1/1/2014

In the long term, I'm convinced the market is overbought. Monthly and weekly charts for the S&P, Dow Industrial, and Dow Transportation are scraping along the upper Bollinger Band (set at 2 standard deviation), with upward momentum lagging.

The thrust seen at year end might produce some more gains this month though, and while we should be due for quite a large retracement as we approach the top of the giant monthly channel on the S&P, the rising wedges on the indexes have all been broken and may provide support. I'm going to suggest more gains in the next couple days and then some very minor relaxation before the rest of this month's upward movement towards 1870.

Also, since I primarily trade options, there's a lot more open interest on SPY calls in the coming months. However irrational it may be, there seems to be a serious amount of fearless greed out there, which could be a warning itself. The VIX has been rising with the market the last several days of the year.

S&P 500 Daily Chart

S&P 500 Weekly Chart

S&P 500 Monthly Chart

12/29/13

With the S&P 500 hitting all time highs in the 1840-50 area over the holidays, it is worth looking at the long term charts and pointing out that we are potentially testing a top of a weekly channel that goes back to the 2009 lows. In the short term, the market does look a bit over bought. The daily chart on the S&P 500 actually has some divergence on the OBV which could be hinting at a decent retracement. The flip side, however, is that a bullish flag is forming. The weekly channel that goes back to the '09 lows is an upward trend., after all.

It's definitely tough to call now, but I can't help but continue to see signals of an overbought market in the S&P 500 for the short term. Other indexes look slightly stronger.

For tomorrow, 1835 is support after a breakout of a channel on the S&P Daily Chart. If we get decisively below this, the next stop would be 1800 - 1802. A good bounce off of 1835 however would be pretty convincingly bullish and set us up for 1880-1900.

I think 2014 will bring further gains. Retracement on a larger scale than recently seen is due, but that would probably still keep us close to or in the 1700's if you look at the weekly channel.

S&P 500 Weekly Chart

S&P 500 Daily Chart