Thursday, July 28, 2011

07.28.2011 -- Date with 200dma

Key Levels

Upside -- 1310, 1316, 1323, 1339

Downside -- 1284, 1262, Then much lower

------------------------------------

Don't have a ton of time tonight, so straight to the charts.

SPX Daily;


As you can see, the Stochs, MACD and RSI still have room for more selling before you need to worry about a major jump higher. Today we had a fake out rally and then a reversal. I really think we have a date with the 200dma here in the mid 1280s. The break of 1311 and then the pop over it and close back under is significant.

Charts are beginning to feel like a true long term rollover is occuring. Also, that large H&S that was starting to feel very fragmented is looking much more healthy today.

Another major item of note.. the spread between the 50 and 200 dma's has collapsed to 23 points. A move below the 200dma for anything more than a day or 2 will put a death cross in play.

No SPX hourly today, only thing i'll note is that it's becoming deeply oversold on the hourly, but you can never trust that on the shorter term charts. Oversold can simply become more and more oversold.

Another chart of importance is the Russel 2000.

IWM;


The Russel also has a long term H&S feel, although not as clear as the S&P. The more important factor is that the Russel is less than 1% away from taking out the 200dma.

If the market loses the Russel, the NAS won't be far behind. If the market loses the S&P, Russel and NAS.. it's game over.

----------------------------

Leaders are STILL idiots. US will be downgraded.

Again... anything can happen tomorrow... bounce 10 points or collapse another 25.

GL

CJ

Wednesday, July 27, 2011

07.27.2011 -- Damaging candle..

Key Levels

Upside -- 1310, 1317, 1324

Downside -- 1283, 1261

------------------------------

I want to start with a quote from yesterdays post;

"Lots of support under us from here til 1311. Below 1311 though, the market would have a major problem on it's hands. If this is more than a pullback, we'll have a big red day here soon. The most damaging would be a big red candle that takes out all 4 levels of support straight down below 1311."

Well, that's exactly what happened today. It's a damaging candle. We are now oversold on the hourlies, so a bounce is very possible, but we are now back under a lot of important support.

SPX Daily;


That's an ugly candle. We are now under the bollinger bands and the 50 and 100 dma's again.

Note also that the daily Stochs, MACD, and RSI didn't move much and have plenty of room still before entering an oversold state.

SPX hourly;


The hourlies look like we are going to head to the bottom of that channel. The MACD and Stochs in the hourly are in a very oversold state though, so a bounce of some sort is certainly possible. However, oversold can just become more and more oversold on the hourlies.

I think we have a date with the 200dma here at 1283. Bulls really need to hope that holds and we dont get a death cross in the SPX.

---------------------------

Debt talks are still crap, leaders still idiots. This will not be solved in any way shape or form. The fix will be short term and will last months not years.

---------------------------

The Russel and NASDAQ really took it on the chin today. Lose them and it's all over... the DOW can't make up for the Russel, NAS and SPX.

Buckle up...

we could bounce 10 points or tank another 25 tomorrow.

GL

CJ

Tuesday, July 26, 2011

07.26.2011 -- Pullback continuing..

Key Levels;

Upside -- 1339, 1353, 1360-1370

Downside -- 1325, 1317, 1311, 1282

-------------------------------------------

SPX Daily;


We fell back into the bollinger bands today, which leaves us with a high probability of getting to at least 1325. 1317 though looks like the most logical place to stop, if it's going to.

Lots of support under us from here til 1311. Below 1311 though, the market would have a major problem on it's hands. If this is more than a pullback, we'll have a big red day here soon. The most damaging would be a big red candle that takes out all 4 levels of support straight down below 1311.

Note that the Stochs, MACD and RSI have plenty of falling room in the daily chart.

SPX hourly;


Again, we've broken a support level and fallen back into the upper half of this channel. The hourlies suggest we may take a trip to 1311. So somewhere between 1311 and 1317 looks like a strong target for a pullback. It's also a very important support level to hold for bulls.

Note that the hourly is approaching oversold in the MACD and Stochs. We may have a few more hours of selling and then a pause or rally for a bit. But I do not believe this pullback is over until we get more overbought burned off on the daily.

--------------------------------------

AMZN apparently had good earnings this afternoon. Strange to me though, they beat analyst estimates, but earnings actually fell as margins got crimped on higher costs.

So while they beat estimates... their P/E is actually going to go even higher, from 96 to over 100.

I'd watch carefully to see if this AH bump holds tomorrow in open trading. Increased costs, lower margins and lower profit is not good. The only thing that was good was that they beat lowered analyst estimates.

--------------------------------------------

US Dollar is getting closer and closer back to the all time low. It deserves a close eye.

Oil back up to 100$ a barrel and that's WTI, which is broken as an index. 105$ on WTI should put us back at record prices at the pump.

--------------------------------------------

Still no debt deal. Our idiot leaders are still idiots. This will not end well. They will pass a temp package and the US is going to lose it's AAA rating. I'm not entirely sure what that will do to the market.

GL

CJ

Monday, July 25, 2011

07.25.2011 -- More perilous than first glance..

Key Levels;

Upside -- 1344, 1352, 1360-1370

Downside -- 1337, 1324, 1317 and 1311

-----------------------------------

Only one chart again for tonight, because I think it's all you need right now.

SPX Daily;


Still holding on to the top of the bollingers. We closed just above them, which is that 1337 downside key level.

NFLX had a pretty terrible report tonight, it's down about 11% AH. That's not going to help momo land, as they were trying to form a move upwards.

We are definitely in a big sideways triangle/flag. The obvious question is which way we ultimately break out of this pattern. It is a LARGE pattern, so whichever way the break is, I would NOT fight it. You have to be careful though, because as we get closer, it is very possible we have at least 1 false break, so don't go balls deep the second it breaks.

To me, the large triangle is a much more likely pattern than the big H&S which is getting sloppier by the day, but still there.

On to the meaning of my title.. More perilous than it looks.

In yellow on the above chart, I have marked placement of the 50dma and 200dma for the S&P 3 months ago and today.

I want you to note how much the spread between them has collapsed recently. We were working with well over 100 points 3 months ago, we are now working with less than 30.

That's important. A death cross, which is the 50 sliding under the 200, in the S&P would be bad, as it would join the death cross in the XLF and SOX.

If the S&P slides here any decent amount below 1311 and doesn't immediately recover, we will have a death cross possibility. It's only 28 points folks. If the market continues this sideways consolidation, it will be reduced to almost zero points in about 30 days. Or if the market were to quickly fall to the 1270 range, we would have a problem.

Just something to keep an eye on, as it's much closer to being possible than it was just 3 short months ago. And without a breakout higher, will be even closer to reality by the end of August.

And.. back to blah blah blah from our piece of crap "leaders"

GL

CJ

Sunday, July 24, 2011

07.24.2011 -- Debt ahead

Key Levels;

Upside - 1344, 1352 and 1360's

Downside - 1334, 1322, 1316 and 1311

---------------------

Only one chart for tonight, the SPX daily;


We stopped on Friday right at the old shoulder line of that 7 month head and shoulders. We also posted a hammer reversal candle. Looking at the futures tonight, it appears that this level will hold here at least for a bit.

So now the question becomes how far down do we go?

If it's a pullback, i'd expect us to go no lower than 1316, but if it did, the market will need to put up support in the 1309-1311 area. Below that is a trip to the 1280s, a test of the 200 and the big H&S pattern would be back in play.

Obvioulsy going to be lots of US debt related talk, headlines and posturing this week. If that starts to get really ugly and we don't break key support, be prepared for a rocket launch afterwards.

Honestly,.. anything can happen this week. It's one of those weeks that you might want to sit out if you don't have a quick trigger finger and don't want to get whipsawed.

Futures down 11.5 as I type. Gonna be a bumpy ride.

GL

CJ

Thursday, July 21, 2011

07.21.2011 -- Gap or crap

Key Levels;

Upside -- 1344, 1353 and 1360's

Downside -- 1344, 1334, 1322, 1316, 1311

--------------------------

Here's the deal, we need to immediately get above 1344 and not dip back below it tomorrow morning. If that doesn't happen, we'll pullback at least 10 points.

Here's the SPX Daily;


There you see why we needed to clear 1344. We didn't and it's a prime reversal spot for a pullback if it's not convincingly taken out. There's 10 points of air back to 1334, just to the top of the bollingers. The daily Stochs, RSI and MACD still have plenty of room, so this move is not over, but if there's goign to be a pullback before going on to top them out, it's going to happen from this spot.

Here's the hourly;


Same deal, there's that pesky 1344 again. We are right on the edge of that channel. We need to immediately clear it in the morning with a gap or just start there and head right up. The hourlies are approaching extreme levels of overbought on the MACD now in addition to the stochs already being very overbought, the RSI isn't extreme, but certainly in overbought territory. These can of course stay overbought and get even worse, but only if we clear 1344 and in that case, I think we'll continue the crazy green candle rampings right up to challenging the 52 week high on the DOW and S&P.

Other items of note;

* They are ramping the finnies with big gap ups. They managed to get them back over the 50, but still well below the 100/200. The finnies already had a death cross in the XLF. This appears to be nothing more than a dead cat bounce to me. As i've said though, this market can go to new 52 week highs with them dead cat bouncing, I just don't believe it can go to new All time highs with the finnies in a confirmed bear market.

*** of particular note.. The momo's had a curiously bad day. Almost ALL of them... odd.. AMZN, NFLX, CMG, LULU, PCLN, all red. AAPL was flat too, although I don't really lump AAPL in with true momo's like AMZN with P/E's of 5 gazillion. Seems strange... gap ramping the finnies and the momo's all sell off. Smells of distribution...

We'll see, looking at it, I expect us to maybe take out 1344 on the open and then proceed to trade right under it. I believe we get a pullback here. But honestly it could go either way. If we put in another big green candle tomorrow, i'm very curious what the momo complex does.

SOX still sucking.. market needs that patient to be medicated.

GL

CJ

Wednesday, July 20, 2011

07.20.2011 -- Some short term mixed signals

Key Levels;

Upside -- 1337, 1345-1351

Downside -- 1323, 1316, 1311

----------

We'll start right with the charts..

SPX Daily;


Looking at the daily, we stayed above the mid-bollingers after a big up day. There doesn't really look like anything stopping a trip to 1351 except a bump at 1337. The MACD, Stochs and RSI are also in a neutral position, so they support a move higher. There's really nothing in this particular chart to make me think we aren't immediately going higher.

Here's the SPX hourly;


I was honestly surprised by this chart. The hourlies are overbought, today did zippy to correct that situation from yesterday. I would have thought today would have consolidated and brought us down out of overbought to allow for continued move higher, but it did not. The hourlies point to a larger potential pullback still coming to fruition before moving higher.

Other things of note;

The Russel closed just under the mid-bollingers and printed a hammer candle. So the Russsel is supporting the case from the hourlies that we have a larger pullback coming than just what we got today.

Chips were getting hurt from the QCOM earnings after the close today. As I mentioned yesterday, the SOX is an area this market needs to do better in order to make a run at new highs and that isn't helping.

I'm leaning towards a deeper pullback than just the pause we got today, we'll see where we go from there and what kind of support a pullback breaks if we get one.

GL

CJ

Tuesday, July 19, 2011

07.19.2011 -- Clear for 20 at least

Key Levels;

Upside 1339-1343 and low 1350s

Downside 1324, 1316, and 1312

All major indicies and most sectors are back above moving averages this afternoon, with 2 notable exceptions. The Financials and Semiconductors, they both appear to be in confirmed bear markets. The financials can probably be left behind for some minor new highs,.. say 1385 or so, but I think the market will need a run from the SOX to put in a new 52 week high.

SPX Daily;


Todays candle took out both the 50/100 and the mid-bollingers. We are overbought short term, so some consolidation may happen, but a touch of at least the 1339-1343 area is likely. After that, it could go either way, the pattern inside of this large flag/pennant definitely looks incomplete and a trip back to the top in the low 1350's will just make it look like we have another trip to the bottom coming. We only look about half way done with this flag/wedge/pennant, whatever you want to call it. The head and shoulders is still potentially there, but unlikely at this point unless we were to get a big reversal down in the next 2 days.

SPX hourly;


The hourlies show us the resistance in the low 1340's and why we are likley to get there as there's really nothing stopping us from doing so barring a total market reversal tomorrow, which with Apple tonight is also unlikely.

I would play it like we are going to bang the top and bottom of that big flag on the daily probably 3 more times until something of signifcance happens. That flag could drag out into the fall.

The mid-day pop today was from the reports on the debt ceiling deal. I read the paper which is really just a bunch of suggestions/wishes. I'm curious to see if this deal still sounds so close to done when the details of exactly how you're going to cut 4 trillion over 10 years comes out. The news also whacked gold. In reality, it was nothing more than me writing a list on a piece of paper of what I'd like to do. Say;

* Build a space shuttle
* Walk on mars
* Create World Peace
* Become NFL player

And have zero details about how they will be done. That's all they did. Of course they all agreed, because there's no details to argue over. I suppose we'll see how that pans out here over the next couple weeks, but by no means do I think that issue is over.

For now, the global government debt boom continues to fuel the large multi-nationals, while others with mostly domestic revenue will continue to do poorly. The question is where the market is with IBM at 350$ and BAC at 2$. Before the government debt bubble blows. Are we at 1370 or 1600 when it happens?

GL

CJ

Monday, July 18, 2011

07.18.2011 -- Is IBM enough?

(Update 8:03 p.m.) Forgot to add key levels. On the north side we have 1313-1316, but only need to take out 1310 to breakout of the falling wedge. Next up would be 1325.

On the downside we have 1300, 1295 and then 2 different areas of support between 1285 and 1277. Below 1277 would target 1250 as a last gasp of support.

-------------------------

(original post)

IBM posted good earnings, presumably thanks to the global government debt boom. Will it be enough to lift markets?

Several charts tonight, so we'll get right to it;

SPX Daily;


We closed back under the 50/100... AGAIN... That area doesn't seem to really provide any resistance or support at this point. We tend to trade over or under it during the day with ease.

I marked in circles where our bounce today originated from. It's the third time we've pinned that exact spot intra-day and bounced off it. I will note that the previous 2 times, it was good for a pretty decent move north directly afterwards. We do have to contend with the 50/100 though this time. Based on this history of this spot, for whatever reason, if we close back over the 50/100, I think a move 20-40 points higher would be likely.

SPX hourly;


Here we have a potentially bullish falling wedge inside of what could be a larger neutral pennant. We wouldn't have to move very far north to break that falling wedge. My feeling is that we may stay in it until we get closer to the bottom of the pennant, but something like IBM today can swing that in the bulls favor.

Some other key things today....

The Russel joined the SPX;


The Russel lost the 50/100 for the first time in a month and a half. It's again cruical for the market that it and the SPX get back over those moving averages.

And finally.. The XLF looks terrible, it appears to be in a confirmed bear market. While the SPX and overall market could make another run without them, I don't see how we can have an extended robust bull market with the financials in a confirmed ugly bear market.


There's just nothing good in that chart for the finnies.

Tomorrow is another critical day. The DOW and Transports are still hanging on and IBM should keep the DOW in that position tomorrow. The Transports are dangerously close to joining the Russel and SPX.

If we lose the Transports, Finnies, Russel and SPX. It will just be a matter of time for the Industrials.

GL

CJ

Sunday, July 17, 2011

07.17.2011 -- SPX still the ball and chain

We'll start right out with the SPX daily;


As you can see we closed above the 50 on Friday, just barely, but closed just under the 100. Friday wasn't very impressive from a bull point of view as the green candle both opened and closed inside of the previous days larger red candle.

The market was set up to potentially break out on Monday, but looking at the futures at the moment, I don't think that will happen and we have more downside on the way.

Here's the hourly;


Assuming the futures stay this way through the open, we'll be looking at a little resistance at 1308 and 1300. After that though is an air pocket with no support on the hourly or daily until about 1280. It will be critical that the market holds that area if it gets down there. The 200 and the previous low must hold. If they break, there will be a longer term lower high and lower low in place. It'll confirm a trend change.

To be honest, I'm surprised the market keeps trying so hard to hold and create a consolidated triangle for another move higher. The Europe news is getting fast and furious, it seems like it's every other day now. Seems it would make folks nervous to be long with the potential of overnight nukes every single day.

Got one more chart for today.. Apple;


I only add charts in addition to the SPX when they are significant or confirm the move in the SPX. This Apple chart is significant.

Apple put in a 7 month closing high on Friday, but it double topped the previous intra-day high. It also has a series of lower lows. Creating what could be a huge expanding wedge/megaphone top. This earnings report will be critical for Apple, the chart is set up either for a big breakout or a big dive.

Futures continued tanking as I typed.

Remember.. US treasuries can stay low like they are ONLY until Europe finally accepts some level of default, which must be done eventually. When that happens for all the PIIGS, they will no longer be the ugly duckling and the derivitive vigilantes will be eyeing the US and UK. Probably UK first, but we'll feel it at the same time.

Europe being so broken is the only thing keeping Bernanke's head from exploding.

GL

CJ

Thursday, July 14, 2011

07.14.2011 -- Market still has a chance...

Lets start right out with the SPX daily;


We closed today back under some critical support. The 50/100 and the bottom of the bollingers. Again we are back in a situation where it's critical that the market bounces tomorrow and regains that support.

Google is rocking north tonight and helping the futures rebound from bad US soverign debt news, but in the end, that's only Google and it can only do so much and the broad effect will last hours not days.

Some other things for the bulls to hang onto, the Russel 2000, Dow Industrials and Transports are all still holding and above all moving averages. So the S&P is the laggard here and the first to break. That's probably because of the horrific action in the finanicals.

Here's the hourly;


We closed back in that channel. That leaves little support for the S&P down here. Again, it's critical that the S&P gets back out of that channel and back over the 50/100 tomorrow.

In my opinion, Google isn't enough. But, it will be enough tomorrow to keep the DOW, Russel and Nasdaq still above critical support. I just don't think it will be enough to save the S&P.

So the question here is what kind of earnings are we going have from tech and small caps in general going forward here. If a few high profile bad reports happen, that may be all it takes. The market will really need some stellar reports from the tech and small cap world to save the S&P here and hold critical support.

With the economic numbers that have been sliding, I don't know if we'll get it. Maybe they'll be good enough to stall a major sell off until the fall when worse numbers are unavoidable.

I think the probability is that we are in for a big sell off. We'll get a clue tomorrow. If the Google news broad effect really doesn't last long and doesn't seem to have much effect, then it would be obvious that the rest of market participants agree with me. Otherwise, they'd see this as a big buying opp in front of some good earnings near the bottom of a correction.

GL

CJ

Wednesday, July 13, 2011

07.13.2011 -- QE3 got nothing

Ben's got to be a little concerned tonight in his comfy bed. His grand hint that more monetary easing, QE3, could be on the horizon had a half life of about 4 hours.

He basically told the world that 600 billion more of asset buying could be announced at sometime in the near future and he got a 100 point rally that lasted 4 hours.

Let me repeat.. a threat of 600 BILLION dollars of asset buying, caused a rally that lasted 4 HOURS.

That's all he's got folks. That's it.. he has asset buying and debt monetization. There are no other tools.

Every bear market since I was born, involved the FED lowering rates to stimulate the economy then in turn raising rates when the economy was solid to slow the growth and prevent higher rates of inflation. Their timing usually sucked, but it was a predictable cycle.

What happens now? The FED can't lower rates, they are at zero. They have monetized amounts in the trillions and now a threat to do that much more resulted in a rally that lasted 4 hours.

Remember 3 presidents ago, the thought of a budget deficit of a few hundred billion was crazy. People were shocked at the 400 billion deficit that Bush hung up with the war in Iraq. We are now printing deficits approaching 2 trillion.

The numbers get so large that they enter the incomprehensible realm.

To help with some prespective;

In 2010 the entire budget for Federal discretionary spending was about 1.3 trillion.

Discretionary spending is basically everything except Medicare, Medicade, Social Security, unemployment/welfare benefits and Interest on debt.

Discretionary includes Defense and basically everything else.

Our budget deficit for 2010 was about 1.2 trillion.

What does that mean?

It means if you cut every single discretionary program from the budget. Defense, Department of Education, Homeland Security, Department of Transportation, of Health and human services, of veteran affairs, of justice, of commerce, of labor, of agriculture, of interior, of energy, of treasury, of state, NASA, the corp of engineers, the SBA, the NSF, and the social security administartion.

If you cut all of those things.. not 10%, not 30%, not 50%, not even 80%. If you cut ALL of those programs by 100%. Meaning none of those programs, including the department of defense even EXISTS in the budget.

IF YOU DID THAT... you'd have a 100 billion surplus for 2010. 100 Billion. Just enough to run 1/6th of the department of defense and everything else is gone.

Politicians trying to tell you that medicare, medicade and social security don't need to or can't be touched are lying. They HAVE to be touched. In fact, they HAVE to be slashed. There's no other way.

Moving on...

Charts...

Here's our daily on the SPX;


As you can see, we had that 4 hour rally, then sold off into the close. We closed back above the 50/100, but only barely. This doesn't look or feel very bullish here. If we get back below the 50/100 again tomorrow, the failed rally today creates potential for a collapse.

Here's our hourly;


The hourly is still holding some support for a bullish move as well, but we don't have far to fall here. 1314 looks like a line in the sand. If the market dips below 1314 tomorrow, put yer helmets on because it could take a nasty dive.

I'll throw this chart out there tonight as well... the Transports;


They closed below the bollingers and are pretty far from some support. So the trannies or financials won't be giving the market any help here.

If the market is going to stage another attempt at a rally here it's going to come from the Russel, Nasdaq or REIT's. I'm not sure though that there is enough fire power there to break through all the resistance overhead.

I'm beginning to firmly believe this market is doomed in the near future.

GL

CJ

Tuesday, July 12, 2011

07.12.2011 -- Took out some support

After seeing the futures in the morning, today would certainly leave a bear with a somewhat disappointed feeling. Waking up thinking the market was going to tank 200 points at the open, then watching it all recover and even have a green market for a bit.

In the end though, we took out 3 levels of yesterdays mentioned support.

I present the first chart, SPX daily / 5 month;


As you can see, we tried to rally, got rejected by the mid-bollinger bands, then proceeded to sell off and actually closed below both the 50 and 100 day moving averages. While it didn't feel all that impressive, that late day sell off was quite damaging to the market. Losing the 50/100 is big. Bulls need to regain that asap.

Another thing the bears should like about today, we didn't leave a big gap on the open. Gaps always close, so a bear that wants to see a sustained selloff, ideally will not want to leave big opening gap downs without them closing intra-day.

Lets take a look at the hourly;


We broke below what was a potential bullish falling wedge. Now its a bearish falling wedge that's broke. As mentioned yesterday, it appears we will test that channel soon at 1304 (rising slightly). If we drop back into that channel.. then we have a big area of support at 1290-1295. Breaking below 1290 will invalidate some Elliot Wave counts that are bullish because a wave 4 cannot invade wave 2's space.

As mentioned yesterday, we are oversold on the hourlies, so a bounce can happen at any time. And as mentioned yesterday, we have a pattern recently of oversold or overbought conditions just continuing to become extreme versions.

Another chart for tonight, the Russel 2000, it's in a huge megaphone pattern, here's the Russel on a 7 month / daily;


That's a big megaphone. So now we have an 5 month old head and shoulders possibly forming in the SPX and we have a nearly 7 month old giant megaphone in the Russel.

The transports have also taken a real hit the last couple days.

The futures are positive at the moment. If the SPX can get back over the 50/100 and stay there tomorrow, it has a chance to put in a bottom for what would likely be a wave 4 and a final rally will occur. If the SPX doesn't recapture the 50/100 tomorrow, I think we have a date with 1290.

GL

CJ

Monday, July 11, 2011

07.11.2011 -- Clearer picture

(8:46 p.m. add) - One thing to add here, we are oversold on the hourly. We could certainly bounce up on the way to testing the 1310-1315 range. But oversold becoming more oversold and overbought becoming more overbought has been the standard lately, so I wouldn't necessarily expect a bounce, just note that we are oversold on the hourly, so a short bounce tomorrow or Wednesday is possible.

--------------------------

(original post)

The cloudy window is starting to clear up a bit. We now have some targets to really pay attention to that will signal what this market intends to do.

Lets start right out with the SPX Daily chart;


Big red candle today, you can see that it engulfed 3 days of last week. One of those days being a big green day.

For the bulls, you can see we closed right inbetween the mid-bollinger bands and the 50/100 dma's which are right on top of each other. So bears still have the mid-bollingers, the 50/100dma's, the bottom of the bollingers, and the 200dma to contend with in order to put in a lower low here. That's a lot to contend with.

Those numbers look like 1319 (mid-bollinger), 1315ish (50/100 dma's), 1301 (bottom of bollingers), 1273 (and rising.. is the 200dma)

ALL of those will need to be taken out in order to put in a definitive trend change with a lower high and lower low.

The MACD, RSI, and Stochs are rolled and are indicating a sell signal. So we will do some testing to the downside here. But it could stop and reverse hard at any of those spots.

Here's the SPX hourly chart;


It looks like we will at a minimum test 1310, that could be an intra-day test in which we bounce and close back over the 50/100dma at 1315. That would be a bullish day IMO. For the bears, if we take out the 50/100 intra-day.. we also want to take out 1310 on the close... Bears do not want see a break of the 50/100 and then bounce off 1310 and close back above the 50/100. Just something to watch because I think at a minimum we are going to see one of those things happen.

If we do break back down into that channel, 1299 would be the only road bump to testing the bottom down in the 1270's, which would also test the 200dma.

So again, another key level is that 1310 area, a loss of that would lead to 30-40 points further down.

Some of the other indicies are not as clear, the Russel 2000 isn't clear yet, the transports put in a new high but are in a DOW theory non-confirmation with the Industrials, NASDAQ is also unclear. Hopefully those will clear up for us soon and add to the picture.

One other area thats clear is the financials. The XLF looks like shit again. I think in addition to being under-reserved to pump earnings, I think our big banks have a lot more exposure to European debt that we think.

Speaking of Europe. The US is lucky Europe is such a mess. As long as they have insolvent countries just waiting to explode, we look like a safe haven, so treasuries rates will stay low. One day though, the PIIGS bond holders will take haircuts, austerity will be applied and fiscal sanity will return. When that happens, the US and UK better look out, because then they will become the targets of the derivitive monsters as we begin to smell like the rotting fish in the barrel. We can only hope that our moron leaders manage to somehow actually fix something before this transition happens. Which we all know won't happen, so all you can do is prepare and wait.

GL

CJ

Sunday, July 10, 2011

07.10.2011 -- Bout to find out

We are about to find out what this market has in store for us.

I'll start out with this chart;


As you can see, the market had broken out over the left shoulder of the potential head and shoulders pattern, then the sell off on Friday broke back below then rallied and closed just above that level.

As of Friday we were still holding a breakout, although at very overbought levels.

Looking at the futures tonight, it looks like this market may lose that support and head back down for what could look more and more like a 6 month long head and shoulders pattern.

Another point of insight is that this current rally obviously has 3 clear waves. From an Elliot Wave prespective, either we have a short pullback here for a wave 4 and then continue up for wave 5 OR this was an ABC corrective ending in only 3 waves. IF this move was a corrective move, that would mean it's a larger wave 2 and we are in fact about to embark on a large wave 3 down.

Our next move could eventually tell us whether we are already in the middle of a large turn down or we have new highs ahead of us.

If we go below 1293, per Elliot rules, we would invalidate the possibility that this is a 5 wave rally with another big up wave left. So, that is a line in the sand.

Here's our 30min chart picture;


From a shorter term prespective, we have broken that severe uptrend line and our first stop will be to test the top of the previous channel. Which will be somewhere between 1315 and 1320 depending on how long it takes to get there.

Below that would be the bottom of the channel between 1280 and 1290. I would think that 1290-1293 area will be critical for the bulls.

Because that area is critical I would put a high probability that we test it, just because that's how the market works. But only if we take out that first support at 1320 or so.

If we hold 1320 and head back up strong, we likely have a 5 wave move and there will be one more big push north, probably to new 52 week highs.

Like I said on Thursday though, I have no idea whats going to happen here, we are in a flux zone. We could flash crash tomorrow or rally to 1500. A little more time should give us a better idea.

GL

CJ

Thursday, July 7, 2011

07.07.2011 -- Challenge new highs

Not looking real good for the bears here.

The only things I can give bears right now is we are approaching extremely overbought, which really means squat a lot of the time, and from a contrarian point of view, severe moves like this are not typical of bull markets. Bull markets tend to grind up very slowly and very painfully over time. This type of violent action is more often seen in bear counter trend rallies.

Only 2 points of resistance left.. 1356 is very light resistance and there's a couple spots in the 1360s. After that it's wide openville.

The things that were previously making everything look bearish all came roaring back. All the momo's, AMZN, LULU, CMG, NFLX, etc. They were looking weak and toppy. Not so much now.

To be perfectly honest,.. this is the most fucked up, riskless, bail out infested, non-capitalist, government intervened, manipulated, computer controlled, algo driven market I have encountered in my 16 years of trading. Things looked ridiculous to me in 2000, watching stocks like bingo.com turn into 50,000% gains on no earnings. This is different, the fucked upedness of this market makes the 2000 tech bubble look sane.

I have no idea whats going to happen short term. I really don't. We could plunge tomorrow out of nowhere, we could rally to new all time highs, we could rally to new highs and then flash crash 1000 points in 1 day. The only thing I can say for certain, is that over a period of time, all this serial fiat printing, bail out nation, socialization of losses, and 1.7 trillion dollar deficits are going to come back and fuck us up real real bad. So bad, that you probably will not want to be living inside the borders of our beloved USA when it happens.

Here's the chart for tonight... not much resistance left. If we hit new highs, there's no telling what could happen. Like I said, anything from suddenly flash crash to new all time highs.


GL

you're gonna need it.

CJ

Tuesday, July 5, 2011

07.05.2011 -- New highs or plunge?

Key level of support is 1316

Key level of resistance is right where we are at 1339 and 1360-1370 above that.

What happens next is very important. If we embark on a violent reversal here off 1339, we have a very large mult-month head and shoulders in play. We can afford a little bit higher, maybe a small push to 1347 or so intra-day, but not much more than that.

We are extremely overbought on the hourlies and becoming very overbought on the daily. The weeklies are in neutral (but on a buy/rising) and the monthlies are very overbought.

I believe if we do go to new 52 week highs, whats left of this rally is does not have much time left. And i'm talking about the entire rally from March 2009. We could roll over anytime from now until September/October. But I do think we are limited to 3-4 months until the monthlies have no choice but to roll over.

Just one chart tonight, showing our nearly 5 month old potential head and shoulder pattern and why we are at such a critical level at the top of the right shoulder;


* I want to note here, even if we don't create a head and shoulders pattern and go to new 52 week highs, I believe this is all part of another long topping pattern like we had from May 2007 to October 2007. If we go to new highs, I believe it will be within 5% of the old highs.

GL

CJ