Saturday, April 4, 2009

Weekend Update 4/4

Boy, this Bill Moyer’s interview was REALLY GOOD, highly recommend it as Mr. Black gets it and is full of common sense – a rare truth teller.

And someone’s going to get it in the market next week I have a feeling, is that a shooting star I see on the NDX? Possibly.

On Friday the DOW gained only 39 points but was lower most of the day and finished strong. The SPX gained 1%, the NDX gained 1.7%, and the RUT gained 1.3%. The XLF gained a strong 4.1%, and IYR led the market by gaining 9 unbelievable percent despite a rise in the CMBX index.

Internally, advancers were a little better than 2 to 1 on the NYSE with 78% of the volume on the way up and only 2 new lows. The volume was weak on the advance overall, a sign that a top is at hand or getting close. There was a small change in the McClelland Oscillator on Monday, so expect a large price move on Monday or Tuesday, direction unknown by that indicator. The Put/Call finished the week at .83:

Let’s look at the weekly charts first, here’s the past 3 months of the DOW. That is an outside hammer on the weekly. You don’t see those too often and it has pretty good odds of being a reversal indication, but if you look back over the past few years there are examples of weekly hammers not being directional change markers. Note the falling volume pattern of the past two weeks, that would tend to confirm the idea of a top or getting close to a top. McHugh, btw, has a Fibonacci turn date window that begins next week and is what he calls a strong one:

Here is the Major Market index weekly and here too is an outside hammer for this broad market index:

So, we have weekly candles with outside hammers and we also have a bunch of daily candles that are outside hammers – outside hammers inside of outside hammers, if you catch my drift! Here’s a one month daily of the SPX. Friday it failed to rise above the intraday high on Thursday and closed just a few points beneath the 848 pivot and very close to the downtrend line from Nov/Jan. It’s actually just inside the line as presented on TOS. Note that the daily stochastic is overbought again and it did close above the 100dma (light blue line):

The DOW daily also produced an outside hammer. This configuration is often a top indicator, but again needs to be verified by a fall in prices on Monday. Note how it failed to rise above the 100 despite closing above 8,000. Also note the falling volume. While this looks like a short term top, a rise above the 100 on rising volume next week would be bullish.

The NDX is both the most bullish and potentially the most bearish. Here’s the daily chart, that’s an outside hammer. With a gap down open on Monday, it could turn into a shooting star. Note, though, that the 50dma is just crossing the 100dma, that’s bullish:

As I zoom out to a 6 month daily chart of the NDX, you can see that it’s trying to poke above up sloping resistance. There are technicians calling this a triple top breakout, but I think it’s still right on resistance and is likely to turn right here. If it doesn’t, and it continues higher, that would be bullish. Note though that the stochastic is overbought, my guess would be a pullback followed by a run higher later. The big name tech companies have been performing more strongly than the broad market and I guess there’s a good case for that as at least they make real products and for the most part aren’t actively involved in outright fraud like our banks!

Here’s a chart of the Transports. Again, a hammer on lower volume:

The XLF was strong on Friday, but closed right on the resistance of its prior high, on lower volume, and with the stochastic approaching overbought again:

IYR looks bearish here. That was a monster move on Friday, and was not justified by one company’s stock sale. That said, it was on higher volume, it broke the 50dma, and there’s still room on the stochastic. It did close above the upper Bollinger and is just above the top trendline of the megaphone it’s been in. I would expect a pullback to at least keep within the bounds of the upper Bollinger. I do see the potential for this wave to be a C wave up… if so, the target would likely be around 30.50 which is coincidental with the 100dma. If you are long SRS, that will hurt. There is, however, a bunch of overhead resistance in this immediate area if you zoom back a couple of months:

Bonds made an aggressive move on Friday, lower in price and higher in yields. That’s a big NO THANKS to Bernanke, he better be able to keep it contained or rates are going higher (one way to keep it contained is to let equities sink). Frankly I hope it happens as this is the last chance at market discipline we have left. The TNX made a big move and here’s TLT with an impulsive move beneath the 50dma on higher volume. Support is in the 101 to 102 area, we’ll see if he can keep it in this range. It’s been in it a long time already, they are creating a never ending supply of fake money debt, I’m pretty sure there’s NOT a never ending supply of idiot buyers to match:

The most bullish thing I see about Friday was the fact that the VIX broke beneath 40 and tripped a lower target on the P&F diagram of 33. It’s actually been lower than this level several times in the past 3 months, so it could still find support and move higher, but it bears watching:

That’s about all I have… this run’s gone on for quite some time already and the SPX is right on an important downtrend line. I certainly would have expected at least some sort of moderate pullback in this rally and we just have not seen it yet. A pullback to SPX 800 would be the minimum from here, and I think the odds of still going back to 750 are good too. If we don’t turn here and head higher on Monday, keep in mind that there is a strong Fibonacci cluster that has a best fit of sometime next week. I think there’s a potential for a turn right here, you may get to see the NDX turn into a shooting star…

Bad Company – Shooting Star: