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Crunch Time: Breakout UP or DOWn


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#1 dTraderB

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Posted 10 January 2019 - 06:03 PM

SPX hourly --- pullback today then up but still not above recent resistance.

Consolidation during past 2 days so now it is either UP or DOWN.... or more thrashing around below SPX 2600

 

49840131_2448059601931626_24604244699491



#2 ryanoo

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Posted 10 January 2019 - 09:09 PM

Nice you covered everything - Up, Down or sideways. LOL! 

Nice chart!



#3 dTraderB

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Posted 10 January 2019 - 09:11 PM

This is how I also view the current market situation & possibilities:

 

".....Momentum is clearly higher and the longer we hold near 2,600 resistance, the more likely it is we will break through it. Trump striking a deal with Democrats and the Chinese will send prices surging higher. But if we don’t pause and consolidate recent gains, that breakout will be fragile and vulnerable to a pullback. I would be selling a sharp breakout, not buying it. This would be a buy the rumor, sell the news kind of thing.

Markets consolidate one of two ways. Either they take a step back, or they trade sideways for an extended period of time. Given how volatile the market has been and how much uncertainty there is in the headlines, boring, sideways trade seems highly unlikely. Instead, this market most likely needs to take a step back before continuing its climb higher. Whether that step-back starts Friday or waits until the 2,600 breakout fizzles is anyone’s guess, but at least we know what to expect and that helps us get ready to trade it.

I would rather be taking profits at these levels than adding new money. A near-term dip to 2,500 that bounces would be a great buying opportunity. An unsustainable breakout above 2,600 that fizzles could be an interesting shorting opportunity."

 

Screen-Shot-2019-01-10-at-5.39.39-PM.png

https://cracked.mark...re-it-happened/



#4 dTraderB

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Posted 10 January 2019 - 09:14 PM

Nice you covered everything - Up, Down or sideways. LOL! 

Nice chart!

 

Yeah, it's consolidating so you got to give the market the advantage and go with it when there are doubts about the next move. 

 

Bulls have the advantage but upwards momentum is declining.



#5 dTraderB

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Posted 10 January 2019 - 09:23 PM

Best read of the day goes to Greg Ip at the WSJ: “Fear of Inverted Yield Curve Stalks Market”. The 2s/5s spread did invert this time around. Its track record in predicting recessions is about 80%. Not so bad, eh?

 

JPM has cut US GDP projection for Q1 from 2.25% to 2.0% due to impact of ongoing shutdown of fed govt. Each week govt is shut down subtracts 0.1-0.2% from quarterly GDP growth. Since output of govt sector not priced & sold in mkt, it has to be inferred by number of hours worked.

 

 

_ErzqsW2_bigger.jpgHolger Zschaepitz @Schuldensuehner
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This chart in which @Lavorgnanomics shows US budget deficit vs Treasury issuance adj by Fed purchases of govt bonds spells trouble for US. Tsy Department to issue $1.3tn this yr while Fed’s balance sheet could shrink by $600bn. This combination poses substantial risks. (via RTRS)

DwlWD85X4AAS_-s.jpg
2:57 PM - 10 Jan 2019 

Edited by dTraderB, 10 January 2019 - 09:24 PM.


#6 dTraderB

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Posted 10 January 2019 - 09:25 PM

NYMO trying to tell us something?

 

 

$NYMO has gotten a lot of attention in the past few days as its extreme oversold readings reached extreme overbought readings within just 11 days.

How extreme? Well, the only other reference point again is the 2008/09 financial crisis:

nymo.png?resize=639%2C478&ssl=1

+117. It’s a sample size of 1, but let’s dig a bit deeper here. What happens when $NYMO goes from over -100 to over +100 in a matter of days as it just has?

2019.png?resize=639%2C523&ssl=1

The only history we have to go by says this happens:

2009.png?resize=639%2C523&ssl=1

People may forget, but that rally from Nov 2008 into January 2009 that produced that big fat $NYMO read was an intermittent top before markets dropped 30% into 666 on $SPX by March. Except this time the $NYMO read has come much faster, but both $NYMO reads occurred in early January following a late year correction.

With a sample size of one it’s not a large enough statistical sample to give this correlation any solid predictive weight, but it is worth pointing out and something to be aware of. After all big corrections often see the initial strong counter rally fail and produce a retest with new lows:

SPXW-4.png?resize=639%2C283&ssl=1

There’s one other difference perhaps of note. In 2008 and 2009 Q1 served as the basis for the ultimate market low. Bailouts, QE, mark to market suspension, you name it, it was all part of the active measures.

All we’ve had so far is talk. QT is still happening. So for all the dovish talk by the Fed there hasn’t been any dovish action that we know of anyways. And why should there be? We’re not in a recession yet.

Which makes for an intriguing question: Where is the crisis? But if there is no crisis, why did Treasury Secretary Mnuchin hold emergency calls around Christmas? Why did Fed Chair Powell cave last week and kick this technical reconnect rally into vertical overdrive?

If there is no crisis why are they acting like there is one? One wonders. We have no overt crisis reminiscent of 2008/2009, but we have several technical signals that are acting like they did back then. And perhaps that is something worth paying attention to in the days and weeks ahead.

 

https://northmantrad...01/10/intrigue/


Edited by dTraderB, 10 January 2019 - 09:27 PM.


#7 dTraderB

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Posted 10 January 2019 - 09:56 PM

Everyone is watching the resistance zones above the current market level

 

Unfortunately, the S&P 500 bounced from the 138.2% Fibonacci level at 2,348, but fell short of the more common 161.8% Fibonacci support at 2,269. Following the breadth thrust, the S&P exceeded the 2,520 level outlined last week, which led to further up side. 
 
      Regardless, the S&P is approaching some potent resistance levels (see first chart here), and a pause is becoming more likely. Based on the breadth thrust, a 'buy the dip approach' seems like the way to go. 

 

MW-HB719_simon1_20190110092801_NS.png?uu

 

https://www.marketwa...2009-2019-01-10



#8 dTraderB

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Posted 10 January 2019 - 09:57 PM

in nose-bleed territory!

 

McClellanOsc_455.gif

 

https://www.mcoscill...t_breadth_data/



#9 dTraderB

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Posted 10 January 2019 - 10:00 PM

WOW!

NAIM at highest level since last July

 

Date NAAIM Number Mean/Average Bearish Quart1 Quart2 Quart3 Bullish Deviation 01/09/2019 66.80 0 6.00 70.00 99.50 200 60.63 01/02/2019 59.43 -25 10.00 60.00 100.00 200 53.30 12/26/2018 47.59 0 0.00 40.00 82.50 200 50.70 12/19/2018 31.96 -100 0.00 18.00 62.50 200 63.86 12/12/2018 55.51 0 2.50 49.50 94.44 200 50.14 12/05/2018 61.96 -100 27.50 75.00 100.00 200 61.26 11/28/2018 53.21 0 19.25 50.00 92.81 120 39.99 11/21/2018 30.55 -200 2.50 30.00 79.00 130 73.89 11/14/2018 35.13 -100 7.00 45.00 60.00 107 48.37 11/07/2018 64.96 0 50.00 80.00 85.00 100 33.59

 

http://www.naaim.org...exposure-index/



#10 dTraderB

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Posted 10 January 2019 - 10:13 PM

It appears to me that many analysts who were bearish last week and early this week are throwing in the towels....

 

....most likely near a ST top.

 

The upward thrust in U.S. equities appears to be slowing, but there's been no damaging move technically to the downside, other than a break of short-term intraday support on the S&P 500 as follows:

1547127719707917319045.pngThe bad news is that there were multiple tests of this trendline - 10 or 11 by my count.  The good news, though, is that this is a very short-term chart and there are several more important support levels below.  The fact that it's occurring at a major price resistance level at 2581 does add a bit more bearishness.

Dow Jones futures are off their worst levels of the morning, but nonetheless pointing to a lower open.  They're down 41 points with roughly 45 minutes left to the opening bell.

Current Outlook

One short-term issue the U.S. stock market must deal with is the negative divergence appearing on 60 minute charts.  During uptrends, these can be resolved rather easily and quickly by a brief period of selling and/or consolidation.  Given the overall downtrend that began in Q4, however, a short-term negative divergence can be a signal to jump start the next leg down.  While it's too early to tell if this is the case currently, you should definitely be prepared for the worst:

1547123460161103459979.pngThe S&P 500 has now made up all of its losses since the infamous "two more rate hikes" FOMC announcement on December 19th that spurred panicked selling into the Christmas holiday.  It's also the level where major price support (2581) resided from the February 2018 low close.  So it makes sense this is an area where sellers would be lined up.  Note also the black arrows marking short-term overbought conditions (RSI near 70).  We hadn't seen that in a long time.  Overbought in a bear market is not usually a good thing as it rarely lasts long.