The bears came to play today, that was apparent from the futures overnight. China lowered its projected growth rate to 7.5%, now under the coveted 8% and higher that held for many years. The news hurts commodities such as copper and is creating market weakness. In addition, with growth rate under 8%, China social unrest is a major worry moving forward. The dynasty's each ended in wild riots and mayhem typically brought on by short term food inflation. China car sales are decreasing as well.
So the bears received a little help from China to start the week off. SPX 1366 was key so as all of you saw that fail, you knew several handles lower was on tap. The LOD thus far is 1359.13. Interestingly, referencing Keystone's SPX S/R, 1361 and 1358 are targeted as support levels. The SPX is now teasing 1361. Thus, by puncturing well under 1361, the test of 1358 should come. More importantly at these levels, the 20-day MA is 1358.02. There you go, serious street cred for 1358 today; a big battle at 1358 should occur and one side will win, the other will lose.
Volatilty is spiking, VIX is printing 18.53, here we are back at the saga where the VIX is fighting to hold the 20-day MA at 18.39 as support. Bears win today iwth VIX above 18.40, bulls win today with VIX under 18.40. The Nasdaq is leading the broad markets lower which gives the move credibility. AAPL is receiving the negative divergence slap down that Keystone has projected in the charts the last few days. This subtle weakness in Apple thus far sees a 10 handle loss on the SPX, just think what it would look like if/when AAPL starts cooking to the downside. AAPL weakness obviously creates the overall tech weakness which provides bear fuel to push markets lower. Keystone's SPX:VIX Ratio Indicator is at 73, well above the critical 68 level, so the bulls continue to hang on.
There is a situation with semiconductors, SOX, today. Watch SOX 410.35, price came down to tap it today and now is less than a point above. All Hades will break loose in markets if SOX loses 410.35.
Note Added 3/5/12 at 21:31 PM: SOX fails. Markets are in trouble, the last thing holding it together is SPX 1359, if that fails, the broad markets will extend the downside substantially. If 1359 fails, price will likely stab thru 1358 support as well as the 20-day MA. Lots of drama on tap now.
Note Added 3/5/12 at 12:49 PM: High drama today. Watch SOX 410.10 and SPX 1359.13, these two characters will tell you everything you need to know today. Bears are winning with SOX, bulls winning with SPX currently. Whichever side pulls the other over, that side will win today. The bears have it in their grasp right now, do they have the strength to get the job done today? Keybot the Quant, Keystone's proprietary algo, is on the verge of going short, but, not yet, if SPX 1359 is lost, however, Keybot (at the left margin) will likely go short. Buckle up, hang on tight, and keep your hands inside the car, this afternoon may become dramatic.
Note Added 3/5/12 at 2:37 PM: The standoff continues. The bears are happy keeping the SOX down under 410, and as this is typed, SOX now has a 408 handle. But, the market bulls are not giving up the ship yet. The SPX teased 1359 at 1 PM but recovered. If SPX drops under 1359.13, substantial down side should kick in for the broad markets. The drama continues. SPX now printing 1362 after a goofy pop to 1363 that only lasted a few minutes. The broad markets are erratic and unstable. Further AAPL weakness will kick in the down side as well.
Note Added 3/5/12 at 4:17 PM: The bears had enough juice to push the semiconductors into the bear camp today to create broad market weakness, but, when it came down to laying it on the line and pushing down thru 1359, the bears folded like a cheap suit. No reason the bears cannot thrust lower tomorrow, since the markets will pick up where they left off. Tomorrow's main event will be SOX 410.10 and SPX 1359.13 which will determine broad market direction moving forward. The bears have semi's in their camp but the bulls have the SPX in their camp. Both sides will rest tonight and tomorrow one side will win. The importance of the semiconductor sector collapsing lower today cannot be understated. The SOX dropped 2.6% today and this is a significant market event, and obviously, a huge feather in the bears cap. It is only a game of pennies so focus on the SOX at the open tomorrow, it is the most important thing to watch, SOX 410.10. This evening's close is 409.65.
Finally some action, after days, if not weeks of a slow melt up with only max 0.3% changes most of the days. AAPL surely not looking like I would wanna take a bite out of it as it's not so juice and shiny anymore. Do I see a worm???
ReplyDeleteDJI trading below it's 20d SMA (12917)
SPX and COMP almost touched their 20d SMA (1359, 2944, respectively)
NDX not yet. (Due to AAPL of course)
That's a welcome change.
Hello Arnie, good eye Arnie, 20-day MA's are key. Semi's puked today, SOX collapsed under 410.10 signaling trouble. Bears need SPX 1359 to seal the deal. Bulls need to bring the SOX back up. Lots of drama likely on tap this afternoon, SOX 410.10 and SPX 1359 will tell the tale.
ReplyDeleteThanks KS. Did AAPL just shake it's tree to get rid of the bad apples so it can continue it upwards climb, or has a worm crawled under it's shiny skin and is it eating it's core from the inside out?
ReplyDeleteTrying to count EWs here: IMHO the melt up completed a 5-wave up On Febr 29's SPX 1378 peak. The ABC correction is now unfolding. A will be a 5 wave down, B an a-b-c correction and C a 5-wave down. Wave 1 of wave A down was the intra day drop from SPX peak 1378 on Feb 29. Then wave 2 was an a-b-c correction, with wave-a up and wave-b down on the Feb 29. Wave-c up was then March 1 intra day's up, peaking at 1376 and completing wave 2.
Wave 3 down started then on March 1 at ~ 2pm and I think we've just completed that entire wave this morning, but it could be a 3rd wave in a 5 wave down. Now we're in wave 4 as this whole mess since ~11am this morning looks corrective and therefore likely a 4th wave.
That means that wave 5 down is still to come to complete this entire wave down. Given that the meltup was a completed 5-wave up, the correction has to be a 3 wave (ABC). So once wave 5 down is completed, we've completed bigger wave A IMHO. Then we've got wave B up to come, which can retrace 100% of wave A and then wave C down again. Once C is completed the rally can continue.
Thus, it wouldn't be unlikely for the bigger ABC correction to go down to SPX's 50d-SMA, which is now at 1319.
Hello Arnie, that is a lot of wave action. For SPX daily chart, negative divergence finally smacked it, but 20-day MA support remains in place, so no big damage, yet. Price should come back up after a sell off, the key will be where the bounce occurs, the huge target would be 1288-1333, perhaps a bounce will occur closer in tune with the 50-day MA as you mentioned, so a tighter bounce zone would be at 1310-1333.
ReplyDeleteBut, first, it has to drop, and that will only start if the SPX loses 1359.13 before the close today.
lol, agreed. yeah counting waves ain't easy. still learning and I may be wrong :-) In the mean time, AAPL closed it's first gap from Febr 29! One down, many more to come. Note how the DJI -which doesn't include AAPL is doing 2-6x better than SPX, NDX, COMP!!! Huge difference.
ReplyDelete