Well that was a good start to the reversal. I would have liked to see the mkt. pop up just a hair more, but I don’t want to sound too picky. This scenario was pretty darn close to what I was talking about yesterday, good jobs news, mkt. still down due to technicals. Now, I would imagine that we would have to drop a bit more if we are going to make another run at the 50% fib area on the DOW. This should prove to be a pretty strong resistance point, even to the level of actually causing a true reversal. Tomorrow we have Mich. Sentiment, which will probably be bte, and trade balance, which I have no idea how that will come out. Again, I think a gap up will result in a great opportunity to short. However, if we open down I would be watching for a possible repeat of Friday two weeks ago, and possibly taking out 10,000 again. Now some charts:
So yesterday we had the nice hang on support, and we rallied off that and closed a little above another minor resistance line. If we continue to rally up, and it looks like we might, we will be a decent trading range here 23 to 29.50 with one anomaly on each side.
It seems like looking at the post short-term tops, we should move sideways a bit before dropping. The v today was not too impressive, but the move itself was pretty impressive, finishing close to the lows of the day. I don’t see anything that looks similar in the past tops, and perhaps, with tomorrow being Friday, we may just have some weekend selling and not spend anytime going sideways this time.
This actually formed what would normally be a pretty obvious top. However, unlike the DOW, we did not get up to the top bb are as close to the 50% fib. If we keep going down from here, I think it is a very strong sign that this rally is tiring. I imagine we will see some support at 1074, but I don’t think it would be enough to stop a strong down move day. If today was the start of the reversal, I think we will be looking to move below the low we set on the RSI on our last move down and I will be watching that indicator closely.
Now, unfortunately the NAS did not lead this down turn like I have been saying it would ( thank you AMZN, AMGN and even AAPL to some extent) but it still moved down .83% today with a nice top wick and smashing of an up trend line. We are very close to support here, but again I don’t think it will withstand a strong move down. We also formed a nice bearish engulfing of the previous day’s tombstone doji, all very bearish.
Something key to note on the UUP, first there is a broadening megaphone formation forming (which I neglected to draw on here). Second, This is the first time since June that we had a move that closed above the previous moves high. And, if you count today’s move vs. the last four days, that would be twice in a row. This really looks like a consolidation forming here, and again watching the RSI should give us a clue if we will continue to break out higher. I would imagine that 23 will offer resistance, so we will need some buyers to step in to make it happen.
Now, the eur/usd is still in an up range, but it appears to be heading to the bottom of the range, which of course strengthens the UUP. There seems to be a lot of support at the 1.4717 area and if it continues down, I think it will at least stall out there.
The FAS is on support, but looking at the little bigger picture, you can see that I have a beautifully drawn potential head and shoulders set up. Also note that the RSI did not correspond with a higher high for the head; an RSI divergence and usually a sign of weakness. However, also notice the v was higher yesterday, but it was a pretty indecisive day unable to hold to the highs.
ESRX looked like it might want to break out of this ascending range, but now it appears that it at least wants to re-test the mid range of the range. Nice v today to end a v divergence.
So AMAT came out with earnings and was bte. But notice it moved up into earnings. A lot of times this is a sell the news play. The whisper number is good, the insiders buy into earnings, heavy call buying is present going into earnings ( over 2 to 1 in this case) and then they beat and drop. Usually they will drop for a few days and then rally back and take out this high. But for now it looks like it will drop some more to me.
very low v stock, but it appears to be forming a bottom near support. Further, I like that the RSI is just coming out of being oversold showing us buyers will be willing to step in. I will be watching the support line and see if we drop to it, if it holds a potential great long set up is in play. If it fails, it could drop significantly with no support in the way.
We have been playing the GDX up and now I think we need to start looking down for direction. Here we sit on fib support, that, if broken, will likely lead to at least a $3 down move.
Finally, we shall finish with a pretty evident, but simple v divergence. You can see we broke out of the rising pennant on 10/26 and dropped for a couple weeks before this recent rally. Originally, I thought this looked a little like a bear flag, but we kept moving up. Now the v divergence has had a couple pops the last couple days, and today with a pretty good down day. It just looks like it is set up to fall to the bbb.
In closing: The NASDAQ is showing surprising strength, but I really think it is over bought and could lose its loftiness quickly. Further, we came very close to what I would say is some very key resistance, close enough that with the Friday before 3f tomorrow, we could certainly see some heavy selling. However, in the past we have usually hung around this area for at least 5 trading days. I am leaning towards the former as this move feels slightly different, at least to me. Trade well, have a great weekend and prosper. AKOT
Is DOW 10 k here to stay?
Tags: banks, bear market, bull market, doji, dow 10000, esrx, hanging man, home forclosures, Nasdaq, overbought, reversals, rjf, RUT, s&p 500, xhb, xli
DOW 10 k was all the rage this week, so is it here to stay? Well, if you have read my thoughts for more than a month, you know how I feel about that, NO is the short answer. In fact, I freely admit that I am very surprised that we made it to DOW 10 k so soon. I thought we wouldn’t see it for at least one more year, but then again fast drops sometimes lead to fast rallies and we have had both. Now, I still submit that this rally is propped up on bad data and propaganda, for as we all basked in the beauty of DOW 10 k ( including my retirement account just so you know that I am not always a bear) more news came out telling us that foreclosures jump to record highs and that more bank closures loom but things are great! Now I know that stock market is not the economy, but let me ask you this, what was this crash we are “recovering” from based on? Who was to blame? Good answer, the banks and sub prime mortgages. Who is still having troubles? Good answer, the banks and mortgages, now moving into commercial real estate like I have pointed out about in the past. Now I know JPM and GS are knocking the ball out of the park right now, but weren’t they doing that just before they all came tumbling down? Further, I have not done the research, but I would extremely curious to know exactly from whence their earnings are derived? Do they not trade? Just asking. Anyway, enough of this cheery stuff, let’s look at some charts shall we?
well the VIX finally gave up the ghost and closed beneath this long term support. I looked very strong early on today, and it looked as if it may push this mkt. south, to a “gasp” sub 10 k close, but alas it twas not to be. I did not draw them out, but I will on this weekend’s video, but Cash21 pointed out to me a very nice megaphone pattern forming here.
The DOW has had decent v the last two days into this surge up. Now I did say on my last post that I thought we would break 10 k if we got bte retail and earnings, and we did. I just felt that the bulls would suck this thing up if it got close, then I thought it would sell off, like today, which it did not . At the top of this chart note that 50% fib at 10,360, anywhere in that area would be a good technical are for a reversal. Further, as I point out on the chart, the last two moves have been about 225 points top to top, that would bring us to 10,075 another area to watch for a stall out.
The SPX looks pretty strong. The 1120 area is being touted as being the most likely reversal area as it is the 50% fib line. We shall see, but I say this chart still looks strong to me.
The NAS still looks the toppiest of all my indice charts. We actually have a tweezer top formation today, a very strong reversal formation, hence I am still short the QQQQ. But, if the other ones rise, this will likely be in tow so I will be tracking it closely.
I take that back, the RUT looks even more toppy than the NAS. We had an inside day with a bearish harami formation here, and this has the power to drag the mkt. a bit, so watch it.
I thought the dollar had formed a nice bottom for a rally near 22.50, but this looks even better. Near identical spin tops with a the same low, a tweezer bottom. This is a good technical sign for a move up from here.
Okay, I put AMB on here because I don’t recall ever seeing this formation. Check out the hammer , hang man – gap, spin top, hang man-gap, spin top, hang man – gap with increasing v. What does it mean? Heck if I know I just said I have never seen this before. If someone knows let me know, but for now all I can say is that the v is increasing into this up move, and it appears that we should look for gaps up off hanging mans, like today.
ESRX, on resistance of upward trading range with an inside selling day today, on increased v. Still looking for a drop from here, especially if the overall mkt. turns south.
Watching this for a breakout. If it makes a strong move above 15.10 it should be a good long up to the gap near 18. It may take a while to get there, but it would give us a very nice easy stop at 15.10. On the other hand, if it breaks below the 200 ma, then that would be a good short with the 200 ma as the stop.
RJF has formed a dark cloud cover in a resistance area ( not a tight line, but area) so we should be looking for a drop back to support from here.
XHB is meeting resistance once again. Note that it is above that bearish engulfing candle from Sept, but hitting its head on resistance.
The XLI had an inside day of trading on not great v, but it is coming up against the highs from Sep, which may offer resistance. Further, we still have an unfilled gap with a base of 26.50 so this has a lot of reason to move down.
In closing: I shorted the QQQQ last night just before the close because it looked to be the weakest. I did not do this based on TA, just based on years of watching the mkt. and thinking that DOW 10 k was going to be a “fluff” and no fundamental move. Further, we had such a strong up move Wed. I expected to open down unless we had amazing news prior to the mkt. We did open down, but not much, and the NAS was the weakest, but not weak enough. I will hold those puts until Monday, as the Monday after 3f is often down, and opx prices are usually high on that day. A good day to sell.
Now, I have to consider that DOW 10 k and the news it will generate, may cause a lot of buying, a lot of people who have been waiting to confirm this mkt. is stable and safe. If this happens, we could easily push this thing up much higher from here. This is what the pros like to see and this is what the pros love to short. I do think we will end up have a couple down days here if not tomorrow then Monday. Trade well, use stops, and prosper. AKOT