Vacation

Woohooo vacation!!!  So it should rain in New York till July 5th.

What was resistance is now support

The bears had a few days of fun ending with a bear flag being completed at 896.  But the bulls were able to regain each piece of resistance back from the bears and now have have support below them once again.  Especially the May lows which the market bounced off and rallied
920 will be key for the market, if it can close above 920 the bulls should have regain the strength in the market. 

The indicators are pretty neutral right now, they worked off an oversold condition and are not giving any clear signals.  I am pulling a Switzerland right now and remaining neutral.

I apologize for the lack of post lately, it has been a hard few weeks, un-market related and needed sometime to recharge the trading batteries. I expect to be back up and running after the 4th!

Three Unwise Men

$RIFIN has the possiblity to form a Falling Three Method Pattern on its daily chart.  This is a pattern which is recognized by one big down day, and 3 smaller days up that remain inside the big down days candle.

So far $RIFIN's candles have given 3 of the four things we need for this pattern to be completed

1. A Downtrend is in progress. A long black candle forms.
2. A group of small bodied candles follow, preferably white bodied.
3. The close of any of the uptrend days not does close higher than the open of the big white candle.
4. The final day opens up into the body of the last uptrend day and proceeds to close below the close of the first big black candle day.  (candlestickforum.com)

  RIFIN is in a downtrend since June 8th, we have a large red candle, now 3 days of small white bodied candles and no close higher then the big down day.  So all RIFIN has to do is close at a new low.  This low would also correspond with the breaking of it's support at 600.
If RIFIN was to complete this pattern it would be very bearish, since it would be a break of support with a candlestick pattern showing a trend continuation.  But wait for the pattern to come too, don't try to chase it. 

Tweezer Tops

I mention the Tweezers Top pattern a few times here.  It is a good pattern for a reversal, but on the flipside of that there is the Tweezers Bottom candles.  Today we had an example of this bullish reversal candlestick pattern.

Yesterday's ending candle's low was 896 and today the market touched this level again forming the tweezer bottom candlestick pattern.  Then the market never looked back. 

8 Ball on NYAD

$NYAD is an important breadth indicators, it gives us a good idea of where the market is moving.  It can show if there is strength in the move up.

The latest short-term trend in NYAD has been down, but today it moved up.  Coming close to its 8 day EMA.  This was important support during the move up in March to May, since the market peeked at 950 NYAD has been climbing down, dropping below its 8EMA.  The real pattern emerges what happens after the NYAD drops below its 8EMA.

When the $NYAD move is capped by the 8EMA, the market typically has a down day the next day.  When the market climbs above it, it has an upday.  But I think the more important thing to look at on this chart is how the 8EMA caps a move and then starts a trend.
The NYAD is already in a downtrend, if it would not be able to get above the 8EMA and start a move up, we could see further downside.

Another possible pattern on the NYAD is the formation of the moving averages.  The have started to flatten and possibly are rolling over.  If you look at a longer-term chart, you can see what happens when the moving averages move down. NYAD is already below its 8 and 19EMA's a break of the 39 would be bearish.

The reason I use the 19 and 39 is that these EMA make up the $NYSI which is a longer-term indicator.
It has been on a steady decline downwards since late May.  It's moving averages look to have the possibility to cross as well.  As this gets closer to zero it will become more important to watch.

Fin Hunting

$RIFIN is the index that FAZ and FAS track. Today it came very close to breaking a key support at 600.
Each day this chart looks weaker and weaker, today helped to strengthen the case as RIFIN closed below its 50EMA. If $RIFIN breaks its support at 600, the next strong area of is around 530-540. This could be 2.00 move on FAZ.

On June 5th, I pointed out the bullish divergence on FAZ. Since then it has taken off, climbing another point off its lows. FAZ is looking more bullish each day. It has an established uptrend since June 5th, and has climbed above its 20EMA. Notice the volume increase since June 5th as well. All these are good signs for FAZ

So the key will be can $RIFIN break 600 and fall like a drunken sailor, or does bounce at this support level. I am still holding my FAZ from June 6th but will take profits if $RIFIN can close above its 50EMA.

Why this time it is a little different

Early May the market sold off and it looked like it might end this rally but the market managed to climb higher after a bounce off the 884 level.  What makes this move down different, is the break of support and the strength of the selling being show in some indicators.

$NYAD- Early May it dropped but quickly bounced and stayed above all its moving averages and didn't break a trendline.  Now look at the NYAD it has dropped faster, broke it's trendlines and moving averages.  The moves in the NYAD this time around have been with great volatility as well.

 

$NYSI the longer term indicator has also been selling off.  In May it moved down but was able to bounce up.  This time around the move down is sharper and is being confirmed by the moving averages, a cross of them would be a signal more selling can be anticipated.

$BPSPX has been a good indicator of when a sell off my occur.  In May it barely dipped as the market dropped as people remained bullish.  Now it has steadily declined during this sell off, similar to how it sold off in early 2009.

So with the indicators point to more selling strength then last May and the market breaking key support levels, it is possible that this market could move down more.  I am looking for the 884 level as the first bounce level and will take it from there.

Resistance ahead

First chart is a short-term chart of the SPX 60 Min.  One thing to notice is the resistance above now.  SPX yesterday broke through key support levels on this chart and the daily.  SPX is now below its 50 and 200EMA. On the short-term chart, SPX is below all its moving averages and they are in a bearish formation. 
Short-term this chart looks oversold, but the question is how the oversold is last week the market chopped around and climed 20 points then dropped off.  With resistance above it might be hard to climb to work off the oversold condition. 

 

Daily chart- 900 is going to be hard to break its the 50EMA, 200EMA and a psychological level.  

The daily chart it still looks like it has the momentum to move down more, epescially to the May lows at the 884 level.

While the Daily looks like it has room to go down more, the weekly looks even better.

The MACD and Stoch on the weekly look like they are starting to roll over.  There is resistance above 915.

Expect a bounce or a bit of chop especially with FOMC on Wed.

Bear Flag

This is my first time looking at the charts today and the first thing I noticed is the bear flag that formed. 
It starts at 940 to 904.  Then we had the 3 days of consolidation and a break today.  The bear flag should be completed at the 884 level.  This is also a level of previous support, 889 is the 20EMA for the weekly time frame. 

A move to this level should enter the market into a short-term oversold condition.  This will be a key level to watch fo the rest of the week.

Broadening Top in oil

Oil has enjoyed a nice run up since early February, with the majority of its gain in May. But after climbing above $70 oil has taken a rest and has formed a Broadening Top Candlestick Pattern.

 If there was to be a break out of the top of the pattern, it could send oil to $74-$75.  But the chart pattern favors a drop in price.  This is drop is also supported by the indicators, the Stoch has crossed and given a sell signal and is working off its overbought condition.  MACD's histogram turned negative on Friday.  But because of the events in Iran, there could be a rise in oil on Monday.  Although post-elections events in Iran did not send oil prices up, so this might not affected the price of oil.  CNBC notes that oil trades are watchin the dollar instead.

Looking at the dollar it looks as it consolidated at these levels and is in a uptrend since the high 70's.  The price action makes a ascending triangle.   A break of 81 would be very bullish for the dollar and negative for oil. But if the short-term trendline is broke it could send the dollar back down to 79.

  

Friday what to do

SPX hourly is now overbought.  The question is how it will work this condition off or if it will.  SPX also broke the downtrend line which started the sell off. 

SPX Resistance= 920-924
         Support=  909-900

The last two days the move down has slowly declined as with volume to the downside.  This could either signal a pause in the downside movement or that there is a short-term bottom forming in the market.

If volume can increase to the upside and SPX can get above 920-930, the market will have the room to run up.  The key will be if the volume is behind it, the last move up in the market have been on low of volume.  If we break this level, I will cover my SDS.

RTH (Retail Holders) is an interesting chart.  It is at key support right now so it might not be a bad trade to go long with a stop at 76.  A break of 76 would be bearish for this sector.

North Korea is really bad at Math

The Two Utes

Utilities has broken out today and has been in a nice uptrend since late May.  This could signal a sector rotation in more defensive stocks.  But looking at XLU it is clear that it has broken out and if there is more a rotation to defensive stocks there is more upside for this sector. .

Notice each time XLU breaks out of it's pennant it starts another move up. This new move should be at least another point up.

There are other stocks within this sector that have similar patterns.

TE

POM

CPN- This one looks really nice if it breaks out!

Tweezer Tops

Twice so far, Tweezer tops have been good sell signals on the SPX  On Tuesday I mentioned that I exited my SSO because of the two tweezer tops.  Today I saw the same thing, hopefully you were able to catch my tweet and caught a .40ish move on SDS.

Look at the 60 MIN SPX chart, the squares highlight the Tweezer candle tops. The Tweezers tops are two candles that touch the same highs, leaving long wicks at the top. It means that the bulls had control but the bears were able to push the market lower at these levels twice. Keep an eye out for these patterns and trade accordingly.  For more info on Tweezer Tops or Bottoms check out this article.
Follow me on Twitter for more trade ideas.

