Thursday, November 12, 2009

Technical Update…

Since yesterday’s new high in the SPX eliminated the possibility that wave C down had started, the current wave count indicates that we are in the final wave up of B up. The final leg should take the form of an a,b,c. It is very likely that wave b of that a,b,c is what started today, and if so there will be one last wave higher. Last waves, however, can truncate and they can also extend, they are not easy to predict.

Yesterday’s high may be the high… it is close to the phi mate and Bradley turn date that fell on Monday. Today’s action produced predominately bearish patterns with today’s close generally below yesterday’s low. There are signs of reversal out there, let’s take a look.

The most telling signal to me at this juncture is actually in the VIX. Below is a 3 month chart showing an expanding bottom. The most recent high, however, was higher than the previous high, and now what appears to be a new low is higher than the previous low. Yesterday’s candle is a reversal marker, now confirmed by today’s action:

Of course the dollar had a very strong up day while commodities took it on the chin. Oil, in particular was hard hit, both because of the dollar rise and because inventories were way up, demand down – again:
A big build across petroleum stocks is sending oil lower. Crude stocks rose 1.8 million barrels in the Nov. 6 week to 337.7 million, swollen by a rise in imports of 530,000 barrels a day to 8.7 million a day. Gasoline stocks rose 2.5 million barrels to 210.8 million with distillate stocks, reflecting weak demand for diesel and heating oil, up 0.3 million barrels to 167.7 million. Demand for gasoline sank for a third week, down 100,000 barrels a day to 8.9 million barrels a day. The bottom line is that supplies are swollen and demand has yet to strengthen.

Oil closed down 3.2% at $76. 75. There’s that darn real world stuff getting in the way of their never ending growth plans.

Gold bearishly engulfed yesterday’s candle and could be starting a correction. Below is a daily chart of oil futures on the left and gold futures on the right:

In the past two days the NDX 100 index went on to barely eek out a new high. The more broad NASDAQ index did not. In fact, just that fact alone tells you that the market breadth is thin, it is being led up by a narrow range of stocks, that is typical of tops. But if you look at the 9 month chart of the NASDAQ below, you will see that yesterday’s candle is a potential top and that today’s candle closed beneath its low, thus confirming a reversal. But that’s not why I’m showing you this chart, I’m showing it because there is the largest divergence on this chart that I’ve ever seen on the daily timeframe in the RSI. Look at the last four peaks over the last four months… Lower peaks in RSI, higher highs in price. That is a massive divergence, one of many, I don’t even need to draw the line for it to stand out:

Next, let’s look at the Utilities. This interest rate sensitive index is SICK. While the rest of the market over the past 9 months rallied wildly, the Utilities, like the financials, have failed to even rise to a 38.2% retracement. It has now clearly made a lower low, and now a confirmed top for a much lower high. It closed back below its 50dma and is coming out of overbought on the daily stochastic:

The XLF is just plain old weak, even with mark to fantasy. It has failed to retrace to 38.2% and on this latest run up it topped at 61.8%, diverging from the Industrials and SPX that made new highs. Today’s action confirmed yesterday’s candle as a potential top and prices returned back below its 50dma as well:

Here’s the DOW Industrials, the strongest index of them all. It did make a new high, but today it closed below the previous two days low. The volume pattern is screaming non-confirmation and the RSI here is divergent too. The weekly MACD is rolling over, even in the face of new highs. Sick.

So, not a huge move down today, but it is looking very heavy with the SPX closing just beneath the 1,090 pivot. The action in long bonds, the dollar, commodities, and the VIX all look suspect. Stay sharp, the criminals and their computers are IN FACT conspiring to take your money, just like all the marketing companies conspire with the corporations to take your money. It is time for your family and friends to be conspiring to take some of it back.

David Bowie – Ziggie Stardust: