Friday, February 13, 2009

End of Day/Week 2/13 – EconoTune Packed Edition!

Well now, that was special! Special, but certainly not a key reversal. That is once again why you must look at more than just one aspect of the markets. The candlesticks by themselves said potential bottom, but the internals, sentiment, and certainly the fundamentals said no. That’s why you always need confirmation on a single day or a single piece of information.

Tim Geithner is reminding me of Whimpy, from Popeye. You know, “I’ll gladly pay you Wednesday for some stimulus today!” Are Americans really, I mean really that gullible? I know… there’s absolutely no need to answer that. Mass psychosis… watching what people believe on CNBS is like watching a live unrehearsed skit from the lives of Alice in Wonderland. To bad they don’t teach math there.

Jethro Tull – Thick as a Brick:

(the first couple of minutes will get the idea across)

The Dow finished the day down 82 points, the S&P lost 1%, the NDX gave up .5%, and the RUT also lost .5%. The XLF still couldn’t find any traction and slipped 3.8%, the VIX gained 4.1%, and IYR lost 6% - it’s been getting killed ever since I wrote Real Estate, Bubbles, & the CMBX Index – Still Showing Severe Stress…

Internally the declining issues outnumbered advancing on the NYSE by 9 to 5, but on the Nasdaq there was a slight positive divergence with advancers outnumbering decliners by a slight margin. However, on a volume basis, declining volume was significantly greater than advancing.

Thursday’s action produced a small movement on the McClelland Oscillator and thus we would have expected a large directional movement within the next two days. I don’t think I’d consider that fulfilled after today and thus I would expect that a large movement on Tuesday is probable. Direction? Let’s look at the charts…

Inside the SPX 20 day, 30 minute, busy working man chart, you can see that we closed beneath the red pennant bottom and the fast stochastic on this timeframe is heading down approaching oversold, but the slow is just exiting from the top. The 60 minute timeframe is overbought and has just rolled over and is about to issue a sell signal (hint for Tuesday), while the 10 minute is mid-range:

When we zoom out to the daily we see that yesterday’s hammer was NOT confirmed and we are beneath that pennant bottom. Any further significant movement to the downside and I’m going to have to call the break confirmed. Note that my stochastic indicators here are not oversold and the lower Bollinger is starting to curl down:

The DOW daily also did not confirm yesterday’s Dragon Fly doji. In fact, that just looks bearish. That was the fourth day in a row with a close beneath 8,000, and is the second lowest close of the bear market with the only support beneath this level the November pin lows which are down around 7,449, about 400 points down there. Again we can see the lower Bollinger turning down, and we’re far enough beneath the pennant that we really can’t fool ourselves, that pennant target is now in play (do you really want to know?):

Okay, let’s look at the DOW pennant… While this one looks confirmed, keep in mind that the other indices have not broken down enough to confirm yet. The SPX, and RUT and just beneath their pennant bottoms and the Major market is actually far enough below its pennant to consider it confirmed to. These targets are tragic if they play out, so I’d really like to see all the indices including the NDX break beneath to call it a done deal, and I’d also like to see the Industrials and Transports make new lows together. If all that happens (could happen soon), then those targets are staring us right in the face. On the DOW that pennant target is approximately 3,650:

That’s a scary number, you and I both don’t want to know what that represents, but that’s what that technical pattern is saying unless it turns around NOW. That target area matches my predictions made at the beginning of the year, before this pennant was formed. Why do they match? Because the 4,000 area on the DOW is where the long term uptrend line currently resides - Predictions for 2009... Riders on the Storm! Funny the way the math on technical patterns target support areas. When you see math relationships like that, they are talkin’ to you – are you listening? Don’t shoot the messenger just because I can do simple math!

Now let’s zoom out to a 9 month DOW weekly chart. Again, excuse the working man charts… it’s a little difficult to see there, but this week basically engulfed last week’s positive candle, and makes the past 4 weeks look like a bear flag. The lower Bollinger has curled up, so we’ll be running into that PRIOR to reaching the November lows. Note that the weekly fast stochastic is entering oversold:

Now let’s go to the NDX daily. The rising red lines are the boundaries of a rising wedge that’s been manufactured over the past 3 months and doesn’t have too much farther to go before it is likely to break. This was entered from above and is upsloping, thus I would expect it to normally break in the downward direction:

Next I want to show you the Major Market Index, one of the most inclusive indexes there is. Yesterday it also produced a Dragon Fly doji and today’s candle is just bearish, pushing down the lower Bollinger. The green line is the 50dma and you can see that although we have been in a sideways pattern, the motion of the market is still down:

Here’s a shot of IYR. Note the two hammers in row, and neither one confirmed a reversal. The candle closed beneath the lower Bollinger, that is something to keep an eye on, but it is obviously bending it downward:

Your weekend bonus chart to ponder is the immigration adjusted birth index spanning most of the entire 20th century. I’m in process of writing a demographics article, so I won’t spoil that and just let you draw any conclusions that you can from it:

Trying to come up with some fitting EconoTunes was a little difficult just because I found so much that I liked. I can’t include it all, as I realize that having too much can bog the site down and overwhelm the senses. But, hey, it’s Friday, so let’s rock in the tradition of my working man charts…

Styx - Blue Collar Man:

Excellent tunes, I went looking for Suite Madame Blue and found this arrangement someone put together that is sure to strike you emotionally – one way or the other… I see this both ways, that’s why it’s interesting.

Styx – Madame Blue/America:

Have a great weekend,