SPX and DOW show positive divergences, as noted it before that market internals are showing positive divergences and now we have positive divergences on the up thrust momentum, e.g. CCI and MACD. While SPX held the recent resistance near at SPX 1530 +/- which is Jun/Jul H/L resistances, DOW and Nasdaq have traded above the respective resistance as shown on the charts right below breakout R.
As noted, markets are at major critical juncture and it seems that most of traders ( guesstimate of 90%) are looking for a pull back near at SPX 1555 after EOM/EOQ action.
As for breakout of LT resistance above SPX 1555, my view is that it will breakout going into year-end. To be conservative, I will be reassessing market actions near or at SPX 1555 to confirm whether we break out at this up wave for the next couple of weeks move.
Based on the positive divergences shown on the price momentum, it is dangerous to think that we have ST top after EOM actions.
With high short level, markets are poised to breakout until proven otherwise. With high short level, breaking out above SPX 1555 could be a strong move with short covering and performance chasers.
Good luck
http://www.stockchar...92375&r=630.png
http://www.stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=0&mn=4&dy=0&i=p97740572246&a=115499637&r=626.png
http://www.stockcharts.com/c-sc/sc?s=$INDU&p=D&yr=0&mn=4&dy=0&i=p58295586883&a=116141288&r=27.png
http://www.stockcharts.com/c-sc/sc?s=$COMPQ&p=D&yr=0&mn=4&dy=0&i=p48446462598&a=115683364&r=441.png
http://www.stockchar...92643&r=619.png
QID target 34 as it has met 39 target today with break-down on weekly chart.
http://investorshub....age_id=23198079
positive divergences... again
Started by
Trend-Signals
, Sep 26 2007 09:46 PM
16 replies to this topic
#1
Trend-Signals
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#2
Sentient Being
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Posted 26 September 2007 - 09:52 PM
Thanks for taking the time to label up the chart. I often have trouble seeing what others see in charts. A few labels made what you were saying clear.
And since I'm very long I hope you are right! I was reminded today that we should thank people from time to time if we get something of value out of their work!
Edited by Sentient Being, 26 September 2007 - 09:53 PM.
In the end we retain from our studies only that which we practically apply.
~ Johann Wolfgang Von Goethe ~
~ Johann Wolfgang Von Goethe ~
#3
redfoliage2
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Posted 26 September 2007 - 10:04 PM
It also looks alike to the July top though.
#4
Trend-Signals
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Posted 26 September 2007 - 10:07 PM
Thanks and I would like to reiterate as we are going into October.....
Good luck with trades
~~~
As we are going into October, some are still hyping the 1987 crash.
We have high short level with full short positions since 7/19 top waiting for markets to pull back.
As noted, with high short level, the positive divergenences on price momentum suggests that market will likely breakout.
http://investorshub....age_id=22563247
The key differences between 2007 and 1987 are “the anticipation of the crash” which we already priced in and “the economic condition” which we are in dynamic global economy.
I commented on the subject on my previous comments; however, I will illustrate with charts on this post.
The anticipation of the crash: I have seen various types of analyses of comparing recent price action to 1929, 1987, and other major market correction. Such as the formation similarities, such as “W” and “RST” formations. I will show why we already priced in the correction.
The dynamic global economy: We are in Global economic environment than ever before as we can see that China and other Asian markets are showing bull market price actions. Comparing 2007 to 1987 or to 1929 is like comparing Apples and Oranges.
Why the 1987 34% correction? Among various reasons which we can come up with, it was the 205% rally going into the 34% correction.
As shown on the SPX monthly chart, SPX rallied 205% during Aug1982~Aug1987 before the 34% correction in Oct 19-20, 1987.
SPX consolidated during Jul1963 ~ Jul1980, then, it attempted to break out in Aug1980 which led to Aug1982 retest of the breakout from Dec1968 and Dec1976 tops.
After the retest of the breakout in Aug1982, SPX rallied 205% which led to 1987 34% correction.
1987 Climactic volume actions Note that the climactic volume actions during Oct 19-20, 1987. Prior to the climactic volume actions, there was no change in volume actions suggesting that the 34% correction was not expected by market participants.
Furthermore, I noted above the correction was triggered by one big market participant who sold based on the analog presentation by a technician comparing 1987 to 1929 overlay. There are various interpretations, but I think that it was mainly due to “overdue correction” after the significant 205% rally prior to the correction.
Even so, it seems that 1987 34% correction was in control since the correction is 50% of 101.44 8/9/82 – 337.88 8/25/1987 (H/L 236.44 points 233%).
The low 216.46 on 10/20/1987
The high 337.88 on 8/25/1987
121.42 H/L correction which is 36%
The 236.44 point rally which is 233% minus 121.42 points correction is 51% correction.
Based on this observation, even though the correction is crash in nature, the crash is in control since it stopped at 50% retracement.
Comparing the above facts of 1987 climactic volume actions, volume actions prior to the climactic volume actions, and 50% retracement to 2007 7/19-8/16 correction
SPX 1555.90 on 7/16/2007
SPX 1411.27 on 8/16/2007
144.63 point 9% correction
This is about 50% correction of Jun2006-Jul2007 rally. 23.6% correction of Oct2002-Jul2007 rally.
As noted, the key is the differences in anticipation of the correction. As shown on the comparative 2007 vs 1987 volumes chart, we can see that market participants were highly anticipating the significant correction shown on the significant increase of volumes going into 8/16/2007 climactic reversal.
Again we heard the 1987-1929 fractal analysis over one year; therefore, market participants are already pricing in the correction.
Therefore, we can conclude that the 2007 7/19 – 8/16 correction was indeed significant when we compare the 216% rally during Aug1982~Aug1987 followed by 34% 1987 correction which was 50% retracement of the rally TO 97% rally during Oct2002~Jul2007 followed by 9% correction during 7/19-8/16, 2007 which is 23% retracement of the rally.
In conclusion, 2007 correction is already completed and based on the IT breadth and the level of retracements during 7/19-8/16/2007 indicates that markets are likely poised to trade higher.
[chart]www.trend-signals.com/Chart/2007/2007_1987.PNG[/chart]
[chart]stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1970-01-01&i=p88109549175&a=117316241&r=903[/chart]
http://www.stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1970-01-01&i=p88109549175&a=117316241&r=903.png
~~~
Strengthening Dollar
Advantages
* Consumer sees lower prices on foreign products/services.
* Lower prices on foreign products/services help keep inflation low.
* U.S. consumers benefit when they travel to foreign countries.
* U.S. investors can purchase foreign stocks/bonds at "lower" prices.
Disadvantages
* U.S. firms find it harder to compete in foreign markets.
* U.S. firms must compete with lower priced foreign goods.
* Foreign tourists find it more expensive to visit U.S.
* More difficult for foreign investors to provide capital to U.S. in times of heavy U.S. borrowing.
Weakening Dollar
Advantages
* U.S. firms find it easier to sell goods in foreign markets.
* U.S. firms find less competitive pressure to keep prices low.
* More foreign tourists can afford to visit the U.S.
* U.S. capital markets become more attractive to foreign investors.
Disadvantages
* Consumers face higher prices on foreign products/services.
* Higher prices on foreign products contribute to higher cost-of-living.
* U.S. consumers find traveling abroad more costly.
* Harder for U.S. firms and investors to expand into foreign markets.
~~~
Not So Fast On Weak Dollar Concerns
By CNBC.com | 24 Sep 2007 | 10:54 AM ET
There's a lot of concern about whether a weaker dollar could cause higher U.S. inflation, but CNBC’s Steve Liesman says not so fast. Here, he offers a quick overview of different ways to think about the influence of the currency on the inflation process:
* The dollar is an inflation factor, not the inflation factor
* Imports make up just 16 percent of the U.S. GDP. Imports have risen as a percent of total U.S. economic activity. A lot of import growth has come from countries that have fixed exchange rates to the dollar, like China and other Southeast Asian countries, so a weaker dollar has no inflation impact from them.
* Wages are the biggest cost, not commodities or imports
Imports vs. Domestic Prices
A look at the year-over-year change of consumer import prices vs. core inflation finds only a modest relationship. There are two reasons for that:
* The United States is mostly a service economy and wages are the biggest input to costs in a service economy.
* The U.S. makes up 25 percent of the world's economy all in one market. As a result, most economists see the U.S. as a price maker, not a price taker.
So, what happens to the U.S. economy will determine what happens to import prices. Import prices will not determine what the price levels are in the U.S.
http://www.cnbc.com/.../site/14081545/
Good luck with trades
~~~
As we are going into October, some are still hyping the 1987 crash.
We have high short level with full short positions since 7/19 top waiting for markets to pull back.
As noted, with high short level, the positive divergenences on price momentum suggests that market will likely breakout.
http://investorshub....age_id=22563247
The key differences between 2007 and 1987 are “the anticipation of the crash” which we already priced in and “the economic condition” which we are in dynamic global economy.
I commented on the subject on my previous comments; however, I will illustrate with charts on this post.
The anticipation of the crash: I have seen various types of analyses of comparing recent price action to 1929, 1987, and other major market correction. Such as the formation similarities, such as “W” and “RST” formations. I will show why we already priced in the correction.
The dynamic global economy: We are in Global economic environment than ever before as we can see that China and other Asian markets are showing bull market price actions. Comparing 2007 to 1987 or to 1929 is like comparing Apples and Oranges.
Why the 1987 34% correction? Among various reasons which we can come up with, it was the 205% rally going into the 34% correction.
As shown on the SPX monthly chart, SPX rallied 205% during Aug1982~Aug1987 before the 34% correction in Oct 19-20, 1987.
SPX consolidated during Jul1963 ~ Jul1980, then, it attempted to break out in Aug1980 which led to Aug1982 retest of the breakout from Dec1968 and Dec1976 tops.
After the retest of the breakout in Aug1982, SPX rallied 205% which led to 1987 34% correction.
1987 Climactic volume actions Note that the climactic volume actions during Oct 19-20, 1987. Prior to the climactic volume actions, there was no change in volume actions suggesting that the 34% correction was not expected by market participants.
Furthermore, I noted above the correction was triggered by one big market participant who sold based on the analog presentation by a technician comparing 1987 to 1929 overlay. There are various interpretations, but I think that it was mainly due to “overdue correction” after the significant 205% rally prior to the correction.
Even so, it seems that 1987 34% correction was in control since the correction is 50% of 101.44 8/9/82 – 337.88 8/25/1987 (H/L 236.44 points 233%).
The low 216.46 on 10/20/1987
The high 337.88 on 8/25/1987
121.42 H/L correction which is 36%
The 236.44 point rally which is 233% minus 121.42 points correction is 51% correction.
Based on this observation, even though the correction is crash in nature, the crash is in control since it stopped at 50% retracement.
Comparing the above facts of 1987 climactic volume actions, volume actions prior to the climactic volume actions, and 50% retracement to 2007 7/19-8/16 correction
SPX 1555.90 on 7/16/2007
SPX 1411.27 on 8/16/2007
144.63 point 9% correction
This is about 50% correction of Jun2006-Jul2007 rally. 23.6% correction of Oct2002-Jul2007 rally.
As noted, the key is the differences in anticipation of the correction. As shown on the comparative 2007 vs 1987 volumes chart, we can see that market participants were highly anticipating the significant correction shown on the significant increase of volumes going into 8/16/2007 climactic reversal.
Again we heard the 1987-1929 fractal analysis over one year; therefore, market participants are already pricing in the correction.
Therefore, we can conclude that the 2007 7/19 – 8/16 correction was indeed significant when we compare the 216% rally during Aug1982~Aug1987 followed by 34% 1987 correction which was 50% retracement of the rally TO 97% rally during Oct2002~Jul2007 followed by 9% correction during 7/19-8/16, 2007 which is 23% retracement of the rally.
In conclusion, 2007 correction is already completed and based on the IT breadth and the level of retracements during 7/19-8/16/2007 indicates that markets are likely poised to trade higher.
[chart]www.trend-signals.com/Chart/2007/2007_1987.PNG[/chart]
[chart]stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1970-01-01&i=p88109549175&a=117316241&r=903[/chart]
http://www.stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1970-01-01&i=p88109549175&a=117316241&r=903.png
~~~
Strengthening Dollar
Advantages
* Consumer sees lower prices on foreign products/services.
* Lower prices on foreign products/services help keep inflation low.
* U.S. consumers benefit when they travel to foreign countries.
* U.S. investors can purchase foreign stocks/bonds at "lower" prices.
Disadvantages
* U.S. firms find it harder to compete in foreign markets.
* U.S. firms must compete with lower priced foreign goods.
* Foreign tourists find it more expensive to visit U.S.
* More difficult for foreign investors to provide capital to U.S. in times of heavy U.S. borrowing.
Weakening Dollar
Advantages
* U.S. firms find it easier to sell goods in foreign markets.
* U.S. firms find less competitive pressure to keep prices low.
* More foreign tourists can afford to visit the U.S.
* U.S. capital markets become more attractive to foreign investors.
Disadvantages
* Consumers face higher prices on foreign products/services.
* Higher prices on foreign products contribute to higher cost-of-living.
* U.S. consumers find traveling abroad more costly.
* Harder for U.S. firms and investors to expand into foreign markets.
~~~
Not So Fast On Weak Dollar Concerns
By CNBC.com | 24 Sep 2007 | 10:54 AM ET
There's a lot of concern about whether a weaker dollar could cause higher U.S. inflation, but CNBC’s Steve Liesman says not so fast. Here, he offers a quick overview of different ways to think about the influence of the currency on the inflation process:
* The dollar is an inflation factor, not the inflation factor
* Imports make up just 16 percent of the U.S. GDP. Imports have risen as a percent of total U.S. economic activity. A lot of import growth has come from countries that have fixed exchange rates to the dollar, like China and other Southeast Asian countries, so a weaker dollar has no inflation impact from them.
* Wages are the biggest cost, not commodities or imports
Imports vs. Domestic Prices
A look at the year-over-year change of consumer import prices vs. core inflation finds only a modest relationship. There are two reasons for that:
* The United States is mostly a service economy and wages are the biggest input to costs in a service economy.
* The U.S. makes up 25 percent of the world's economy all in one market. As a result, most economists see the U.S. as a price maker, not a price taker.
So, what happens to the U.S. economy will determine what happens to import prices. Import prices will not determine what the price levels are in the U.S.
http://www.cnbc.com/.../site/14081545/
#5
raleigh
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Posted 26 September 2007 - 11:38 PM
Thanks. You do good work.
#6
diogenes227
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Member
Posted 27 September 2007 - 01:38 AM
My compliments. Great post. Very well reasoned and very, very informative.
However, I hate a doji when I see one and I think I see three on the charts above, and two of those are on the money charts (QQQQ and SPY). No big deal I suppose... I just hate them, hate them, hate them...
"If you've heard this story before, don't stop me because I'd like to hear it again," Groucho Marx (on market history?).
“I've learned in options trading simple is best and the obvious is often the most elusive to recognize.”
"The god of trading rewards persistence, experience and discipline, and absolutely nothing else."
#7
Sentient Being
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Posted 27 September 2007 - 02:23 AM
My compliments. Great post. Very well reasoned and very, very informative.
However, I hate a doji when I see one and I think I see three on the charts above, and two of those are on the money charts (QQQQ and SPY). No big deal I suppose... I just hate them, hate them, hate them...
I'm with you. You sound long and nervous.
In the end we retain from our studies only that which we practically apply.
~ Johann Wolfgang Von Goethe ~
~ Johann Wolfgang Von Goethe ~
#8
Trend-Signals
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Posted 27 September 2007 - 06:39 AM
My compliments. Great post. Very well reasoned and very, very informative.
However, I hate a doji when I see one and I think I see three on the charts above, and two of those are on the money charts (QQQQ and SPY). No big deal I suppose... I just hate them, hate them, hate them...
Thanks for your compliments
Not sure when you entered the long, it seems that you are long, but futures are up at the moment. Also, market just had intraday turning up as noted on my board on Tuesday, also EOM/EOQ action and first day of each month has strong up bias.Good luck with trades
#9
Trend-Signals
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Posted 27 September 2007 - 06:47 AM
Thanks. You do good work.
Thanks raleigh
Good luck with your trades.
Thanks for taking the time to label up the chart. I often have trouble seeing what others see in charts. A few labels made what you were saying clear.
And since I'm very long I hope you are right! I was reminded today that we should thank people from time to time if we get something of value out of their work!
Thanks Sentiment Being... !
Called market reversal on 8/16 and market has traded to upside. Now we are at the critical juncture at SPX 1555 which will be a major battle between bulls/bears; so, we need to be cautious but as noted earlier, we have a good chance to break above considering price momentum. But it would be better to be cautious. Will update.
Good luck with your trades.
Thanks for taking the time to label up the chart. I often have trouble seeing what others see in charts. A few labels made what you were saying clear.
And since I'm very long I hope you are right! I was reminded today that we should thank people from time to time if we get something of value out of their work!
Thanks Sentiment Being... !
Called market reversal on 8/16 and market has traded to upside. Now we are at the critical juncture at SPX 1555 which will be a major battle between bulls/bears; so, we need to be cautious but as noted earlier, we have a good chance to break above considering price momentum. But it would be better to be cautious. Will update.
Good luck with your trades.
Thanks for taking the time to label up the chart. I often have trouble seeing what others see in charts. A few labels made what you were saying clear.
And since I'm very long I hope you are right! I was reminded today that we should thank people from time to time if we get something of value out of their work!
Thanks Sentiment Being... !
Called market reversal on 8/16 and market has traded to upside. Now we are at the critical juncture at SPX 1555 which will be a major battle between bulls/bears; so, we need to be cautious but as noted earlier, we have a good chance to break above considering price momentum. But it would be better to be cautious. Will update.
Good luck with your trades.
Thanks for taking the time to label up the chart. I often have trouble seeing what others see in charts. A few labels made what you were saying clear.
And since I'm very long I hope you are right! I was reminded today that we should thank people from time to time if we get something of value out of their work!
Thanks Sentiment Being... !
Called market reversal on 8/16 and market has traded to upside. Now we are at the critical juncture at SPX 1555 which will be a major battle between bulls/bears; so, we need to be cautious but as noted earlier, we have a good chance to break above considering price momentum. But it would be better to be cautious. Will update.
Good luck with your trades.
#10
mss
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I'M WATCHING
Posted 27 September 2007 - 06:55 AM
Nice post you got there Sharon. Keep up the good work.
mss
WOMEN & CATS WILL DO AS THEY PLEASE, AND MEN & DOGS SHOULD GET USED TO THE IDEA.
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!
