Wednesday, June 30, 2010

Dow 5-Day 15 Minute Chart

Not much space left to go anywhere. It's got to resolve one way or the other. The last triangle pattern broke badly to the downside just yesterday.

Tuesday, June 29, 2010

End of the Bull Market?


Good analysis. Particularly after today's rout.

Did you know that there was only one stock in S&P 500 Index ended in green today? Zero in Dow Jones Industrial Average, and only 1 in Nasdaq 100?

Did you know that such an extreme number on S&P last happened in September 29, 2008, right before the cascading market crash in October 2008?

End of the Bull: Primary Trend Shifts as Markets Shatter
(6/29/2010 via Zero Hedge)

"While technical analysts and traders have numerous techniques for determining trends, the most basic method is the tracking of higher highs and higher lows (bullish trends), or lower highs and lower lows (bearish trends). Tuesday's relentless sell-off across US equity markets marked an undeniable end to the continuous series of higher lows that had been intact since July 2009. With Tuesday's close below 1,044.50 on the S&P 500 Cash, 'bulltards' can no longer claim that the primary trend of equities remains bullish.

"Traders are going to have their work cut out for them in the days and weeks ahead as a plethora of support levels remain scattered between the levels of 950 - 1,030. Though equities appear poised for downside acceleration into Q3, remaining short may prove difficult in days ahead for most as increased volatility, erratic HFT algos and near-record market internal readings combine to create yo-yo-like equity markets. Tuesday's Advance / Decline line for the S&P 500 clocked in at -498, with only Zimmer Holdings (ZMH) closing higher. As a company that designs, develops, manufactures and markets orthopaedic reconstructive implants, dental implants, spinal implants, trauma products and related surgical products ... could GETCO be anticipating a large order from Mr. Market for a new hip?

"Joking aside, what can we expect after such an all-encompassing technical rout? There are essentially two ways to interpret such overwhelmingly positive / negative market internal readings: temporary exhaustion and inflection or breakaway continuation. Normally, when US equity markets exhibit an opening dislocation (greater than +/- 1.5%) and an extreme trend day (greater than 90% A/D, VOLD, etc.) there tends to be an immediate reflex so as to offset lopsided internal measures of momentum. And though the majority of such dislocationary instances immediately resolve themselves in the opposite price direction, the possibility of witnessing a breakaway continuation to the downside here looms large. [Emphasis is mine.]

"The only other modern instance of a -498 Advance / Decline reading on the S&P 500 occurred on September 29, 2008."

The article continues, and it has several charts (including the one I linked above) that illustrate this was no ordinary down day.

Their recommendation for traders? Sit on your hands for a day or two, to see if any set up presents itself.

This gotta bounce tomorrow, at least some, and the stock futures are in green right now (Dow futures up 31 points, S&P futures up 3.70 points).

Since all that matters seems to be Fibonacci retracement numbers, here are numbers to watch if the market does bounce tomorrow:

38.2%: 9,935
50%: 9,973
61.8%: 10,011

38.2%: 1,048
50%: 1,053
61.8%: 1,057

Just keep in mind what says above, that it may be a "breakaway continuation" to the downside. That means without hardly any dead-cat bounce.

Batten down the hatches, I'd say.

AMZN: Make or Break (with Updates)

(2ND UPDATE 6/29/2010) The stock ended at $108.61, and it was as low as $106.01. Let's see if It tries to regain $110 tomorrow. If it tries and fails... look out below... to 200-MA on weekly at $78, which happens to be just about the target for the head and shoulders pattern...

(UPDATE 6/29/2010) And it broke! Watch if it stops around $110 and bounces. Slight positive divergence on RSI is gone now. If it does bounce but if it's a weak bounce (price, volume), filling the gap down to $80 may be coming soon....


Amazon (AMZN) may be getting ready for a plunge, unless it manages to rebound right here right now.

Here's is AMZN's daily 1 year chart. After gapping up in late October above $110, it has managed to stay above that. But in the process, the volume has dwindled, and the pattern looks like a big head and shoulders (bearish), with the tiny right shoulder shaping like a descending triangle (bearish).

If the plunge happens, it is likely to fill the gap and settle between $80 and $90. Height of the head from the neckline (say $115) is 36. Neckline minus 36 will give you the target of $79, but I do see some support above $90. Also, technical indicators are not totally bearish, except for slow stochastics set at 89. It's already in a bearish territory of below 20. There's a positive divergence between the stochastics and MACD, but that divergence could be blown away if the tentative general market decides to go down.

AMZN will report its earnings on July 23. The stock tends to move significantly on earnings. August put option at $100, traded today for $2.69, could be worth $20 if AMZN plunges to my target... [Please do your own DD. This is not advice in any way...]

