After X-mas the market had a chance to pull up. Cumulative breadth was rising, albeit stubbornly, and the "key" indicators were moving into a position from which upside action "should have" resulted. In my last post I noted the good news-bad news look to it all, placed my bets, put in my stops and sat back...And then it all caved in. So now what?
First, breadth fell apart:
The EMA 10 is below the EMA 55 and its all well below the 200
The weekly fell back hard, way below its key 21wma and the ROC 5 at below minus 10 is unusual, to say the least.
So what's it all mean? Well we are "oversold" but something more ominous is going on. Post the August wipe out the charts were still oscillating nicely in their buy low sell high mode but the gentle pattern of gradual wealth accumulation has, for the time being, been "disrupted". Cracks in the normal ebb and flow usually indicate deeper problems out there and this is not to be taken lightly. Kudos to the bears who had the good sense to cash in on these declines, but more to the point: caution to those who may have not lived through (or survived) big dips. Things can go from bad to worse. There will be rallies, but this is no time for the amateurs or those with funds that they cannot afford to lose....
But remember: life goes on and there are more important things than money: Like a freezing cold beach on a winter's day:
Good Luck in all your endeavors.
Its more of the same good news-bad news... The key, IMHO, is breadth, which continues to improve:
the weekly picture is "positive" in that there are now 2 closes above the 21wma and the ROC 5 remains positive:
And the daily continues to show the mixed bag of positive price with lagging key MAs. Price is above the EMA 10, but the 10 remains below the EMA 55. THis can change quickly. If the market is strong, these EMAs should flip soon, but remember, we play what we see, not what we wish we're seeing....
Bottom line? Still long, taking advantage of adding to longs on swoons, trade management in place. If the market is "ok" we should continue with an upward bias... if we do, great. If not, we're stopped out and reconsider what it all means if/when it happens. I would not be surprised by lower volume and volatility until the end of the year. Good trading to all
Might as well post here....
First of all, Happy Holidays to everyone!
Second, as you know I follow cumulative breadth. It is positive. I trade predominantly in the direction of this indicator.... when this is positive, as it is now, I "plunge in" on swoons and trade long. So far so good:
Third, the weekly chart shows a positive MACD, and a squeaker close above the weekly MA. Needless to say, the ROC 5 is up, after a sweet double bottom. Be nice to see the weekly MACD cross above zero...:
finally, the daily. Here's the good news/bad news. Note that the 3 major indicators, the 10 and 55 EMA and the 200 dSMA are all smooshed together with today's close... A kiss back and blast off or a kiss of death? Note, too, the "overbought" appearing slow stochastic... perhaps this is similar to September, but perhaps.... it is what it is, overbought...:
So? I'm long off the recent big swoons and added on the recent reactionary swoons, shifted from Dec to Jan OEX calls. But I must admit the charts make me nervous. One look at these charts and you can see what's not right. Either we push up higher with gusto, and start seeing a rising RSI (unlike the currently barely positive wimpy RSI), a turn up in the weekly MA, or the rally's days are numbered...does look a lot like early to mid September, though, doesn't it?
Trade smart, trade carefully and always have a plan.
I didn't update for the past 2 weeks because nothing had changed. I pointed out that NYSI was still negative and although some indicators were oversold, not all were. I expected a reactionary bounce, which we got in spades, but also suggested that even if the bottom were in place, the odds were against the market simply cranking straight up. So, what's new? March ended with a very interesting and tricky technical picture. Several key indicators still suggest that the selling may not be done, but at the same time several indicators have moved up nicely. The EMA 10 is back above the 55 and the weekly closed back above its 21wma. The weekly ROC still looks very weak. RSI helped (not!) by settling in right at 50. So, where does that leave us? Obviously the market is sensing some internal unease here and the numbers reflect that very clearly. IF the market takes off to the upside from here, it will be doing so at the risk of a much more disastrous collapse later this year, as the requisite "oversold" conditions were not met. But that's just chin-stroking for the future. Shorter term, I'm back to day trading, as I'm still not comfortable parking a big, intermediate position on the long side. There is still the possiblity of one last swoon...
