Wednesday, February 25, 2009

End of Day 2/25

Boy, did today leave you dazed and confused? You’re not alone as I can tell by all the dojis that were produced today. I would have been happier ending the day with a positive close and a nice hammer, but instead we got the big indecision doji candle – a mixed picture to be sure.

On the day the DOW closed down 80 points, the S&P closed down 1.1%, the NDX finished down .9%, and the RUT gave up 2.7%. FSLR was notable, losing 22% on the day. Oil finished higher and gold was down sharply again.

Internals showed declining issues over advancers by a 3 to 2 margin and the volume was just about 2 to 1 negative. Diverging against prices, however, was the number of new lows which rose today over yesterday. The put/call ratio bottomed at .79 and finished slightly higher at .85.

Let’s start on the charts by looking at a 20 day, 30 minute SPX chart. I was thinking wave 4 was done with yesterday’s move, but now it looks like wave 4 produced a triangle (in blue) that overthrew this afternoon and broke back inside. That pattern is almost complete if that’s what’s happening. I think so; all the indices have it except for the RUT which is just bearish. Overthrows have been so common in this market that I just plan on them. Note that we closed beneath the 768 pivot again… typical wave 4 actions. It also looks like an abc off the bottom on the 23rd and if you drill down into a 5 minute chart today’s ‘c’ has a clean 5 wave pattern to it. The 10 minute stochastic came down off overbought, but the 30 and 60 are in overbought or just coming down from that range:

Now let’s look at the daily SPX, one month. Big fat spinner, still inside the down channel. Earlier the daily stochastic looked like it was going to issue a buy, but it backed off. Honestly, I can see that if the doji is a continuation, then higher might be in the cards, but that triangle was entered from above, looks like a wave 4, and should break lower:

The DOW daily is basically the same picture. While the volume is slightly lower here, it is slightly higher on both the DIA and SPY. Almost a buy on the stochs with my indicators, but not quite:

The NDX is next, a classic doji, almost right in the middle. Again, still in the down channel:

Next is the RUT. No spinner because it never made it back up into the range, a bearish divergence from the rest of the market. Remember that the RUT has been leading the market both ways. The 400 level is key support that’s held for four days now:

Here are the transports… That’s no doji either; it’s pretty bearish and spent most of the day beneath yesterday’s low. The only thing bullish about that is that it did manage to close above that support. But tell you what, that just doesn’t look like the key reversal that some were hoping yesterday’s candle would be:

Here’s an updated chart of TLT (20 year bonds). The parabolic collapse did get arrested, but the movement has been sideways while the equity markets have crumbled. Today was a big down day and took it right to the bottom of that large flag. The twin red parallel lines mark an area on the chart where there’s an open gap still waiting to be filled. We break that flag going down and interest rates will be moving higher:

Last chart is six months of the dollar with the SPX behind it. The dollar made a pretty good move up today keeping the uptrend into the prior highs in tact. Breaking out to new highs would be very bearish for stocks, while breaking down would be bullish. Keep an eye on the dollar since we’re in this critical area:

Overall we remain in the down channels and look to have produced a triangle for wave 4 of 3 down. Yes, that count could be wrong, but I don’t think so. We should get resolution soon and a break above that triangle a second time would be something I respect. Doc has a great wave 4 saying that I like, “placing money on it should feel painful!” Ouch.

Guess that crystal ball is a little foggy, I was looking for a hammer and got a doji – Hey, it can’t be me, the market’s still dazed and confused!

Led Zeppelin - Dazed and Confused: