Wednesday, March 14, 2012

03.14.2012 -- Blow off top?

Last time I posted, I went over how the market had to make a decision and the decision was made to move higher and we have now broken the rising wedge to the upside.

This, IMO, is a classic blow off top with a false breakout. This is what I wanted to see. Finally.

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Key Levels

Upside -- 1400, 1450?

Downside -- 1391, 1373, 1354, 1335, 1286, 1260

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SPX Daily;


So obviously the market feels really bullish right here, so lets go over some of the hidden things that are bearish.

1) First move is usually wrong. That is the underlying premise of our fake breakout higher and blow off top.

2) You can see in the chart that the RSI and MACD is declining while the S&P is putting in a powerful move north. That is a bearish divergence.

3) Yesterday the Transports tried to make a move north and got back over the 50DMA.. that reversed heavily today and is back underneath the trannies greatly underperformed today. This is still a DOW theory non-confirmation, which is bearish.

4) Sentiment is getting extremely bullish with things like CNBC having an "analyst" on this morning that when asked, essentially said he was buying pretty much anything and everything.

5) The financials were trying to stage a breakout yesterday. Today the XLF closed flat.. but the internals were quite mixed.. with some stocks like Citi and Goldman Suchs taking a big hit and others like BAC rallying hard. The XLF was very bi-polar today.

I know it doesn't seem like it, but something ugly is about to come out of the woodwork here soon. It could be that housing prices start tanking again with rates looking like they've put in a long term bottom. I still believe there are simply more houses than people to occupy them and it will remain a fundamental problem for the housing market. It could also be when the CDS trigger on Greek debt is pulled. It could be a large country like Spain or Italy that suddenly starts spinning the toilet bowl... but it will be something and soon.

GL

CJ

Thursday, March 8, 2012

03.08.2012 -- Decision time..

So we did what I expected in my last post, we broke, we are now backtesting. Believe it or not, it took the last 2 days of rallying to backtest the old trendline.

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Key Levels

Upside -- here to 1374

Downside -- 1325, 1320, 1279, 1259

Again still at a point where 110 S&P points breaks all support.

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SPX Daily;


So pretty clearly you can see the break below the trendline and then now the perfect backtest.

We either break back into the wedge now and most likely put in another round of new highs, or we will fail right here.

If we fail right here, I suspect we will test the full bounderies of completely falling apart which would be the lowest moving average which currently sits at 1259 and rising. Below that, the market has a real problem on its hands.

its pretty much do or die for at least 50 points here, the break higher must happen tomorrow if its going to do it. Either that, or it would need to be a very narrow range day and explode up on Monday.

Otherwise, i expect us to re-fall hard here soon.

GL

CJ

Monday, March 5, 2012

03.05.2012 -- Potential roll over..

As a side note, I am finding it harder and harder to make the time to do these with our 2 month old and our 2 year old right now, so they may not continue to be 4-5 days a week and might just be 2-3 days a week for a little while.

Moving to the markets.. i think we have a rollover in process. The outstanding question is what kind of top it is. The power of the eventual selling will help answer that question.

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Key Levels

Upside -- 1366-1377

Downside -- todays low to 1360, 1319 (big drop to next support), 1275, 1258

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SPX Daily;


So you can see there what happened today. We sold back into the wedge, which qualifies as a false break north, but would have liked to see a bigger blow off. After falling back into the wedge we fell to the bottom of it and then bounced and closed back in the bollingers.

I think within the next few days, we will again test the bottom and break lower out of it. Which will produce (after a possible back test) at least a 50 point S&P selloff just to start.

Could we have a fake out here and THEN complete a final surge that is the real blow off I was looking for? Yes.. its possible. But if we break convincingly below this wedge on close, that will be it for the rallying for awhile.

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Lots of rotational selling going on right now. The Russel 2000 and Transports were very weak last Thursday/Friday while the market tried to hold its own and stocks like Apple still closed green. Today the Russel held up o.k. while Apple sold off hard and sent the NAS down hard.

Right now.. the Russel 2000, Transports and SOX are being a drag on the market. Leadership had really narrowed and we have parts of the market starting to show cracks in the armor.

The trannies, Russel and SOX are especially important as a group. The Trannies failed to reach a new high and therefor have a non-confirmation of a DOW Theory buy signal. A non-confirmation is bearish. The SOX is important becuase its the semi-conductors and they often lead during bull markets as strength in manufacturing shows up and chips are needed in so many products. The Russel is important because it represents small business in America and generally is a better represention of the local economy and not so much how our economy is benefiting from the debasing of our currency and government deficit spending.

Without those three sectors also participating and hitting new 52 week highs with the S&P and DOW, it's really a bearish divergence in the market.

GL

CJ