE All Equities & P/C Ratio: ISEE at 296 and P/C Ratio at .70 so again this is showing that the Exuberatti are in the building and that perhaps the long side is getting too crowded.

$TRIN: Closed at .43 which goes along with the low P/C Ratio and suggests that the Exuberatti may be a little too, well, exuberant.

RSI on 15min & 60min charts closed above 70 and was that way most of the day for $SPX, $RUT, etc, and suggest a cooling off period is probably in the works.

BB’s: $TRAN, $CYC, $SOX, & $RUT smashed through their respective BB’s today with most of these closing outside. Even though this doesn’t necessarily mean a pull back, it does suggest that a consolidation period may be in order.

Aroon Oscillator: A/O for $TRAN hit 100 today. Unlike the A/O for the $SPX, which can stay at elevated levels for several days, when the A/O on $TRAN hits 100, it generally indicates a consolidation is in the works. Since the transports are the de facto leader of this rally, then if transports go into a consolidation or into a minor pull back, then the market will just about have to go along for the ride, no pun intended. The A/O for the $SOX is also at 100 and you can look at your charts and see what happens over the course of the next few sessions when this has happened before.

$NYSI, $NASI, $NYMO, $NAMO: Upticks today for $NYSI & $NASI which pushes $NYMO and $NAMO above their respective zero lines for the first time in almost a month and is a sign that market breadth is truly improving which means that shorting right now would be the risky trade.

Chart of $SPX showing the important 1227 level. Every bull, every bear, and every computer is going to be watching this level for a potential double top. A break of this level, which may or may not happen on Friday, will need to be accomplished on very strong, convincing volume. If not, then it could be a head fake and failure. Shorts are going to be champing at the bit to short this level and will probably go whole hog if the break happens on light volume. This could lead to a major short squeeze which would bring in the volume as shorts cover.  Or, as Joe Granville would say, the obvious is obviously wrong.

Chart courtesy of StockCharts.com

SG for $SPX: Yesterday I mentioned that the momentum indicator that I use had been ticking up for several days. Today, two more indicators joined in with upward ticks.

Also, since I do expect some kind of consolidation over the course of the next couple of sessions, I did take profits today on TNA but am holding my other longs. I will look to re-enter TNA some time in the near future.

Weekend Update November 27th, 2010

The big wild cards in the coming week are going to be news driven. From Xmas shopping, to North Korea, to problems in Europe.  The markets are currently held hostage by news events as most earnings reports are out of the way.

Bulls vs Bears

Bullish:

$BPSPX ticked up on Friday even as the market dropped.  It is now within 2.6 percentage points of its November 8th high. The stochastic is now below 20 and may start to move up in the next few sessions. Maybe.  Not adding to long positions or initiating new long positions while the Sto has been dropping continues to be a fairly good strategy.

$NYUPV closed at 78.10 on Friday. I’m not sure how reliable this reading is given the 1/2 day of trading.  $NAUPV, which I really don’t follow as closley as $NYUPV, closed at 204.78, the same level it hit on November 16th, but I’m not reading much into this, either, given the 1/2 session.

$NYUPV:$NYDNV hit .22 on Friday. When this ratio gets into this area, it usually means that the market is very oversold, but, like $NYUPV, this ratio may be skewed due to the 1/2 session.

$VIX nearing upper BB. $VIX may tag its upper BB on Monday. A bounce of some kind may or may not follow.

POMO $$ coming in on Monday, not Tuesday as I posted previously. $33 billion minimum throughout the week. While this hasn’t led to any rallies lately, POMO injections may be what is keeping the market in its current holding pattern.

$TRAN, $CYC, $SOX, $RUT, $NDX, $COMPQ, RTH, XLE, & $XAL remain ‘holds’ per the 9/20 cross method.

P/C Ratio closed at .85 which is only slightly bullish, IMHO.

$TRIN closed at 2.13 on Friday and has pushed the  5-day Arm’s Index to 8.32, which is clearly oversold. This should/could mean that the bulk of selling is over for now but that doesn’t mean a bounce on Monday. Insider selling could be skewing the daily $TRIN readings. See below.

Bearish:

See Chris’ $SPX Signal Watch Table, link to your right.

Insider selling reaches an unheard of 8000:1 ratio in the past few days. Insiders are expected to increase their selling as the new year approaches in order to avoid paying an extra 5% on their capital gains. The new capital gains tax increases from 20% to 25% on January 1st. This selling is increasing the floats in many stocks and will ultimately have a dilutive effect on the value of stocks and earnings per share going forward.

$SPX, $INDU, $NYA are ‘sells’ per the 9/20 method and need to get back above their respective 20MA’s ASAP. I think most of their problems are coming from the financial sector so until XLF, $RIFIN, IYF either bottom or start moving up, then you just have to expect the majors to languish.

$USD in a strong up trend and like in the past this is putting pressure on most equity classes, but $SOX and $TRAN have so far only been negligibly impacted. If $SOX and $TRAN do start to languish due to $USD strength, then $NDX/$COMPQ & $RUT will follow.

$SPXA50R dropped by 5 percentage points on Friday to 62.20%. Until this starts to rise consistently and gets back above 75%, then longs beware.

Chart of $SPX showing first a bull flag pattern and break out and now what could well be a bear flag pattern. The bear flag would be confirmed, at least initially, with a close below 1180. A close below 1173 could open the door to a serious drop, IMHO, of course.

Click here to open chart in new window.

$NYMO & $NAMO remain below the zero line. It looked like they might get above zero but Friday’s sell off prevented that.

$NASI & $NYSI are locked in a down trend and until these two base and start up, longs are at risk.

Chart of $NYSI showing various stages of current ‘sell’ signal.

Click here to open chart in new window.

Charts courtesy of StockCharts.com

No Lowry’s data this week as Puplava is at the San Francisco hard assets show, but I think it’s safe to say that Lowry’s  current ST sell signal remains in effect.

The $SPX is now up about 6.6%  or 74pts for the year which isn’t really a bad gain but is far from the 25% gain that I predicted on January 1st. And of course it could easily drop 6.6% at any time which is why I say that money in the market is money at risk. I own shares of a Ginnie Mae Fund and those shares will return, on a compounded basis, a little more than 6% this year and will do so with little or no risk. While I spend several hours each day going over stock market data, I only spend a few hours a year managing my Ginnie Mae fund. Since I believe that 2011 is going to be a much tougher year for traders than 2010 and will require countless hours of work in order to stay in front of or with the trend, I am seriously considering following insiders out the door. I can, of course, change my mind at any time, but one thing I’m not going to change my mind about is my last post on this blog, which will be January 1st, 2011.

Only the paranoid survive.

GL in the week ahead.