Tuesday, July 7, 2009

End of Day Market Update...

Just a quick update to point out a few chart items…

First of all, it’s quite unusual to have such well formed hammers from yesterday be bearishly engulfed as they were. Yesterday’s last minute rally had a contrived appearance and did not look like it was something that would last.

Today’s action produced two new bearish targets on the Point & Figure charts, one for the SPX, the other for the NDX:



Below is a daily chart of the SPX for the past month. Note how the lower Bollinger band is turning down to accommodate the action. Today broke the 200dma average and closed below it – that is bearish as is the engulfment of yesterday’s candle. Note, however, that the daily stochastics is now oversold again:

On the 60 minute chart you can see that the very prominent H&S pattern now has a broken neckline. This is a very reliable pattern once confirmed, as this one now is, and it has a downside target of about 810ish which is below the P&F target of 825.

The DOW’s H&S is targeting about 7,600ish, just below the P&F 7,700 target. Note the bearish engulfment and oversold daily fast stochastic.

Below is a chart of the Transports. Note how they have not broken beneath the most recent lows as of yet while the Industrials have. There’s still plenty of room here for lower and I will be surprised if they don’t make a lower low soon:

Note that the VIX rose right to the 50dma and stopped dead. It needs to get over the 50 for the bearish case to have further legs. This is a dangerous place to sit tonight as it could springboard off the 50 in either direction:

I note that all the short term stochastics are oversold tonight from the 10 minute to the 60 minute and even the daily. Today was an 80% down day by volume. I will not be surprised if we retest the neckline of that H&S pattern, possibly even rising back above the neckline. The only thing that can invalidate that pattern now is if prices rise back to new highs above the head – unlikely here.

That’s about it for now, will have more in tomorrow’s thread.

Have a great evening,


Whenever I think of California, I’m reminded of Don Henley’s lyrics, “Call someplace paradise, kiss it goodbye…”

Issuing I.O.U.’s? Truly the last resort!

The Eagles – The Last Resort: