08-25-13 Weekly Recap & Outlook
Stock Index Futures:
I wanted to post all four this week because they are all showing different price action. Russell is showing more strength then the rest of them overall, Dow Jones is showing the most weakness, Nasdaq is showing no failure pattern at all, and the S&P is just showing a stronger version of the Dow Jones. It is a mixed bag right now, and they all need to converge into one direction and that will be the confirmation. The failure patterns are still a big focus point of mine. I think that area represents heavy selling, but there is still something that we can’t overlook. That would be the stochastic buy signal that is being bought on the weekly charts especially on the Russell 2000. However, we also can note that on the S&P weekly chart, the divergence is playing out so far. I have been saying that if we do get back into the 1680-1700 area that I would be looking for a bearish reaction and that is still the case. That would be 1040-1060 for the Russell. If we did get back into that area, that would be enough to justify the weekly buy signal being bought and if there was some bearish reaction I think all those buyers would bail also justifying the heavy selling in those failure patterns.
Crude Oil:
Crude oil is still looking great as I have been saying all year. These past 6 or 7 weeks have just been a healthy consolidation after a vicious up move. Many people want to spin this into distribution or whatever but don’t listen to that junk. This is an uptrend on every time frame showing accumulation on both the daily and weekly charts. Let’s say hypothetically if we were to go lower from here which is a very low probability, there is support at 102, 101, 100, 99, 98, 97.50, 95… you get the point. Support is everywhere and it has already battled to get out of that cluster of support and has decided which direction it is going in. The only resistance above is 110 and I think crude will turn that into support as well. So, as far as the update goes.. everything still looks great and am just waiting on the continuation now.
Gold:
I am very impressed with how gold has been acting toward the bulls. Speculators covering their shorts, even reversing their positions, and physical holders buying all they can is making for a nice rally. One more week and this monthly bar closes another step closer to a V shape reversal. As far as this week goes, if 1400 is broken 1420 is next up right behind it. I think 1420 will be a very strong resistance level if 1400 is broken. The light blue long term trend support was proven this week as solid support, so if gold can consolidate above it for a bit while it curls beneath it providing even more support that would make for a perfect launching pad for bulls to use. That would mean gold holding above 1375-1350 for a good while, a few weeks at least. For now all we can do is level trade it, and those are the levels I will be watching.
Market Internals:
Internals are trying to recover themselves but still very damaged. Percent of stocks above 200sma is rounding off which can be very bearish if a new high isn’t made. The same goes for McClellan Summation Index, if a new high can’t be made above that one made around 500, that is very bearish as well. Volatility is loosing steam which isn’t something I like to see. Overall I feel the two directional internals are getting very heavy and doing so at levels that bulls can’t afford to loose.
Economic Releases:
This week looks good, should keep the markets happy and moving. GDP is the highlight for the week.
You may have noticed that I changed my trigger setup. All I did was merge the two triggers into one.. price is either gaining steam or loosing steam, right? No need for two.
Take it easy and happy trading to everyone,
-Michael
08-18-13 Weekly Recap & Outlook
Stock Index Futures:
On last weeks recap I mentioned the failure patterns in the indices and looking for the daily 20ema to be broken to see how price reacts to the midpoint of the channel support. Price broke through it like it wasn’t even there, that tells me there is some real weakness here. Next level to be watching on the Russell is the 50sma on the daily charts (S&P already slightly broke 50sma) and after that $990 area. I do expect the weakness to continue this week as the market internals are showing no signs of life, those will be posted at the end. $1625 will be an important area to watch as it is daily long term trend support level and weekly 20ema. Something I just noticed this weekend is that failure pattern I have been talking about also is happening on the weekly chart of the S&P. If you draw a line from the May highs you will see price broke above it for a short period of time, couldn’t hold, and failed just like it did on the daily chart. If that $1625 level fails I will be watching $1600 then $1580 for reactions. Also note that S&P weekly divergence is playing out as well as daily indicators going negative. Even monthly fast trigger is starting to show early signs of weakness.
Crude Oil:
Another good looking week in crude oil. Mainly just a slow drift higher and there is nothing wrong with that given the context it is in. The weekly chart is really what I am looking at here for more buy pressure to come in. I think after a base being built below $110 as it has done that $110 level will be broken through and likely act as support. All the triggers and indicators on all time frames are still looking great as well as the trends. $108 will be the level that needs to be broken above and held to see higher prices. Intraday rebounds or dip buyers have been happening over and over again typically in the afternoon so that tells me buyers are still interested. I am now watching for some wide range activity in crude and some nice intraday trends to trade to the upside.
Gold:
Well bulls gave an impressive show this week of strength. As was mentioned last week I said I would be watching for the $1340 resistance to be broken to get a test of $1370 which is exactly what happened. It stopped right at the $1370 weekly 20ema level while also repairing the triggers further. The monthly fast trigger is green as it stands right now and honestly if this price action continues we could really see the V shape reversal I have been saying could happen. But we aren’t there yet. Next levels bulls will have to deal with is still the weekly 20ema and next $1390-$1400 resistance levels. Daily triggers look great as well for some added confirmation. Now at least bulls have some support levels below at $1340. I really wouldn’t be surprised to see price consolidate between $1400 & $1340 either. If they do break through $1400 level though, I really don’t expect $1420 to be broken immediately being that it is a key resistance level and there is long term trend support falling on top of it. So those are some levels to pay attention to. Another thing looking out a bit further, if bulls can regain $1475-$1500, they can potentially save the weekly long term trend support structure and start to rebuild the daily long term trend support as well as continue to build the monthly V shape reversal. Just a thought for a longer term perspective.
Treasuries:
I think I have been quite clear on the fact that notes look like trash. Still do, but they look like gold to traders who don’t have a long bias. People that trade with no emotions unlike these bond managers that live in la-la land. Anyway, 125 is still a key level that needs to be broken as well as the July 8th low to see lower prices. Next key daily support level is 122 22/32. Weekly triggers and sell signals are still being sold aggressively. I honestly believe longer term bonds can see a lot lower, in the 119s. For now I will just be watching for July 8th low to be broken so we can see 122 22/32 in a jiffy. Keepin’ it real..
Euro Currency:
I wanted to include the Euro this week because of the very interesting spot it’s in. 1.3400 is a key level but it is also the weekly long term trend support level. Obviously there is more data for the dollar so I like to take a look at that as well when doing Euro analysis, and the dollar is in a strong long term down trend. I will post the chart after this. So, if 1.3400 gets broken I am going to be watching for 1.3500 to be broken as well at which point there is fairly open air up to 1.3700-1.3800. This would be very good for gold since bonds, dollar & equities will be falling as crude is rallying. It might also possibly wake up some politicians if this scenario were to play out. Also think about that for a second. Bonds, dollar, and equities falling as crude and gold are rising… conspiracy theory? Anyway, triggers across the time frames are also set up for a break of 1.3400, so it isn’t unlikely that it will happen.
U.S. Dollar:
I’m only posting this for Euro analysis purposes, but you can clearly see the downtrend on the monthly chart I am talking about. Now obviously the weekly poses a slight problem, but it isn’t nearly as long term as the monthly. Also the monthly chart is getting bearish reactions off of the resistance levels. By the time it gets to 79.000 anyway it will be below all of the weekly long term trends if it were to get there. I don’t see this chart screaming bullish to me anyway. Triggers are also overall bearish.
Market Internals:
It really seems to me that a lot of people discount these internals especially the first two. If the market is rallying, and these first two internals are below the midpoints.. that is really bad news. With the scenario I wrote about in the Euro & U.S. Dollar analysis possibly happening at the same time these internals are heading below their midpoints, I mean, the ducks are aligning quickly. I suppose they could still bounce from here, but if the midpoints start acting as resistance that is just screaming to get out or watch for a crash of some type. If we just slam through the midpoints quickly well that is probably because the market is going to be having a very fast brutal selloff similar to the flash crash or U.S. credit downgrade in 2011. They are important whether you watch them or not.
