09-29-13 Weekly Recap & Outlook

I want to start this one off by saying I completed the education piece on daily key support and resistance levels.. if you haven’t read it already you can check it out here.

Stock Index Futures:

 
This week is proving to myself that I am not crazy.  The weekly S&P chart looks like trash, as well as the Dow.  The week before last, we printed a distribution bar (a very strong one at that).  I am sure I talked about it in last week’s recap.  This week gave us confirmation that people are in fact selling at these levels, which is what I have been saying since the failure pattern in early August.  The debt ceiling thing is obviously going to have some impact, but even if they do get it together and pass something to kick the can down the road, I don’t think the market is going to care.  We are so technically damaged here while being very extended from this artificial run while everyone in the world is waiting on a pullback to buy, there is no reason we shouldn’t get one.  The weekly divergence still has not failed which is just another sign sellers are doing the deed up here.  We now, as of last week, have a confirmed failure pattern on the weekly chart.  Russell chart does not look so terrible, aside from the fact that all of last week was printing distribution bars at $1080.  The 4 bar weekly runs the Russell has been having all year ended in a doji this time around, showing weakness.  There is also some divergence on the daily and weekly chart that the sellers could take advantage of.  Below Friday’s low on the Russell will trigger lower prices.  I do not expect the 20ema on weekly chart to hold again, it has held three times already, and it is just too damn obvious this time.  But, I will be watching it as a short term target.  That would be $1020 on Russell and $1650 on S&P.  If those targets are hit this week I will update new ones on stock twits.  The Russell does have support coming up under it, so that may act as a short term backbone depending on how hard the sellers come in.  I will admit I am wrong on a weekly close at new highs on the S&P, but I seriously do not see that happening.  Summary: distribution, divergence, failure pattern, extended, buyers need better prices, & bearish reactions on rally attempts.  Targeting: $1020 Russell & $1650 S&P. 

Crude Oil:

Crude made it to the first trend support target I had laid out.  Buyers aren’t exactly giving the reaction I was looking for but sellers aren’t pounding through it either.  That is why I have given it the threshold of getting back above $104.  If it can’t do that it may need to pull lower to the $101 trend support and see what kind of reactions we get from there.  This level we are at now is a good demand level if buyers could pull this off it could see a fast move back to $108.  The monthly chart is not exactly what I want to see, distribution at resistance, but sometimes you have to drill down to lower time frames to see inside of that distribution so you can determine if there is bearish price structure as well.  It’s not.  This is a shakeout pattern that I see all the time and it typically leads to V shape reversals, which is why I gave it the $104 threshold to break above.  So that is where we are at on crude, still waiting for a reaction.

Gold:

Gold never did get that breakdown below $1320.  It didn’t overcome any major resistance levels either.  If bulls are really going to take charge here, they will reclaim $1350 and show some conviction.  I do see some resistance and congestion at $1370 both on a weekly and daily chart, so there is another problem for bulls.  If they can’t do that, then I will still be waiting on huge bearish moves below $1320 (or $1310 if you want to be more sure).  Fairly straight forward plan.  Gold has been very unwilling to play ball on an intraday basis and this is likely why.  Bulls and bears are duking it out for territory and there will be big moves once one of them wins.  This is why you really need to pay attention to big picture and know where you are day trading at.  Are you trading in a territorial fight or are you trading in an open range where massive moves can take place?

Market Internals:

Internals are pretty much confirming my analysis of what price is telling me.  Remember a couple of weeks ago I said that the July/Aug high made on the Percent of stocks above 200sma indicator (shown in picture) needed to be taken out with solid price action on the indices for a healthy market to continue.  Well it never happened, not even close.  It is about to cross back below the half way mark, 50%.  Same goes for McClellan Summation Index, it is still below the zero line which is even more dangerous for price.  VIX got a huge pop on Friday but yet I didn’t see a huge sell off.  People are worried about the shutdown obviously, a lot are convinced it is going to happen.  I don’t know, but I know how to read price and measure correlations with market internals. 