Finally, no real help from sentiment. The weekly OEX put call ratios are still supportive to the upside, but have been so for several weeks and are, therefore, neutral at best. Bearish investor sentiment swung very rapidly from "too bearish" a couple of weeks ago (hence the rally) to slightly bullish, hence the stall we've seen so far. This, too, doesn't help. My best guess? An upward drift during the first few days of a new month, pre-Easter trading period, keeping in mind that the all clear has not, at least to my ears, been blown.
Good Luck with your trades...
NYSI/Cumulative breadth is still pointing down:
The daily chart shows signs of being "oversold" but is unreliable:
And the weekly chart is only 3 weeks into a "sell" signal. Sell signals on a weekly basis almost always last longer than 3 weeks. Sometimes much longer:
Sentiment is falling into line exactly as expected. There continues to be an increase in put buying, and public sentiment gauges are showing a persistent tilt to the bearish camp. All of this is conducive to the cleansing out period we are in, and is setting the stage for a nice rally/recovery. Perhaphs a real "summer rally"?
In the meantime, there is enough energy stored up in the decline to support a bounce at any moment. The daily and weekly both suggest resistance at the 1412 to 1414 level. I still expect any further sinking into this slush should be limited to the 1325 area, while any sudden collapse to 1275 would be a spectacular buying opportunity.
Good luck in your trading this week. Remember what Baruch said, "Buy straw hats in the winter, for surely spring will come"
This decline continues to remind me of last year's May-June-July affair. The key word is "remind". Markets are never quite the same.
As you can, the current "sell signal" on the NYSI is starting to mature. In a bull market this signal should not really last more than 12 weeks...
1419 on the SPX ... jot it down....
The weekly is instructive. It shows how the market ultimately broke down. If we are still in a bull market, then we'll have to "back and fill" down here for awhile. While violent and sudden "V" reversals have been known to occur, they are rare. The downside damage should ideally be no more than another 50 or so SP points. A break to trend line support in the 1275 to 1300 range would be a little bit hairier than expected right now (maybe later this year).
Finally, sentiment is catching up nicely with the decline, and is, as usual, building a platform underneath.
Have a great week trading.
Not much new to add to the Feb 28 post. Markets, as expected, remained under pressure and by week's end the EMA 10 crossed under the EMA 55, which is never a good sign for bulls. NYSI is still falling and does not appear either oversold or showing any signs of turning yet. RSI, which was very low last week, remains low. As of late Sunday night, Asian markets are already down 2 to 3% and unless something dramatic happens before the opening bell, Monday looks to be a potentially ugly event for the bulls. Expect dramatic bounces to occur, possibly up to the EMA 55. With markets under full retreat, that long trend line is looking more like a possiblity, around 1300. Before we get there, though, there is the 200 day MA, which tends to give markets a point of reference, if not a pause. And where's that? Right around a 3% drop from Friday's close on the SPX, roughly 1344....
Good luck this week.
First, cumulative breadth is still pointing lower:
And the WEEKLY data suggests we could be stuck in the muck for awhile:
But the action is rarely straight up or down, so some zig zags are expected along the way, especially as we get our short-term indicators oversold:
Bottom line? I have no doubt that we are still in a bull market that is far from over. If you share that longer term view, then you agree with me that we are getting one of those rare and lucrative "buying opportunities". We should have several weeks to accumulate profitable positions. Shorter term what you see is what you get: increasing volatility with a negative NYSI, i.e. downward pressure.
My "feel" is that its a lot like last May-June.
"Negative cumulative breadth is not good for bulls". Ask your mother to make a needle-point pillow of that, and sit on that pillow whenever you are reviewing your charts. Unfortunately it does not tell you the magnitutude of the weakness and is of no use in predicting precise numeric tops and bottoms. If you believe that NYSI is of any use, then you should be very careful about trying to pick a bottom any time soon.
Here are two charts. The first is 1987 and the second is now. Just some visual aids for those trying to visualize a bottom....
While the drop to 30 on the RSI is intriguing, as it's been able to hold corrections for the past few years, I would not be surprised to see us drift a little lower this time.
NYSI made a valiant effort to climb back out of the muck, but stalled. As pointed out in my last update a few weeks ago, the last part of a NYSI "sell signal" can be messy. The only fly in the ointment still remains the ongoing enormously elevated weekly OEX put/call numbers which could yet put a floor under any "crash". The market will tell us, by either coming to rest around the 55 day EMA or crushing its way lower.
Fasten your seatbelts....