Tuesday, March 17, 2009

End of Day 3/17

That’s definitely what I get for having fun with bells yesterday, a new high! LOL, that’s some kind of black market magic there - the high on the /ES is Seth's 707! Today was the fifth positive of the last six days, and yesterday was only negative by 7 points on the DOW…

The DOW finished up 178 points (2.5%), the S&P finished up 3.2%, the NDX was up a whopping 4.1%, and the RUT gained 4.5%, running right into a resistance area on my chart. The XLF gained 6.5%, and the transports kept rolling for another 3.2%.

Since all the indices made new highs, I was just flat out wrong yesterday about wave 5, and additionally, what looked like an ending diagonal was, in fact, not.

So, has a wave 4 correction been eliminated yet? Close, it’s run much farther without correction than I would have thought, but if you look at the larger wave 5 down channel, this up wave still has not touched the upper boundary:

That said, today’s action created new targets on the P&F charts for the DOW and S&P that are much higher than they were, so they are projecting that this rally has significance above that of a wave 4 correction:



Can we really reach those targets? I really doubt it, there’s a lot of overhead resistance we would have to get through to make it that high. I wouldn’t play for it, that’s for sure.

Internally, we had a very rare event that is quite bullish in that it was the third 90% up day on the NYSE in the past 6 sessions. That’s screaming bullish, and will have many technicians calling THE bottom (not me). It was also a 92% up volume day on the Nasdaq. Advancers were about 3.5 to 1 on the NYSE and new lows contracted to 17.

Here’s a one month daily of the SPX, you can see that it’s a very bullish candle, and closed at a new high, on the high. The daily stochs are very overbought as they are on all shorter timeframes as well. The next pivot higher is at 789, and you can see that the 50dma and the upper Bollinger band are coming right on down into the very obvious 800 area which is also an area of volume resistance:

Looking inside at the ten day SPX I had to redraw my channel to accommodate the action which just didn’t fit otherwise. I drew a rising green line off the old peak at 725 and you can make out a rising wedge pattern. Again, overbought stochastics all timeframes up to daily:

Let’s look inside the NDX at a 20 day, 30 minute chart. That’s a pretty clear rising wedge, if it’s accurate, it may have seen its high – may have. Again, overbought stochastic on this timeframe. Look at the RSI… each higher peak in that wedge has a lower peak on the RSI, a very bearish divergence. This divergence has been here longer than it usually sticks around:

Now let’s zoom out at the NDX daily. That looks pretty bullish as it covered yesterday’s candle and finished higher, above the 50dma. The broader Nasdaq did not, however, close above its 50dma. I checked the A/D line here and it is also diverging bearishly with prices rising much faster than the A/D line:

Next is the DOW daily. Real close to a double top, but it did close a couple points above yesterday’s peak. Note the falling volume. That is true across most of the market. The DOW closed just beneath the 2003 pin bottom:

The XLF did not exceed yesterday’s peak and is starting to look like a rounded top. Again, volume is falling rapidly, the stochastic is overbought and we are just beneath the upper Bollinger and 50dma:

The Put/Call has just been weird. I would think that it would swing to an extreme, but it is just hanging out in the low .70 to .80 range. Hard to find a similar time like that on the chart:

And the VIX came to rest right on the 200 day moving average. That could be a launching pad for tomorrow, or if it breaks beneath, it would probably signal the VIX going down to the 30ish range:

So, overall a sneaky bullish day, one that did not initially look like it was going to race higher at the end of the day, but did. It also did not feel like a 90% up day, but it was. Definitely open to the fact that this could be something more than a wave 4, but there is always a correction somewhere, nothing moves in a straight line. This rally is really going to sucker in a lot of money. It’s a black magic market… hey, I had a lot of better song titles for today, but Youtube keeps pulling the good tunes! Not that I don’t like Santana, I do…).

Santana – Black Magic Woman: