Thursday, August 27, 2015

SPX S&P 500 Daily Chart

The stock market prints a strong recovery rally yesterday. The central bankers are powerful. Fed's Dudley says "there is no compelling reason to raise rates in September" so stocks catch a bid. A dead cat bounce was needed and the previous 2-hour charts show the bottoming process over the last couple days. The daily chart shows two low price prints the first on Monday the intraday low shown by the long candlestick shadow and Tuesday where price closed at the low shown by the thick red candle (since price moved down all day). The white candle shows the big recovery yesterday up to 1941.

As price prints a matching or lower low (green bar), the only indicator that is positively diverged is stochastics, as well as oversold, so this helps create the bounce in stocks. The other indicators, however, are weak and bleak preferring to see lower lows in price in the days ahead or week or two ahead. Price gapped down daily during the mini-crash event (purple circles) and those gaps may need revisited.

1921 is the -10% correction level off the May all-time top at 2135 so the S&P 500 is no longer in correction territory. Keystone highlighted the high CPC and CPCE put/call ratios that called for a bottom which occurred. The elevated VIX above 50 also showed fear and panic and is always a good time to nibble on longs. Now what?

The central bankers save the day as usual with Dudley sent out to  pump the stock market and he succeeded with his dovish words. Fed Chair Yellen will bring the tablets down from on high on 9/17/15 with the rate decision only three weeks away. That day is a pivot point where stocks are going to move violently higher or violently lower. A full moon occurs tomorrow and stocks are typically bullish, about 65% of the time, moving through the full moon.

New money is typically put to work at the start of a month and September begins on Tuesday. Stocks tend to be buoyant from the last day of the month through the first three or four days of the new month which is next week. August is a down month and when a month is weak like this month it tends to finish up for the last couple days. So the dominoes are lining up for the bulls.

The Labor Day holiday is Monday, 9/7/15, when markets will be closed, and stocks are typically up the two days in front of a three-day holiday weekend (Thursday and Friday next week); more bull-friendly stuff. The Jobs Report is on Friday, 9/4/15, which may influence market direction. It appears that the bulls have the wind at their backs now into Labor Day. Bears would be well served to try and create weakness today if they can since stocks may begin lifting again into the weekend and next week. The bears may growl from 9/8/15, as traders return from holiday, into the Fed decision on 9.17/15. Of course this is all seasonality and historical market mumbo-jumbo, and with high volatility, each day can only be taken one step at a time.

The gaps serve as upside targets. Last week's low is 1971 which is a resistance target where a bounce or die decision would occur. There is strong price resistance and support at 1985-1991, 1978, 1973, 1964, 1951, 1942, 1928 and 1924. Price begins at 1940.51. The expectation is for some further buoyancy in stock prices but in the days ahead at some point price should come back down to the lows again. 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 9:52 AM: The SPX launches higher and tags the 1971 level (last week's low) out of the gate and fills the first gap. Watch the 1971-1973 resistance, if the bulls push up through, then 1978 is next. Bears need to hold the 1971-1973 resistance. Price is at 1966 using the 1964 as support.

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