XLF breakdown

XLF has been in a tight range for a while forming a triangle.  Yesterday the triangle broke on XLF after it broke through its 20EMA.  The measured moved on the triangle should take XLF to the low 10.20's.  The key level for this move to be completed will be the 11.50.  Notice at this level, the buyers outweigh the sellers.  There was a strong amount of accumulation at this level, breaking through this will should start additional selling, putting pressure on the sector. 
People will start saying "But Cramer said banks were safe", "Erin Burnett said I should buy banks", "Warren Buffet was buying banks" "Wahhh Green Shoots Wahhh"

Other downward pressure on the sector is the downward sloping 200MA, resistance at 12.15 and above.  My out on my FAZ would be a break of the 200MA. 

Short-Term Longer-Term

The market completed two days of moving in the same direction. It almost makes a trend!
Let's look at the short-term picture of this market. For me this is an hourly time frame.
Stoch is very oversold, but this can not be a sole reason to go long. CCI looks to be moving back above -100 which can be a buy signal. MACD needs to turn up to give a more definite signal, also RSI is heading below 30 which is almost over sold.

Also $NYMO is almost in oversold territory. It needs to be below -100, which it still has a few more points to go.

But longer-term where can the market go. To decide that you have to take a look at longer term indicators and charts.
SPX has now dropped below two important moving averages, first the 200EMA which was strong resistance but more importantly it dropped below the 20EMA. This MA had confirmed the trend and provided support.

Dropping below the 20EMA adds even more resistance at the 920 level.
More importantly the indicators on the daily chart are giving sell signals. STOCH has rolled over, CCI moved below +100 and MACD has crossed and the histogram has 2 bars in the negative.

On a weekly time-frame SPX looks like it is beginning to roll-over. MACD is stalling at zero, STOCH remains overbought and as of today, it is forming a bearish engulfing pattern.

$NYSI is a longer-term indicators, it has continued to move down which is bearish for the market.

Short-term 925-930 is possible, since the market is oversold and could make a dead-cat bounce.
Longer-term if resistance levels hold 880 would be the first real support test, the trend looks like the market wants to gravitate towards the 50EMA.

DUG

$DJUSEN has broken its trendline and is below its 200EMA and 20EMA.  If you look at the XOM (seen on the chart) which is one the major compents of this index.  It made a big bearish engulfing candlestick today and is looking weak. 

 

  Then looking at DUG it  has broke out of its downtrend line. The indicators are turning up and momentum looks to be to the upside.

I expect a pull back from here but I am looking for a target of 18.50-19.00.

Lunch Time Update

Out of my SSO long I played for a bounce today.  The 3 Tweezers tops at 928 weren't giving me good feelings. 

Added to FAZ after XLF broke its 20EMA, it have moved back above it right now(12:06) but it can't get above 12.20. 

DUG is still looking good hold since the 15.72 level.  $DJUSEN is below its 200EMA. XOM is down today too, so it could see additional weakness.

Enjoy lunch and beware of the CHOP!

Watching Da Banks

XLF has been having some trouble moving up with this market, maybe they need another mysterious memo to fall out of the sky.  I've been mentioning to watch the 20EMA-12.12.  This has been a  level of support for XLF. 
12.20-12.25 may provide resistance now for XLF on an intra-day 60 min chart.  This resistance could pin XLF at its 20EMA.  Any selling pressure could send it below it. 

The daily triangle on XLF still has not been resolved and is getting tighter to an area where it can go either way now.

I am still holding FAZ.

One hit wonder?

Was yesterdays move down a one hit wonder.  Today I am expecting a bounce for a few reasons.


Reason 1:
60 Min SPX chart is oversold, look at the other times recently when the STOCH has been at these levels. There was at least a slight bounce off these levels to bring it out of oversold.

Reason 2:
920 was the gap from early June that was filled and now is support for the market. Now the market has a gap above it that is unfilled.

Reason 3:
TRIN was above 2.00


The market should meet resistance at 930-940, the bears have to hold this level if they want yesterday to be anything more meaningful, then just a correction.

Right now the kid just turned around and starting heading towards the ladder, he could still jump.

DIG or DUG

Here is a chart of the Dow Jones U.S Oil and Gas Index which DUG and DIG follow. 

Today it bounced off its lower channel line which has support underneath it well from the 20EMA.  But it is also below resistance and has formed a wedge which is bearish. 

Keep an eye on this.  A break of that lower channel line would be bearish, but it could bounce off this level as well.

Bear Flag?

Update#2: Bear flag worked out nice! Do we close the gap at 920. looking like we might


Update: Bear Flag almost at 930 level, might see a bounce here

I mention the bearish patterns Friday the SPX was forming a bearish pennant, which failed because of nothing but someone pushing the market up. See this from Zero Hedge.

I still see the same bearish pattern on SPX, right now we have a Bear Flag. Which looks like we will either open at the bottom of that flag or below it. If this flag breaks it should send SPX to the 930 level, where it may bounce. It will be important to read the internals today to see if 930 can be broken. Here is the live chart to follow along at home

Dollar Break Out

The dollar looks to be breaking out of its bull flag I had mentioned on Thursday.
Here is the chart today:

The flag is a 4 point flag; the pole starts at 78 going to 82. The break out was at 80 so the top of the move should be 84, which lines up with some over head resistance. Strength in the dollar should soften this market.

Jump or get down! (Personifying the market)

To personify where the market is right now here is a scenario. Remember when you were a kid at the town pool. Every once and a while there was a kid who thought, today would be the day he jump off the high dive. He would walk up to the ladder, the first step would be easy, 5th step would be harder, then as he gets to the platform and he starts to get scared. Now he really is having second thoughts, its a big jump. But now there is a line of people waiting to go, a bunch of people watching; some are cheering him to jump, others are hoping he climbs down to laugh at him.
So the poor kid can either climb back down and risk embarrassment or face his fear and jump. Right now the market has to either face its fear and jump(ie Go Higher) or climb back down the ladder and be embarrassed(market goes lower)

Since the market is in an uptrend and has support below it. Let's say the kid jumps, where does the market go.
The daily chart is making a ascending triangle with 950-955 being the top. A break of this would be bullish. The measured move would be to 978-980. If you make the flag pole from 900 to 950 its a 50 point move to 1000.

On the weekly there is a similar pattern which would take SPX to 976, but 2 points below at 974 is the 50 EMA weekly.

Other positives for the market is that it is above its 200EMA, 200MA and trending with its 20/50EMA. This quick move to these levels would be the final blow to any bears especially the new ones who were shorting at 950. Now that the kid jumped, he will keep on jumping. So if the market breaks out, it might have the confidence to keep on climbing.

But what if the market decides to walk down the ladder and have everyone laugh at it. Can this happen, this is the side I am leaning towards.
First looking at the 60 min chart we can see some topping action via resistance at the 950 level, this area has been strong resistance. Right now the 60 MIN SPX is trading in a channel that is trending up. While this looks bullish, the indicators are showing that the recent move up has had some weakness. The kid is getting scared! MACD had failed to make new highs during this move up and is showing bearish divergence, RSI has also been trending down as well.

The daily chart shows the resistance at 950 equal to the 60min. The market also has broken the green channel, falling through the bottom of the channel. It is also close to a longer-term trendline from March, which may provide some support. But note the lack of volume on this move up to the new highs(bearish, the kid is losing confidence as he walks up). In fact volume has slacked off since 900. Other bearish indicators are; the Stoch is overbought and turning down, MACD histogram is moving down, CCI has moved from +100 back down.

But the market unlike the kid on the diving board, has some internals we can read to see if it has the confidence to jump.


$BPSPX is at the same levels where the market dropped previously, so the kid walked to the ladder a couple of times with the same confidence but failed to jump.

$NYMO is still below zero and trending down, while the market has been trending up giving negative divergence.

$NYSI- has turned negative but will it turn up again like it did 2 weeks ago.

$NYAD has stalled and notice the ATR has been in a decline the past couple of days. If this trend continues $NYSI will keep moving down as well, since the numbers of advancers will not support the NYSI move up. But also look at the level where ATR is. It is very similar to last big market move down, $NYAD right those levels as well.

Looking at MEGA B, the Advancers and Advancing volume has been in a steady decline, while it is the opposite for Decliners, they have been moving up.

TRIN- is confirming this increase in decliners. TRIN has slowly been trending upwards since May, while the market has been moving up.

So will the kid jump. It's hard to tell, the internals are saying he won't do it since these indicators are looking bearish or showing divergence between the market and the indicator.
But if something gives the kid courage, like seeing little Suzie watching him(b.s economic news or Goldman bidding the market up). Then market could break out causing these indicators to head upwards.
But I am leaning towards the kid walking down the ladder, the indicators are showing he did the same thing before and walked down. I think SPX gets another possible push up to 950-960, then a move down to at least 920 to fill the gap. Then we will have to see if the kid goes crying home to his mommy(drops more) or stays at the pool and plays running bases(bounces back up).

There is one other scenario that if it happens everyone will be amazed. Here it is: