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Divergence anyone?

Lots of divergence going on in the market, SPX is making new intra-day highs(has not made a new closing high) while breadth indicators and indicators that are not following this trend. 

NYAD- the last rallies were lead by the a higher highs on NYAD

TICK- the moving averages on tick are trending down, the last rallies they moved up with the market.

NYHL- (New High's and New Lows')- Last time stocks made new highs with the market.  Doesn't mean it can't happen but if the market is making new highs, so should stocks.

SPX (hourly)- MACD divergence, also notice the bullish divergence on the MACD before the rally.

SPX (daily)- MACD Divergence

IYT- Transports, double divergence on the MACD and with Dow Theory.  Trannies should be making new highs with the market

$USD- Bullish Divergence, MACD not making new lows, USD is.

Some more charts

I got more comments just posting one chart on Friday then I do posting commentary. I really enjoy the charts people posted and comments. Thanks!
I guess KISS(Keep. It. Simple. Stupid) works.

So here are some more charts, feel free to post charts or make comments. Feel free to email me if you want me to post any charts you have.
Here is an updated chart from Friday. No real break of the triangle:

SPX Daily:

IYR:

$DJUSEN(DIG AND DUG)

NYSI is nearing a support level

Just a chart

Advancers and Decliners

Here is a chart of NYAD (Advancers-Decliners), notice anything different about the latest "dip". Breadth is stronger to the downside this time around then the previous market pullbacks.

NYAD has broken below its 3 important moving averages and it broke it's up trendline since March(trendline is not drawn on the chart). During this rally NYAD had never dropped below its 39EMA. It is now failing to get above the 39EMA and the other moving averages are crossing and looking bearish. If the 19 EMA crosses the 39EMA it can be seen as bearish. Of course breaks above these moving averages would be bullish and if NYAD starts leading price it would be even more bullish. But for now the NYAD looks bearish.

Here is NYAD in 2007-2008; notice when the NYAD moving averages cross

.05

On Friday of last week the bears finally had a nice day, beating the bulls in every sector.   It  was such a  bad beating that Up-Volume was almost non-existent.  For the second time in a month, the Up-Volume to Total Volume Ratio was .05.
The most recent time this occurred was Oct 1st, here is the post about it on that day.

So now this event has a occurred 20 times since the 1980.  Here is a list of how the SPX preformed after this event.

Now we can add October 1st to this list:
SPX 1 day after=-4.24
SPX 5 days after= 36.03
SPX 10 days after= 67.11

There is a good possibility of a market bounce from here based on historical moves after .05 up-volume day.

Another good reason to support a bounce is an over sold condition on both the hourly chart and daily chart.

On the hourly the Stoch indicator is nearing oversold but one thing to take away from the chart is the MACD indicator.  Notice how it did not make a new low with the market on Friday, this is an example of a bullish divergence set-up.

On a daily time frame, stoch is also oversold, but not deeply oversold and can actually drop down more.

What will be key going forward to watch is SPX can first get back above 1047-1050, the bulls now have to get out of the bearish engulfing candle from Friday.  But if the market drops it will be important how the market handles the 1025 level.  It would form a double bottom at the level and may provide a bouncing point.  The rally in earlier October started at the same level, after having a .05/.95 day.  So keep a look out for this.  But one thing is for sure, volatility is back and there may be more large one sided swings like this in the future.

Hump Day

Don't get to bearish, while the market has moved off it's highs it is nearing oversold and could give the market a short-term bounce.

The gap at 1050 is still open and the pressure on the market is still down so this gap may be filled before a move up. One thing to note is the positive divergence on RSI, the market has made lower lows on the hourly and RSI has not followed.

The 1050 level is now very important for this market, it is the nearest remaining gap and the up trendline from March. A move to 1050 also completes the descending triangle.

NYMO has moved below -80 and perviously this has started rallies since March.

Short-term the market is showing signs of oversold, so a bounce may be coming. Internals are weaker during this decline so the chance of a strong rally to new highs is less likely then the previous rallies.

Never Leave Home With Out It

AXP- Weekly Line Chart

35.20 is a key level for AXP, this level represents it's 2002 highs and it's 2008 support before it tanked. AXP has closed above this level on a daily time frame but has not closed above it on a weekly time frame.
MACD histogram has been diverging from the price action and it is overbought on a weekly time frame. A break above 35.20 would be bullish but there may be a lot of resistance from that level, 36.03 is a 50% retracement from it's high's in 2007 to the 2008 lows.

Triangle break

That was a fun day!  The bulls looked like it was going to party but then whammy the market drops.  I mention this morning if SPX was to test the 1075 level it would break, how many technical analysis books describe a "triple bottom".  It doesn't happen.

The descending triangle broke as did the 20 ema and both were broken easily.

The gap at 1050 still remains unfilled and looks like it could be filled soon with a short-term down trend now established.  I am still looking for the major trend change day in the first few day in November, either the new down trend breaks or the up trend since March breaks.

There is a chance of a retracement back up to 1070-1075 or the bottom of the descending triangle, as the market is nearing oversold.  The volume ratios are nearing oversold conditions as the down-volume to total is nearing its upper range and up-volume to total is below it's range.

New Fall Trends

SPX filled it's first of 3 short-term gaps on Thursday and this area became support on Friday.  The market tried to break through it but was unsucessful each time, as buyers stepped in and bought at that level. 
SPX has now a short-term down trend from Wed to Friday of last week.  The key area will remain the support at 1073-1070 and the more the market test this level the weaker it becomes.

The 1070 level is more import on the daily chart.  On the daily SPX a descending triangle has formed, although it is young and not well defined yet, forming with only a few candles. The bottom of it is the 1070 level, which is also the 20ema.  A break of this descending triangle, which would make a rough measured move from 1100-1075=25pts.  This would put SPX right at the second gap that has yet be filled at 1050.

Wait a second!

What was this "selling" at the close.  How can they do that?  You are suppose to hit the buy button at 3!
Finally some action in the market.  I haven't been posting, one because I've been busy but two the market sucked.  Everyday "The market is up", and some pundit is screaming "We have recovered, go out and spend, have unprotected sex, eat raw meat, earnings are doing great".  Each day the market ripped up and all you had to do was pick three letters and hit buy.

The bears finally did some damage today.   The first thing that should be smacking you in the face, is the beautiful double top.  The bears have claimed the 1095-1100 level their house and they will defend it. The selling was quick and fast today, breaking the 20 and 50 ema.  It stopped in no mans land close to support but not there, now the momentum may be down and that gap is looking like it needs to be filled.
One thing to note on this chart is the text book negative divergence.  Look how SPX made highs and each time MACD, RSI did not make a new high, it just trended down.  That my friends is BEARISH Divergence.

The Daily chart shows the divergence too and it's indicators look ready to roll over!

The divergence is clear in this chart and the negative trend in the MACD.  If the rally was a true rally as it was in March and July, MACD would have made new highs, confirming the move.

Gaps, Divergence and SPX

Gaps always get filled is an old saying, but there is no time frame to when gaps get filled.  Right now on SPX there are three filled gaps below the current market price.  There is also a gap at 900 that has not been filled yet.

Right now the market is looking neutral, sitting between support and resistance.  If the market starts selling, the market could gravitate towards these gaps.  But the trend is still up and the market will trend towards resistance.

Here is the daily chart of SPX, you can see the first two gaps on the daily chart.  The 900 gap is not highlighted.

What is interesting to note is the divergences on the indicators.  While price has made a new high, MACD has not.  Also shown is the CMF indicator, look how there is less accumulation during the latest rally.

There is a lot of chatter about going to 1100, but because this is the most predictable area for the market to move too this might not happen.   In fact the sentiment is very bullish going into next week.

Look at the 5 day EMA on CPC, it is at a very low level indicating some strong bullish sentiment as well.

It is still hard to get bearish on the market when you have the energy sector breaking out.  Remember oil and energy has been leading the market.  If oil and energy can sustain this move, equities can keep climbing.

Broken Tools

If the price action lately has been making you scratch your head and saying "Wtf is this?", then take a look at some of the most reliable indicators and oscillators. These indicators and oscillators are screaming bearish divergence, either that or they are broken and cannot be trusted anymore.

First here is NYMO, normally if the market is exploding higher each day NYMO would move a good amount with the market. NYMO touched -75 on Oct 2nd, it is now barely about 20. Just look at the pervious market rallies and how NYMO has reacted bounce off its low of -75. NYMO has barely budged during this monster rally. Either NYMO is broken or something is screaming beware.

NYSI- Very similar to NYMO but on a longer-term time frame. Just look at this chart, NYSI hasn't even made a move up, it is almost flat line.

TICK- Notice the highs it made during the rally from July, when the market was making new highs so was the 5 MA on TICK. Now the market is making new highs and TICK is failing too.

These indicators are reliable and right now they are showing lots of divergence between their movement and price. This divergence coupled with the lack of volume may be signaling that the market rally might be running out of steam. Or the new market with constant gap ups, no meaningful correction and back to back to back to back days up, could just be wrecking the indicators proving them useless.

INTC Before Earnings

Intel's earnings come out after the market today, there is a lot of attention being put on Intel's earnings being a gauge is the economy is recovering.

