Tuesday, January 6, 2015

SPX 30-Minute Chart 8/34 MA Cross Oversold Positive Divergence

The 8 MA remains below the 34 MA signaling bearish markets for the hours ahead. Ditto the SPX under the 200 EMA on the 60-minute chart at 2050.17 that signals bearish markets for the hours and days ahead. The SPX is catching a bounce from the oversold conditions and positive divergence (green lines). The possie d is strong and creates a launch pad. Since price is above the 8 MA it will curl the 8 MA upward for a potential positive 8/34 cross perhaps tomorrow. The SPX 2-hour chart is setting up with possie d but the MACD line remains weak and bleak and money flow has not reached oversold conditions. Nonetheless, a bottom appears close but the 2-hour chart may need a couple or more candlesticks to create possie d with the MACD, thus, although the 30-minute chart above says the bottom is in, the 2-hour chart likely wants to spend some additional time basing. So the near-term bottom should be today or after tomorrow's opening bell. Simply monitor the MACD on the 2-hour chart.

So the SPX may continue its relief bounce but then come back down to tease the support at 2018-2020 again that was described yesterday. If that fails then 2011 will print and that would likely create a firm near-term bottom. The strongest S/R is 2057, 2054, 2040, 2038, 2032, 2024, 2018, 2011 and 2002-2003.

Next week is setting up to be bullish seasonality-wise with OpEx on tap. Monday would be expected to be up, plus a rally from a Tuesday low to a Wednesday high, plus Thursday and Friday positivity ahead of the three-day weekend with the Dr Martin Luther King holiday on Monday 1/19/15 with markets closed. Thus, mixing it all together and sprinking some magic dust, equities may jog sideways over the next day or so, with the SPX potentially back checking 2018-2020 and/or 2011 again but a near-term bottom is at hand and a move higher probably to 2040-2060 may occur into and through next week. The CPC put/call ratio is above 1.20 indicating that enough fear exists to create a bottom.

Interestingly, after the big market selloff yesterday, the CPC and CPCE put/call ratios only moved sideways. This is surprising. With the Dow collapsing over 350 points you would think there was rampant fear and panic in the air--but there was not. The CPC above 1.20 indicates a tinge of fear developing and signals a near-term market bottom at hand but after yesterday's selling a leap in the CPC to 1.3, 1.4 or 1.5 or higher would have been expected to pound home the fact that fear is rampant (and markets are set to bounce). By the put/calls remaining benign and sideways, it hints that a prolonged market malaise of nagging selling events will likely continue going forward. In other words, bulls would be better off with a complete wash-out where fear is rampant with the CPC spiking to 1.50 to firmly lock in a market bottom. Right now, the door is open to an ongoing market malaise.

The Keybot the Quant algorithm is bearish having flipped short yestreday. The algo is tracking XLF 24.27 to see if further market carnage is on tap. XLF is at 24.13 so equities would be expected to remain weak despite the initial rally. Markets will recover only if XLF moves above 24.27. Markets are toast if XLF remains under 24.27. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 10:06 AM: Note that equities rally out of the gate. The SPX runs above 2027. However, the XLF, financials, remain under 24.27 a level identified by Keystone's quant model; thus equities reverse and put on a sour face. Bulls need XLF 24.27 or they got nothing. Bears need weaker semiconductors to create additional carnage. Watch SOX. Whoa. SOX is 666 having ruptured the key level identified by the Keybot the Quant algorithm at SOX 671.50. With the weak semi's it is surprising to see stocks holding up. The weaker chips should create far more market selling. Watch XLF 24.27 and SOX 671.50. Bulls need one of these two parameters and ultimately both to create a recovery rally. With the semiconductor failure, a price move to the SPX 2011 support would have been expected but price remains elevated at 2022. Any recovery is likely not to be trusted unless either financials or chips cooperate with the upside.

Note Added 10:16 AM: SPX 2029 printing the highs of the day. SOX 669.20. XLF 24.17. There is a disconnect here. Either SOX moves above 671.50 and higher to confirm the rally, or, stocks will reverse to the downside. The SOX under 671.50 at 669.20 should be creating far more negativity than current markets indicate.

Note Added 7:50 PM: The semiconductors extracted their pound of flesh. That was an easy call for day traders today. The weakness in chips was substantive and equities were trading higher that did not make any sense and sure enough, stocks collapsed for another day. The SPX 2-hour chart wanted the lower lows so the SPX came back down. It is a bit surprising that price came down to a low at 1992 but considering that chips failed today, that created the stronger negativity. The SPX 1-hour chart appears to be agreeable to upside with positive divergence for the indicators although money flow did not reach oversold conditions. Interestingly, the 2-hour chart shows a weak and bleak MACD line still yet so another lower low in price is desired after a bounce so Wednesday may play out a lot like today. So if price jogs up-down-up to give the MACD a chance to positively diverge, that will be one to four candlesticks and each is 2 hours of time so from 2 to 8 hours of trading time which is all of tomorrow and into Thursday's opening bell before the near-term bottom may be firmed up. CPC and CPCE put/calls oddly dropped again. With two wild and strong negative selling days, traders on both days have decreased their level of fear; increased fear would have been expected but everyone believes in the power of the central bankers. If you are bullish you would rather see fear and panic to create a bottom. Nonetheless, the CPC above 1.20 two days ago signals a near-term bottom near. The same analysis as above basically remains. Stocks will likely bounce then retreat again so the MACD line can turn possie d on the 2-hour chart and the bottom should be in and a relief rally will begin. Watch XLF 24.26 and SOX 671.80 identified by the Keybot the Quant algorithm. Bulls need at least one of these two parameters to print and higher which will verify that a recovery rally has started. Since the 2-hour chart wants that lower low for price due to the MACD, the guess would be that stocks rally tomorrow but the bulls will not attain the XLF or SOX goal listed, so stocks will weaken and drop similar to today. Then the 2-hour chart should be set up properly and stocks should mount a rally perhaps into and through next week. The SPX support levels can be studied from this weekend's list for potential bounce points. Watch 2003.66 (100-day MA), 2002-2003, 1998, 1992, 1987.85 (150-day MA), 1985-1986, 1982.12 (10-month MA) and 1978. Note that the indexes are sitting on their 100-day MA's and will make a bounce or die decision tomorrow morning from this critical moving average.

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