Thursday, June 17, 2010

Gold Ready to Break Out

from the ascending triangle pattern which formed a 2-month "handle" to the 5-month cup.

J.P.Morgan Chase could only do so much. Gold is the true money.

Tuesday, June 15, 2010

Jim Cramer Hates This Market

Hey I'm in agreement with Cramer!

"This market is stupid. I continue to believe that the character of this market has changed, and changed dramatically ever since the 'flash crash', when suddenly the public collectively said 'You know what? Enough already! I've had it'."

"Integrity has been violated, and no one believes anything right now."

"The market seems rapacious, arbitrary, capricious and downright ridiculous. It is a tale told by an idiot, full of sound and fury, signifying nothing."

"Today's rally was based on NOTHING."

Here's his 10-minute rant.

Tuesday, June 8, 2010

NYSE Summation Index May Be Rolling Over

What is NYSE Summation Index? The explanation is here (from Decision Point), but what I know, thanks to Breakpoint Trade, is that when the cumulative chart of this rolls over it could be that the market top has been reached.

I've been watching this for the long-term trend change, and it seems it is rolling over after 14 months of uninterrupted uptrend. It could whipsaw, as it did on the way down from the 2007 market top.

Just a quick note.

Thanks to Helicopter Ben's positive comment on the US economy, the stock market futures are green, big time. Dow futures up 96 points, S&P 500 futures up 13 points, Nasdaq 100 futures up almost 20 points. It is so senseless it's comical.

Saturday, June 5, 2010

S&P500 on the Edge of the Wedge

Well, are the US stock indices following BP? Verdict is not in yet, but the indices continue to look pessimistic, having unable to break above 200-DMA. Nasdaq, which did break above 200-DMA, ended Friday below that line again. If the indices gaps down on Monday, then we would know that they indeed followed BP.

Here's the daily chart of S&P500 again, this time a nine-month chart. Notice the expanding wedge (dotted lines), and the index about to break down. In each significant correction since October, the turnaround happened when a candlestick formed with a tiny body and long shadow. This time, we had such a candle formed on May 25, but the market couldn't produce the bounce that held, like it used to.

Also, notice that in each correction the first bounce was sold, and the second bounce from lower point was bought, albeit on a decreasing volume. This time, the first bounce was sold again, but the second bounce hasn't materialized.

The correction pattern got bigger each time, which I'd interpret as reaching a 'critical point' as in physics. (Think of it as increasingly wild, erratic movement of the needle on the seismograph right before the earthquake hits.)

It looks AROON actually crossed over even before the 'flash crash' of May 6.

I remain bearish, and continue to hide behind gold and silver stocks. I'm keeping TZA calls as a small hedge, and I added July puts on FAS on Thursday bounce also as a hedge. They were both doing OK on Friday. Not doing much here. I'm hoping for a small low-volume bounce on Monday to buy puts on the index or puts on leveraged long index or sector ETFs. Maybe long-dated, far out of money 'disaster' puts.

Since algo bots seem to be programmed for index futures and indices. But gold and silver, they are still manipulated by humans at JP Morgan Chase and Deutsche Bank, and somehow they feel safer to me.

Tuesday, June 1, 2010

Are S&P and Dow Following BP?

That's the distinct feeling I've been getting for some time when I see the charts.

Other than pattern recognition, I have no fundamental basis for my assertion. But take a look. It seems the US stock market lags BP by about 2 weeks.

This is BP, from the beginning of this year to May 14. Notice how hard it tried to hang on to $48 line, for 9 trading days. On May 14, it started the second leg down. Today BP eneded nearly 15% down, at $36.52.

Now S&P500. Right now, it is trying to hold on to 1,070 for 8 trading days, having been unable to recapture 200-SMA which is at 1,105. I put two sets of Fibonacci numbers, one from the market top to the bottom of 'flash crash', the other from the post-'flash crash' high to the May 25 low. The flash crash rebound was slightly above 61.8%. After May 25 reversal, the index only managed 50% retracement, hit the 200-SMA, and quickly turned back. Price action is decidedly negative.

On BP chart, MACD histogram (sorry not in the BP chart) was showing positive divergence on May 13, but nonetheless the stock dived the next trading day. S&P is currently showing positive divergence on MACD histogram.

Am I doing any trading based on my ridiculous notion that the market is following BP? Not in particular right now. I am basically sitting on my gold and silver shares and doing OK in this current correction. I wish I heeded my own advice on May 13 and shorted the stock. I still have TZA calls. If 1070 breaks, I may actually go short on the index. My downside target would be 1,000 as psychological support, but I don't see a good enough support until 940-950 area. (See my post from May 19 on Dow.)

As for BP, if it doesn't rebound right here, I don't see a support until it gets below $20, and that's the level in 1995.

2-week delay. If the index was to follow BP, it should do so within the next few days. Patience, patience.