Economic Releases:

The highlight of the week is obviously Employment Situation (non farm payrolls) on Friday.  But, people are going to be heavily focused on the possible shutdown or if it happens the current shutdown.  So those are the two things to pay attention to during this week.  ISM Manufacturing is also important on Tuesday.
Trade well,
-Michael

09-22-13 Weekly Recap & Outlook

Stock Index Futures:
  Well, it looks like the fed gave sellers a better price than they were expecting.  There are going to be people blindly buying this market up until they loose money doing it.  Monday we got a distribution bar right where I expected it, inside the liquidation zone.  Then FOMC day, as everyone knows, shot price into new all time highs as Bernanke “surprisingly” didn’t taper QE.  As of right now that is looking like sellers took advantage of that new high to unload as much of their positions as they could.  It also created an upthrust bar on the weekly chart, with extremely noticeable divergences.  I didn't post it here, but go look at the Dow Jones Average and throw a 21 period RSI on there.  The Russell held up better than the majors, but it has tended to do that all year.  I am really just waiting for the sellers to start tripping over each other as they realize the S&P, Dow Jones hasn’t gone anywhere since May and that they will likely be able to get better prices lower.  I do think though that this market will likely start to get more volatile from here on out, Sept FOMC out of the way, it is clear sailing from here on out.  Only the free market and QE.  On the weekly I will be watching for a high close into the distribution if they are going to prove me wrong; or getting and staying under the liquidation zone (Aug highs) to prove me right.  The probabilities say I am right, the market couldn’t even last two days at new highs and I have been talking about this entire zone up here as liquidation until people can get better prices.

Crude Oil:

Wild ride in crude this week.  It did not hold last week’s lows and that means I am still looking for $103-$104 support.  Now after re-assessing the current price structure, I think it is very possible we break the $103-$104 support and go to test the long term trend support at $102.5-$100.75.  The good news for the bulls is if they (buyers) are still active and just waiting for better prices; this is the kind of price structure that could create a V shape bounce and launch it into new highs.  Anyway, you know the drill.  Watch for what kind of reaction we get off of $103-$104 support and if it isn’t good, anticipate the long term trend support to come in play.  Remember the big picture as well, the trend is up long term.  It just needs to back and fill that massive move in July, as well as take out the weak hands.

Gold:

Gold really isn’t looking too hot.  After that massive rally on FOMC news, I posted the mid-week update for my key markets and said I really don’t like the price structure here.  I said that because I know where we are on the weekly and monthly chart, which is bearish territory inside of a long term uptrend.  Even on the daily chart we are in a downtrend.  If gold was really that strong, trying to make a major comeback in the face of a clear downtrend; it would have held the 20ema on the daily as it broke through all the resistance across the time frames.  It didn’t, it failed.  Sellers grabbed it by the throat at the $1420/long term trend support resistance zone and smashed it back down.  It also was getting absolutely no bullish reactions from any of the support levels on the daily, and in the face of the weekly/monthly positioning; that counted me out of the bullish camp.  You can tell people that were long from the $1400 level just wanted out and to run far away from gold.  That blue dotted line is a channel low from connecting 06-28 & 08-07 lows, and once it broke down from it; I just didn’t see it getting back above as price rarely does after that kind of break.  This week I will be watching the $1320 and last weeks lows as breakdown levels.  I am really not much interested in the upside at this point, price would really have to pop some fireworks for me to get interested to the upside.

Euro Currency:

Quick note on the Euro.  I included Euro in a blog post from a while back saying that I am now long term bullish, which I still am.  I posted on stock twits at the beginning of September to seriously consider the possibility of a V shape bounce off of the 1.3150 level.  Anyway, the fact that I am right just means that the bulls are doing what they are supposed to do; which gives me more conviction in my long term bullishness on the Euro.  Just like what crude did.  Over the next few years I think 1.50 is possible, maybe sooner.  In the short term, the next level I am watching is 1.37.  The reaction off of that will be important, I want to see it make a run to the 1.40 area which is the level after that.  That may even give us the volatility we used to see in the Euro at those levels.  At a minimum we need to hold 1.34-1.345 for this bull run to continue, so that is what I will be watching.

Japanese Yen:

Yen looks very vulnerable to some serious selling here.  The low of the week of 09-09 is the trigger in my opinion to a big move down.  That specific level is 9939.  Longer term charts are definitely showing bearish reactions are still in play big time, so be prepared.  9550 is the target zone for this move lower.  That is about it for the yen.

Treasuries:

To be honest, I don’t know if this chart is completely accurate.  My charting package should fix it though, but for now I only wanted to say one thing.  125 is key to hold for the bulls.  If they can hold that, they can see higher prices. 127 is a resistance zone based on the weekly chart.  If sellers grab hold here, it could get nasty.

Market Internals:

As long as those highs shown are not taken out, I consider this bearish.  This is just the icing on the cake for all of the bearish analysis on the indices.  I really think a correction is nearing and sparks are going to fly.  These internals are bearish, make no mistake about it.

Economic Releases:

Looks like the highlight is Wednesday, Durable Goods and New Home Sales.  I don’t think news will play a huge role though anymore now that the fed has admitted they aren’t going to ever taper.  I think the market will continue to digest all the news it has taken in and price discovery will begin aka volatility. 
Take it easy and happy trading to everyone,
-Michael

09-15-13 Weekly Recap & Outlook

Stock Index Futures:

 

So picking up from last week, we broke above the doji bar on Monday’s session and closed with a big wide range green bar smack into a liquidation area. Looking at that weekly chart though, it does look very attractive and the daily chart no longer looks like total crap. Still though, I believe in not being greedy and only trading solid signals and this really isn’t one of them yet. The fact that $1036 is yearly R3 is also lingering in my mind, even at the beginning of the year that was what I was looking at as the area of liquidation if we made it up here. The FOMC this Wednesday will ultimately decide it’s fate. This entire year has been Fed based. I still stand by my statement, that is a strong failure pattern up there at the highs. I have seen many, many stocks top out like that. Apple for example. But, at this point I am just waiting for reactions to either confirm my theory or disprove it. Divergences still present.

Crude Oil:

It is looking more and more like crude has found a range that it likes, aka price acceptance.  I will be watching last weeks low, if it is broken $103-$104 support is very possible.  If it holds it is very possible that crude is making a small base between $107-$110 before breaking out to the upside.  The ideal situation for bulls at this point would be to breakout above $110 again and actually hold/consolidate above it to make another move higher (which is what I thought it was attempting to do last week).  Weekly and monthly indicators are still in trend mode.  There isn’t much more to say about crude at this point.

Gold:

Like I said last week, if resistance levels start getting sold it is time to remember where we are on the weekly chart.  That is what ended up playing out and I gave a midweek update on stock twits saying that the bullish reactions just weren’t cutting it for the context that price was in.  Now it is below $1320 which is a very pivotal level.  As long as it stays below $1320 we could even possibly see new lows.  Weekly trigger has even turned back red, the long term downtrend has come back with a roar.  At this point, gold has pretty much screwed itself.  Even if it does rally back above $1320 there are so many resistance levels that bears will have a field day stopping out the longs and driving it back below $1320.  If you draw a box from 5-20 low to 6-03 high on the weekly and extend it over, that is a classic sell signal zone people use all the time.  That is all this move back up is shaping up to be as it stands right now.  That weekly 20ema is also going to be a brick wall now that it has failed.  At this point I would be looking for sell signals.

Market Internals:

Internals are still looking very weak, which is another reason I am skeptical of another move up.  These first two market internals are very much forward looking.  I encourage you to study and backtest them.

Economic Releases:

Obviously the highlight of the week is FOMC day Wednesday @ 2:00pm EST.  On top of that there are important data points coming out all week, including CPI which will be interpreted to have a direct impact on the FOMC day potentially causing big market moves.  It should be a great week of trading, as last week was very much a dud.
I plan on doing my next education piece pretty soon.
Take it easy and happy trading to everyone,
-Michael

09-08-13 Weekly Recap & Outlook

Stock Index Futures:

    

    

Looking at all 4 indices, they are showing different signs of strength.  The Dow is the weakest, Russell and S&P are still pretty indecisive, and Nasdaq is the strongest.  I am just going to talk about S&P & Russell as usual.  Last week I was talking about how the market needs to prove itself by showing signs that buyers are coming in on the daily chart.  It still really hasn’t convinced me of anything but there are two things that caught my attention.  First, we have been consolidating at this level for a while without breaking down.  Second, Friday’s action was pretty bullish intraday if you don’t pay any attention to the news that caused it.  However, Friday’s action was also a huge doji, giving some breakout/breakdown levels to watch for next week.  Above Friday’s high would be sending the markets straight into a liquidation area, so if I was to see any type of distribution bars that is nearly a sure sign people want out at that level around $1680-$1700 and I would be one of them.  Also look at the RSI on ES weekly chart along with the trigger.  Both showing strong divergences being acted on.  Below Friday’s low is where the bear party comes into play.  Nothing but air below to $1600 and below that $1565.  With all this Syria uncertainty and technical weakness, it wouldn’t surprise me.  For the Russell, the next level is $1000 then $975.  I think after consolidating above $1000 for so long, if it were to break down I think that would turn into resistance and I would be targeting $975.

Crude Oil:

Crude has really handled up on that distribution bar printed last week.  It got a strong close into more than 50% of it, creating huge accumulation at the same time and that is a good sign.  Indicators all still bullish.  Only thing I am going to be looking for is a break and close above the distribution.  It may need to build up some pressure near the highs of it but however it does it, it needs to happen.  Not something to worry too much about though since price structure is so nearly perfect.  I said a few weeks ago that after that huge consolidation under $110 I think that would turn into support rather than act as resistance at this point and I think that is what is happening right now.  That could be the support level crude needs to build up the pressure to bust through that distribution level.  So, I will be watching that level to hold this week.  If on the off chance it doesn’t hold, there are support levels everywhere.  20ema, channel support, 50sma, & 104-103 key support.  That makes the path of least resistance to the upside, and that is what the market looks for.  On a bit of a longer term note (or maybe not), this accumulation base crude is trying to break out from could be the launching pad up to $120 or higher.

Gold:

Gold is a tough read here.  On the weekly chart gold is printing distribution at previous distribution levels and resistance.  But on the daily chart, we have strong bullish reactions off of support levels and the 50sma turning back to the upside.  I really can’t get very bearish on gold unless we were to break back below $1320.  There is a lot of support in between the last traded price and $1320.  I am leaning more on the bullish side of gold and I don’t feel like those weekly distribution bars are going to pose a huge problem, though they do need to be closed above.  Last weeks bar was actually a doji, showing both accumulation and distribution.  Anyway, the best thing to do here to get a better read is watch the reactions off the the support and resistance levels.  If we keep getting price action like we are now off of support levels then there is no reason to stop being bullish.  But if resistance levels are starting to get sold then it may be time to remember where we are on that weekly chart.

Treasuries:

I just wanted to make a quick point on the 10 year note.  This is bearish.  See the rounded continuation pattern on the daily, that is bearish.  We got a pop on Friday and it was a pop right into resistance that got sold into.  They actually did some front running and sold it before it even got to the resistance.  Next support levels on the daily are 122’22, 121’23, 121’15.  Indicators are all in downtrend mode as well as price action, there is no reason to fight it.

Market Internals:

I drew a downtrend line on the percent above 200 indicator because I feel like it is going to stay in that downtrend until the market has a significant sell off and that indicator goes down to 20%.  These indicators combined with the weak price action are what have me in the bear camp right now, at a minimum not in the bull camp.  I feel like the market needs to be refreshed, and these indicators are screaming at me that my feeling is right.
Not much going on until Thursday and more importantly Friday.  This week is probably going to be trading purely on news about Syria and market sentiment about Syria.  I don’t think the market likes it.  The market knows that no one else in the world is for the U.S. to invade Syria with little to no evidence on our reasoning.  The market knows that we can’t afford it as a nation, that other countries will likely be there to help Syria, and could realistically spur into WW3.
You probably noticed I made a few small changes.  I changed the color of the trigger and took out the stochastic on the bottom.  I did that so I could have heavier emphasis on the RSI.  The stochastic was there to give specific signals, but I know exactly what those signals look like on the price action so I gave it the boot.  I don’t like having anything on my charts that I don’t absolutely need anymore.  Plus the RSI and the trigger make a good team for indicating strength of a trend, and I have a lot of experience with the RSI and know a lot of nuances with it.  I changed the color just because loosing momentum on the upside or downside really doesn’t need to be differentiated.  It is indicating the trend is loosing momentum and that is the same on either side so I made it the same color, black.  Everything else is the same and will likely stay that way.
Take it easy and happy trading to everyone,
-Michael

09-01-13 Weekly Recap & Outlook

Stock Index Futures:

 

Well, it should be pretty clear how I feel about the stock index futures after yesterday’s blog post/rant I wrote.  In summary, yes it is bullish that the weekly charts are still holding above the 20ema.  You can’t just write that off as a reason to be looking for upside though.  You need confirmation from the daily chart and it is just not there.  Also, the 20ema has already been bought twice so that is what everyone in the whole world is probably buying right now while they are filled with complacency.  They will probably loose money, as they should.  So, looking for more downside.  I am watching round numbers right now $1600 on S&P and $1000 on Russell.  I am not just looking for these targets to be hit, but they are also support levels so I will be watching at what type of reaction we get from these. 

Crude Oil:

The breakout did come, then it went.  As bullish as I am, I cannot just ignore both of these distribution bars on the daily and weekly.  Bulls are going to have to deal with that level of supply above $110 which only makes that key level even stronger.  We also came back into the consolidation zone and closed inside of it which also isn’t a good sign.  On the bright side, we did get the slightest bit of accumulation off of the 20ema on the daily charts Friday.  I consider that a decent reaction off of a support level.  Long term, I am still very bullish.  Short term, bulls really need to work through or setup a platform to break above that distribution.  Other than that I will just be watching the support resistance on the daily chart.

Gold:

Like I said last week, I expected $1420 to be major resistance after that huge run off of the lows.  Similar to crude we got distribution on daily and weekly charts but the difference is gold is in an intermediate term downtrend.  So if it breaks under $1392 support level, I will be watching the daily 20ema which is at $1370 right now.  Looking at the weekly chart, that sharp V like reversal is very bullish so there is no reason to loose faith yet especially with the monthly chart still in a long term uptrend.  Whatever happens, in the near future $1320 will be absolutely key to hold if gold wants anymore upside even $1340 would be better.  An extremely bullish scenario would be consolidating up here near these highs, and that could act as a launch pad to $1475 and above.  For now, you could really just look at the daily chart at all the support levels I am watching for reactions off of to gauge how much strength is in this market.

Market Internals:

Ok, so lets forget for a second about the levels they are actually at right now.  Just take a look at where they are headed.  There isn’t technical analysis needed here, they are either going up or down.  Now, you see they are going down.  Next what I do with these is look at the level at which they are trading at.  Percent of stocks is trading at 45% of stocks above the 200sma, these are all NYSE stocks as well not just S&P like most people like to look at.  McClellan is trading at –2000 which obviously isn’t bullish.  Also VIX is rising.

Economic Releases:

Markets don’t open until Tuesday due to Labor day.  After that the highlight of the week is definitely the Employment Situation on Friday.  There are some good events before that though that should keep the market moving on this shortened week.
Take it easy and happy trading to everyone,
-Michael