1/31/2014

So I need to confess - I got pretty excited when stock futures were showing the Dow opening -130 points or something like that. Unfortunately for me, and those who see some potential bearish opportunities in the indexes right now, the market recovered nearly all of its losses throughout the day.

Regardless of today's recovery, we have seen the S&P 500 test 1800 a few times this week, and it cannot get above it. As a result, the current bear flag appearing on the daily chart looks a little more like a rectangle now - the upper level being 1800, and 1770 being the lower end.

The Dow is the weird one right now, as it did clear its December low. Perhaps the appropriate support level would be 15580 - 15600 - at the 23.6 fib level of the wave from November 2012.

I don't really like the way the oscillators look on the daily charts. The hourly suggests downside, but the daily is not offering a high probability of a red day tomorrow. But I guess you could argue that we will enter dip two of the usual double dip into overbought/oversold areas. We'll see. I'm going to be skeptical.

The weekly looks to favor more downside in the weeks to come, but it may pull back upwards in the very short term before continuing the losses. I will probably question the downside if we get too far above S&P 1815.

Also to note on the weekly, there is a parallel channel from 2009 on the S&P 500. It was broken during October, and has just tested the resistance-turned-support. The low for the day made it through, but it did not close below it.

S&P 500 Daily Chart

 

S&P 500 Hourly Chart

S&P 500 Weekly Chart

Dow Jones Industrial Average Daily Chart

1/30/2014

US indices saw saw gains of around 1% on Thursday. There is likely going to be an attempt to make it to 1815 on the S&P but I doubt it will break through. We are already seeing a lot of resistance at 1800.

The hourly chart looks poised to move upward again tomorrow, but I'm not sure how much to expect. The bullish advances look weak for once, and we are kind of far from the 1815 S&P levels still. Either way, unless 1815 is broken, I'm not swayed by the upside....and even then I'd still be skeptical. The lows from December still hold as a support point to break for continued declines, after which I will target the S&P 1735-40 levels for confirmation of a push to the 200 day MA.

This current action is most likely the formation of a bear flag on the daily chart. Looking a tiny but more into the future, this could end up as a H&S pattern.

Only the S&P charts below, as the story is largely the same on the other indices.

S&P 500 Daily Chart

S&P 500 Hourly Chart

1/29/2014

With a pretty low open (Dow -100 pts) and a bit of drama after the FOMC minutes, all major US indices lost over 1% as they pushed toward support dictated by the December 2013 lows.

When I look at the hourly charts, given the very bearish formation and oscillators that, frankly, look like they want to drop more.

For the wave from November 2012, the first descending fib level is at 1730 on the S&P, so I think if the lows from December are broken, that is a potential target.. RSI on the weekly charts doesn't look very tired at all.

I'm still waiting for a break below the December lows, however going for the downside at the close yesterday would have proved profitable.

Dow Jones Industrial Average Hourly Chart

Dow Jones Industrial Average Daily Chart

Dow Jones Industrial Average Weekly Chart 

S&P 500 Hourly Chart

S&P 500 Daily Chart

S&P 500 Weekly Chart

1/28/2014

As expected, the S&P and the Dow (and pretty much all other US indices) rose moderately on Tuesday. I am surprised to see that the flags I drew on yesterday's posts look like they should be pennants/triangles at this point. However, the gains were weak today and Wednesday is bound to bring drama via FOMC minutes. This, coupled with lower volume from Tuesday, has me thinking the market is waiting to react to the impending remarks about US monetary policy.

Wednesday could see a big rally to 1815, but the next upper fib level from October 2013 is around 1800-1802. This may or may not give the bulls trouble on Wednesday. While there seems to be minor resistance in the 1795 area, a break above it is likely tomorrow.

I'm still using the horizontal supports of 1760 for S&P and 15,700 for the Dow. The completion of what looks like a bear flag should culminate in a drop below these levels, at least to the 1740's on the S&P.

While it does appear the FOMC minutes will be used as an excuse to rally, there are rumors of removing another $10 billion of QE per month. This has the potential to swing the market in either direction, so Wednesday could be more of a toss up than some realize. I really dislike speaking too much to news/policy events and their effects on markets, but the fact has been that these Fed days are prone to light-speed swings, around which I would exercise caution.

S&P 500 Daily Chart

S&P 500 Hourly Chart

Dow Jones Industrial Average Daily Chart

Dow Jones Industrial Average Hourly Chart

1/27/2014

After declines earlier in the day, Monday's price action in the S&P saw a tiny bit of recovery only to close 8 points lower than it opened. The sell off is very aggressive right now, and the weekly looks like it's spelling more doom in the months ahead. That being said, I think after a lower open on Tuesday, we'll see a bounce toward old supports like 1800 - 1815. The hourly has built a pretty obvious bear flag that I think will either guide the bounce tomorrow or break and open the door for a blow below 1760.

There's a similar story on the Dow Jones Industrial - the bear flag on the hourly held at the close....but barely. 

The bears seem to have a decent grip on the market. If this continues the next logical support area to watch is the low from December on the indices - 1767.99 on the S&P, 15,703 on the Dow.

There is some Fed action on Wednesday, so the middle of this week is bound to be rocky, but it's unlikely the bulls will regain control this week. 

S&P 500 Daily Chart

S&P 500 Hourly Chart

Dow Jones Industrial Average Daily Chart

Dow Jones Industrial Average Hourly Chart

1/24/2014

While the Dow hinted at it last Thursday, Friday saw the sideways channel on the S&P decisively broken, along with multiple support points for all other US indices. Markets lost between 2% and 3% for the most part across the board. Watching how this market reacts to support points on its way down will be be key.

It looks like the markets will test the lows from December - although the oscillators suggest they may bounce off it for a corrective wave. On the S&P, this is 1868, but I'd seek a break under 1865-60 . On the Dow, 15,700 is due to be tested.

The Russell 2000 still has some fib levels to break for the wave up from December low of 1100, as well as a channels support from October 2013. This index may not retrace 100% of the late December they way the others are hinting at.

The weekly charts suggest more downside after a bounce. And oscillators are classically double peaked in overbought territory on the monthly.

S&P 500 Daily Chart

Dow Jones Industrial Average Daily Chart

Russell 2000 Daily Chart

1/23/2014

A little bit of action commenced today with some drops of nearly -1% across all US indices. The results are a bit mixed, but probably bullish overall.

The S&P 500 remained in it's range of 1845-1815 despite the declines. 1820 actually held very tight, and could be confirming a rising channel on the daily chart.

The Dow technically broke out of its rising channel from Oct. 2013, and while it's low was through the current falling channel/flag, it wasn't on a closing basis. With all the other indices not breaking out in any sense, and some (Russell, Dow Transports, NASDAQ) still looking bullish as ever, it simply can't be taken seriously.

The oscillators now look like the got a chance to relax. Momentum and RSI are closer to oversold after today. Will be interesting to see what tomorrow brings.

S&P 500 Daily Chart

Dow Jones Industrial Average Daily Chart

Russell 2000 Daily Chart

1/22/2014

There isn't a ton more to say about today's price action than there was yesterday....and every other day preceding it this month. The sideways pattern on the S&P 500 goes back 3 weeks, so any breakout should be decent.

I will say that on the S&P Daily chart, we appear to be forming the third impulse wave of the Elliot cycle...looks like it could bring us to 1870.

The Russell 2000 climbed again today and made a new high. I'd assume this index is leading the next bullish charge.

S&P 500 Daily Chart

Dow Jones Industrial Average Daily Chart

Russell 2000 Daily Chart

1/21/2014

As if the markets knew I was out of town, they continue to trade sideways. This doesn't bother me as whichever way it breaks, it will be decent having almost gone sideways for nearly 3 trading weeks. Previous consolidation patterns similar to this have lasted just under a month recently, so the clock is ticking.

On the S&P 500, the upper level is still 1850. It has proven a very sturdy resistance. On the low side, I'm sticking with below 1815 as the breaking point.

The Dow industrial is still consolidating as well, and is offering upper resistance of 16500-16550. Lower support would be a decisive blow below 16200. We shall see.

The Russell 2000 broke out of it's consolidation 4 trading days ago, and appears strong. It may be a clue of things to come.

S&P 500 Daily Chart

Dow Jones Industrial Average Daily Chart

Russell 2000 Daily Chart

1/14/2014

After the 1.20ish percent decline that occurred on Monday, Tuesday's open on the S&P bounced upward with great force, almost completely wiping away Monday's losses.

The channel on the weekly chart appears to have been what provided the support for Monday's decline. 1815 is right where the current upward channel from last October was sitting. I'd say that's pretty encouraging for the bullish side as it most likely means Monday saw the low for the week.

I'm also attempting to (finally) utilize Elliot Wave Theory in my analysis, so the counts will be showing up. The daily cycles fit in nicely within the weekly right now, and it appears a new impulse wave is forming.

Tomorrow should ideally generate new historic highs with the momentum this breakout appears to have. A realistic target is between 1850 and 1860, but above 1860 might have a chance. This next wave up could see 1880 or so before another correction.

S&P 500 Daily Chart

S&P 500 Weekly Chart

1/12/2014

Trading has been largely sideways on the S&P 500 since the last short side shakeout. Most of the US indices look bullish, at least for the immediate term. But we can't ignore the fact the these markets are hanging close to overbought territory on a regular basis.The channels on the daily charts are all offering higher levels yet again, and the trajectory appears very steep.

The Dow Transportation Average has already made new highs, so I'd like to think it's a hint of what's to come for other indices. The blue channel on the S&P 500 was drawn a day or two ago, and is being held to on a closing basis. Oscillators on the 4 charts below all suggest continued upward motion for another visit to overbought land.

Another thing of note - the jobs data that came out was largely considered 'disappointing', yet the market didn't appear to react as many expected. Some chalk this up to being a case of market participants seeing it as an excuse for our central bank to put off tapering. I think we could be seeing potential examples of the ideas that surround contrary opinion in the markets. There's a lot of fearless optimism these days (low VIX, the consensus bullish sentiment on Barron's is 'overly-optimistic'), so I intend to remain very alert.

Barron's Investor Sentiment Readings

Below are the daily charts for four US indices.

S&P 500 Daily Chart

Dow Jones Industrial Average Daily Chart

Dow Jones Transportation Average Daily Chart

Russell 200 Daily Chart

1/8/2014

Well, tonight's post might be very similar to the previous one. The triangle on the hourly chart held pretty much to the line. Interesting the daily chart now has some semblance of a channel from recent price action. The upper band actually makes sense for tomorrow if there's a breakout - about 1880 - but if that happens I think we'll be overbought again.

Once again, tomorrow will test 1840, although the downside tolerance will be much lower if that is going to happen.

There were FOMC minutes today with some interesting outcomes. Unemployment target now sits at 6.0% for a policy change. $75 billion in open market purchases per month will continue to be made. I think the sideways trading that occurred today is a great visual representation for the way this information was priced in. It was largely expected, market participants appeared indifferent. This only became slightly more volatile.

Also, there may not be a post tomorrow, as I will be out of town.

S&P 500 Hourly Chart

S&P 500 Daily Chart

1/7/2014

So we had a decent 3 days in the red, which could very well have shaken out the bearish positions. The market pretty much opened and took off. 1840 was tested a few times, and the high for the day was 1840.10, but there was no decisive break above it.

The hourly shows an ascending triangle whose top is right at 1840, so hopefully Wednesday we see this level taken out to lock in some gains. Wednesday's low could be as low as 1831 in the early part of trading, but it would appear that the support increases by about 1 point every hour if it's to stay in the triangle. Momentum is pointing up, and RSI is ready to run.

I think things are bullish in the immediate term, and we'll see how the market treats 1850. Since I've switched my charts to candles, the daily looks like some sort of ladder bottom, or a morning star without the gaps.

The only major problem I see is that levels above 1850 in the coming months only seem plausible if we get above the giant monthly channel. The monthly chart without this channel - which I've placed below - still looks bearish, and it is probable that January will close red. To test the support in the monthly channel from 2011, we would either need to see 1725-1750 in the next couple months, or we bounce off 1800 in the spring.

Either way, I'm sort of expecting 1850 to be resistance before the spring, and will be surprised if there's a breakout. I think many would agree we need a correction, as this is getting a bit ridiculous.

S&P 500 Hourly Chart

S&P 500 Daily Chart

S&P 500 Monthly Chart

1/6/2014

With losses today, the correction from the Christmas-time rally appears to be nearing it's home stretch. I don't know if we'll see a red close Tuesday, but I do expect new lows before any turn towards the up-side can be taken seriously. Breaking decisively above 1830 on the S&P should end the down trend and the next fib level is around 1818 - 1820. The lower end of the current falling channel spans the 1815-1810 range, so these levels could very well be tested.

As Oscar Carboni points out in his latest video, the S&P daily chart now looks like a bear flag. It's also worth noting that the Monday low is below the lower band of that flag. Oscillators on the daily appear to be coasting smoothly towards over sold, but have not yet reached their destination

We should keep in mind, this down trend did technically bounce off the giant monthly channel. The chart is below for reference.

S&P 500 Daily Chart

S&P 500 Hourly Chart

S&P 500 Monthly Chart

1/5/2014

Friday saw some very sideways trading occur with a negative close on the S&P, though not by much. Other indexes closed green. The shorter time frames such as the hourly and 30 minute charts on the S&P make the sideways action look like a continuation of of downward pressure, while the daily chart looks in mid-plunge toward 1810-ish.

Monday morning may see fast gains toward 1838 before it starts heading down again in the latter part of the day. If 1840 is passed, technically it could still bounce off of 1849.

I'm pretty bearish about the short term, and I think gains tomorrow still fit in with this outlook so long as the S&P remains below 1838. The bottom for tomorrow should be around 1820. You never know, of course, but we are creeping ever closer to the perceived 'top' of the big channel on the S&P.

Also, the VIX hourly appears to be bull flagging. Although. I'm not sure how relevant flags are on the VIX. It appears to act more like an oscillator.

S&P 500 30 Minute Chart

S&P 500 Daily Chart

VIX Hourly Chart

1/2/2014

While I expected declines in the near term, I did not expect them today. Luckily, when I saw that S&P 500 futures were below 1840 this morning I leaned heavily toward short positions.

Declines at this stage should not really surprise anyone as there are signals of the market being overbought, as well as some trend channels that have very long term significance. Tomorrow looks set to be another red day, considering the oscillators appear to be in mid jump on the daily and weekly charts. Also, this could be a bull flag forming on the daily and weekly, in which case it would merit more than one day. Not to mention, it's completely feasible to envision this short trading week to turn red with 2 out of the 4 days seeing sell pressure.

Who knows, I could be biased.

Getting close to 1800 tomorrow - which is where support is on the tentative trend line from the October lows - is a bit of a stretch. The lower Bollinger Band is at around 1805 and there are a few fib levels to hit before 1800. As I have recently pointed out though, this market is overbought in the short term for sure. 

S&P 500 30 Minute Chart

S&P 500 Daily Chart

S&P 500 Weekly Chart