Economic Releases:
Take it easy and happy trading to everyone,
-Michael
08-11-13 Weekly Recap & Outlook
Stock Index Futures:
There are really no new signals to look at this week in the index futures, but we did get a failure pattern with a confirmed divergence on the daily charts. The S&P weekly chart divergence is also starting to play out with the fast trigger going magenta. The failure pattern being poking into new highs and coming back down showing that price wasn’t ready to break out again. I’m going to be watching the 20ema on the daily charts to be broken below to then get a test of the channel support and see how price reacts to that. You can see on the Russell monthly chart a pattern going on; one green month, one red month (consolidation). If that continues, this month is going to be the red consolidation month. Market internals are showing that to be a strong possibility. Looking at the weekly charts, every stochastic spike down has been bought and price is working on giving another one of those signals. This weeks price action will be a key factor in how that plays out. Also note the daily slow triggers, showing very clear loss of momentum. Bottom line is no trade signals this week but I am watching for one to form and that would entail breaking below the daily 20ema or $1040 level giving a nice sell off.
Crude Oil:
Crude oil did very well this week. It gave accumulation on the weekly and reacted very well to daily support levels. The 50sma on the daily is coming up right below it showing that price has relaxed itself enough to make another run. Everything is still looking good. There weren’t any signals given or much to update about at all, just some good old fashioned consolidation after a nice run.
Gold:
Finally gold weekly slow trigger printed green. Sellers really aren’t getting the job done as they were for a while there. That is not to say buyers are either. It is just a turf war going on right now. On top of that, if buyers did win the turf war, they still have a ton of resistance to get through. I mean it’s everywhere, just look at the charts through the time frames. Price on the weekly chart hasn’t touched the 20ema since the first week of February so there is almost definitely going to be sellers lined up there. Taking it one step at a time though, bulls are finally working through the daily 50sma and can likely get through the 1320 & 1340 resistance to test the 1370 long term resistance which is also strong weekly resistance. So that is what I will be watching for this week. If bulls loose and selling takes over, (which I don’t see as a very likely situation) well that is a pretty easy situation to handle. Nothing but air below.
Market Internals:
Internals really aren’t looking too hot and VIX is looking ready to take off. If there was real strength in this market during this last run, both McClellan Summation and Percent of Stocks Above 200 would be a lot higher than they are now. On top of that at the slightest bit of selling they are both turned down ready to tank. If the selling gets going, those two internals will be below the midpoint in no time. If they stay below the midpoint, especially if the market starts rallying again, then there will be a serious problem on my end.
Economic Releases:
Decent amount of news this week to keep the markets busy aside from Monday. Inflation numbers, retail sales, and housing numbers should get Wall Street excited. Remember, good news is bad news and bad news is good news.
Take it easy and happy trading to everyone,
-Michael
08-04-13 Weekly Recap & Outlook
I wanted to start this recap off by explaining why I changed my charts up. On my daily charts all I did was remove the fast avgs and the key reversal dots I had. The key reversal dots were just completely useless, and the fast avgs were just a representation of something that I could see just fine without them. In context with everything else I use on the daily charts, it just became clutter. I use just pure price action a lot as well in my analysis, and this allows me to see the candles easier when going through the multiple time frames. Now that is not to discount them for people who may need more structure on the price to train your mind how price action works, it’s just that I don’t need them. On my intraday charts, I pretty much stripped everything but the 20ema and my indicators. I did this because price on an intraday basis is not as rational as on a daily basis and I can clearly identify a trend with just a 20ema and trade it the same way I would with everything else on the charts. The indicators I use are as much of a crutch as I need while managing a position. Most of the time the only thing that I’m watching across the multiple time frames is the relationship between the candles and the 20ema, along with an understanding of trends, momentum, and price action of course so it’s really not that big of a change to me. I know what my signals are, I know what my confirmation is, and I know how I am going to be managing my trades so that is all I need. Again though for a trader learning trends, being more conservative, and learning what the highest probability environment looks like, this is a great tool to have the channel and fast avgs on intraday charts. Below is just a screenshot of what my setup now looks like. You can’t see my daily, weekly, and monthly pivot points but they are still there.
Stock Index Futures:
Is it a bubble yet? There was hardly any pullback and it is already trying to go again. At some point this stops being a bull market and becomes a bubble. That point is when we are printing monthly bars like July just did and they continue to be that large and get even larger. The QE bubble? Seems logical. Anyway, I am sure I mentioned last weeks weekly bar was a buy signal and it was bought. So buyers are still buying and there are no signs of distribution that haven’t already been broken above. Also note that the Russell is above yearly R3 at 1036 and everything is still bullish. The only reason to sell is to take profits. There really isn’t much to update about at this point in the stock index futures. Buyers are buying, still. Internals are far from confirming this by the way, but those aren’t presenting a serious problem at this point.
Crude Oil:
I know for sure I mentioned last week that weekly candle was a buy signal. It was bought. So just as the stock index futures, buyers are buying. Also the 103-104 support area held perfectly. This isn’t magic, these were plotted when crude was around $101. I posted a chart on stock twits right when I plotted them if you want to go look at that. I will get around to doing that blog on those. Anyway, a pullback to the daily 20ema wouldn’t surprise me. At that point I’d like to see it hold, maybe give some accumulation signals on a lower time frame as discussed in Using Multiple Time Frames for Day and Swing Trading educational piece I did. That $109 area keeps printing distribution, so people are selling into that level. Buyers are going to have to build up strength to break through it if they want to keep this train rolling. The chart is still bullish though, that V shape on the daily isn’t a sign of weakness. Furthermore, technically that daily candle is a buy signal. Weekly and monthly charts are still looking great, nothing changed there.
Gold:
The first thing I’ll say here is that monthly bar is a pure and simple sell signal. Last weeks sell signal was sold at first until the bulls came in Friday and really tore it up on the job numbers. Bulls gave a good accumulation bar on Friday to work with, but gold is still a very “iffy” situation. No real clear direction now that buyers have started to come in but sellers are still in control. In the middle of the week I checked the weekly slow trigger and it had turned green, but sellers caused it to stay red. Monthly chart shows bears clearly in control with $1145 as a reasonable target, while the weekly chart is in a downtrend with a red slow trigger giving credit to sellers below last weeks low, and the daily chart got trapped in a key daily resistance level while still in a downtrend. So, $1385 can be a reasonable target above $1340 key resistance level and below Friday’s accumulation bar there is nothing but air and could even see new lows.
Treasuries:
Well, 10 year notes are definitely trying to build a bottom or something like that. The daily chart just looks heavy to me. But, I can’t argue with the weekly or monthly charts showing buyers. So what I will say about this is, below 125 is bearish territory. Even though weekly and monthly (mainly weekly) price action is showing buyers, the indicators are showing sellers. I did mention before that we could start to see the bouncing effect here causing a huge roll over in the bond market. If they popped up to the 129 level on the weekly chart that would be smacking right into two important resistance levels and on top of the the daily charts are already showing a strong downtrend. You can read more about the bouncing effect here. It is very real, and this weekly chart is a perfect candidate for that to happen. The only trades I would be taking here is below 125 on a swing trade basis, and even then I would need to see a weekly bar close below there. Bond managers are fooling themselves if they don’t believe the path of least resistance is to the downside.
Market Internals:
We can all see the divergences loud and clear. My worry is when they get below the midpoint (50% & 0 lines) and stay there. For now they are holding up and that is why I said they aren’t posing a problem. But, one more sell off and these guys will be below the midpoint and that means big trouble for the markets. Especially a very quick, rapid, selloff. Even one or two days of that kind of price action could bury these indicators.
Economic Releases:
Not a whole lot of news this week. Hopefully we get some decent price action though while digesting that mountain of data we got last week.
Take it easy and happy trading to everyone,
-Michael