Let's see if Intel's chart can give us a clue to what Intel's earning's might be or how to trade INTC after it's earnings are released.

First thing to notice is yesterday doji right at resistance, this is a bearish candle. The 20.66 level provided resistance perviously and moved Intel down to 19.50, it also formed a doji candle around the 20.66 level. There is also longer-term resistance above the 20.66 level that can be seen on the weekly chart.
While there is resistance at 20.66 there is strong support at 19.50 but be careful of the gap that has not been filled at 17.50. If Intel misses their earnings, it could try to fill that gap.

Intel doesn't report till after the market is closed but these should be key levels to watch after Intel announces earnings. But more importantly watch INTC at 3:56 when the big guys get the earnings report first.

End of Day Review looking at Oil SPX and the Dollar

Today was a typical holiday trading day.  Low volume and swings. but in the end SPX closed at another high for the 6th day up in a row.  While this is bullish, SPX may be nearing an overbought condition.

Here is the Volume of the market:
When the Up-volume to Total Volume ratio reaches above .60 it starts signal an overbought condition.  When Down-Volume to Total Volume reaches close to .35 it is overbought too.  The Moving averages are nearing these conditions.

One thing to be wary of if you are long is that MACD is not making new highs.  MACD has barely moved up with this latest market move.  If this move had strong strength to it, it would have moved the MACD.  You want to see MACD make new highs with the market.

It is still hard to get very bearish with SPX making new highs and energy breaking out.

Oil still has not broken out but is nearing it's high for the year, it broke above its June highs.  The 75 area may provide some resistance and a pullback.  But Oil's MACD is performing just like SPX's, it is not making new highs with the price and oil's stoch is showing overbought.

So watch oil, if it starts to pullback it could bring the market with it.  This is what has happen after the pervious rallies since March.

XLE broke out today and has now retrace 32% from its high in 07 to its low in 09.

Of course can't forget about the U.S Papyrus De Toilet.  I personally think Bob Pisani has been selling the dollar just so he has something to talk about everyday.
Is it possible that the dollar may be forming a DOUBLE BOTTOM!

The 76 level just might be providing some support of the dollar.  But every single bullish pattern for the dollar has been completely destroyed.  But it does look like the dollar may be forming some type of short-term bottom.  Pisani is shitting his pants, he won't know what to talk about if this happens.

So let's bring it all together, SPX making new highs, meeting resistance at 1080, nearing overbought.  Oil is nearing resistance and showing signs of overbought.  U.S Peso possible forming a bottom or sideways action.  So the key will be to see if energy can keep climbing to boost the market, but if the dollar does find a bottom here both the market and oil can see some weakness.

New Week

While sacked out on the couch sick this whole week, I would occansionally put on Mad Money, partial to see what Cramer was saying but more to induce vomit. While watching that stellar piece of market commentary I remembered one phone call some lady calls up and says this and I quote "I am a beginning investor, DECK has had a long run up, is this a good short". I was running a high fever and thought I was hallucinating because someone suggested SHORTING! on Mad Money.
Right away I knew after hearing that this market had to go higher. It has to kill those people who for the first time in their life discovered shorting after the 2008 crash and now think they can make money shorting the market. Till these fake bears are brought out back and beaten like a red headed step child the market will go higher. This latest pop might even be the one that does it.
But I also might have had my Shoeshine boy story this weekend too! That can come later.

SPX had one of its best weeks of the year rallying hard after a small "correction". It is now nearing it's highs in Sept and almost poised to possibly break them.
The Sept highs may provide some resistance, since there are still some bulls underwater from buying at those levels. RSI is nearing overbought and STOCH is overbought. There is also a gap unfilled at 1060. A move to the 1070 level may provide a pullback or a consolidation.

On the daily chart, the trendline is still in tack and climbing. (may chart isn't a log anymore so it reflects the new trendline).

It will be interesting to see what the next few days bring for the market. There are a few potential bullish patterns that could be forming.

While SPX is looking more bullish then bearish, the lack of volume is still a concern:

The last 3 days have seen low volume on the moves up, but this is a double edge sword. But this doesn't mean the rally is weak or fake. Look at the volume around Sept 8th when the market was nearing it's previous highs. The volume was low, once it broke it's highs volume came back into the market.

NYAD keeps climbing and is showing strength. The trendline is still up and it has broken out of its highs of the year. This shows advancers are leading price.

Another bullish sign is NYHL, is making new highs a head of making market highs and keeps climbing.

Overall SPX is nearing some short-term resistance at the September highs and may pullback to close the gap at 1060. But there is now stronger support below the market after it tested the 1025 levels and was able to hold. 1054 should be a level to watch now as support.