The futures were weak from the overnight thru now but the bulls are pushing them to the green side as this is typed. Very surprising since FDX, a market bellwether, lowered its yearly guidance. The Fed's bazooka is powerful so the money is flowing like water and is difficult to fight. The 8 MA is under the 34 MA on the SPX 30-minute chart which is bearish so keep an eye on that cross as the day unfolds. UTIL is under 478.48 so markets should remain weak moving forward, watch the utilities sector closely. SOX 396 would indicate further market weakness ahead. AAPL hit 700+ in AH's trading last night, and the pre-market today, so it appears the 700 line will give way as the trading day begins. Note that Keystone's SPXA150R Indicator dropped back under 80 which is favorable for the bears moving forward. The bulls will need to move back above 80 to regain control; check it after the close this evening.
The big news yesterday was Keybot the Quant now flipping to the short side. Today we see if the algorithm wants to whipsaw back to the long side, or not. For the SPX starting at 1461, the bears need to push under 1457.50 and a strong downward acceleration will occur. The bulls need to touch the 1466 handle, if so, an upside market orgy will result. A move thru 1459-1464 is sideways action today. Tech is not leading the broad market lower this morning in the futures so this is not encouraging for bears. It is not encouraging for bulls either, the action is flat. Watch to see which way the COMPQ wants to lead the SPX today.
Note Added 9/18/12 at 10:26 AM: The SPX keeps testing 1457.50 to start the day but is unable to lock it in, each time it fails, the bulls push it back above a few minutes later. The COMPQ is not leading the SPX lower and the VIX is negative helping the bulls prevent the downside. UTIL is 467-ish printing a 466 handle today edging ever closer to huge market danger at 462-ish. SOX is 400 only four points away from 396. AAPL receives the 700+ print. The bears need to see the COMPQ lead lower, the VIX to turn positive, and the SPX to hold under 1457.50 for at least seven to ten minutes, which would accelerate the downside. Otherwise, sideways action today.
Note Added 9/18/12 at 1:06 PM: The SPX drops under 1457.50 but the bulls will not let it drown, quickly propping it back up again with life preservers. Tech is not leading the downside so the bears do not have any oomph. VIX is flat. SOX 400. Staus quo. Markets move sideways. UTIL now printing at the lows at 466.87, see if price collapses moving forward, or not. The dangerous trap-door at UTIL 462.17 is drawing nearer. Reference the bear flag for the utilities in this mornings chart (type 'UTIL' into the search box above), and note that price is on the verge of placing a lower low than the first leg low as well as the entire consolidation move making up the bear pennant. Call this level at about 465.50-466.30 on 9/4 thru 9/6/12, thus, if UTIL drops under 466, it could get ugly fast, with UTIL moving to the 200-day MA at 464.68 in short order, then perhaps lower to test the line in the sand at 462.17.
Note Added 9/18/12 at 1:32 PM: Bears either need the COMPQ to start leading the SPX down, or, for the VIX to turn green. These actions will cause a push lower, otherwise, sideways action continues. Here's the SPX testing the 1457.50-ish again, does it fail this time? For OpEx week, there is typically an up period between a Tuesday low into a Wednesday high.
Note Added 9/18/12 at 2:24 PM: Very tight range today at 1456-1461 up until 11 AM, then 1456-1458, only a two point range, for the last couple hours. SPX keeps playing around with the 1456 base today which keeps resulting in a bounce and move back above 1457.50. If price comes down and loses 1456.50, it has a descending triangle vibe on the 5-minute chart, a target of 1451-1452 would be in play.
Note Added 9/18/12 at 4:02 PM: Mixed markets to end the day. UTIL remains below 478.48 which perpetuates the market weakness. Tech would not lead the downside today, and the VIX was negative, so the bears had no oomph. Sideways was the order of the day; perhaps the Housing Starts number is needed in the morning, then the all important China PMI tomorrow night. SOX is at 400 four points above 396 which would cause broad market weakness.
Hi KS, since RSI and/or money flow indicators move under 50% (bearish) on the SPX chart 8MA & 34MA Cross, for MACD what number should we look for that will indicate negative divergence too? Thx!
ReplyDeleteYou will have to study previous charts and learn how to spot divergences. For technical analysis, there is nothing more important than identifying if either negative, or positive, divergences exist. Divergence means the price move is diverging from the indicators that are shown under the main chart. When price is moving up, study the price move higher from the last peak to the current peak, then look down below at the indicators to see if, for the same distance, if the indicators are sloping down (negative divergence), or up, which would be maintaining a long and strong profile.
ReplyDeleteVisa versa for a stock that is dropping, look at the price low to low, and compare that distance to the indicators to see if any are sloping up which is positive divergence that would bounce the stock. If the indicators are sloping down while the price is sloping down, everything making new lows, this is weak and bleak and points to another lower low in price. There should bne plenty to look at on the Internet with divergences so studying all this is highly recommended. You should be able to look at any chart and wihtin seconds tell if it is negatively diverged, positively diverged, partially, or neither.
So on the 30-minute chart, as mentioned this morning, indicators were weak and bleak wanting another low in price, they got it at LOD of 1456.13 today so far, and the indicators are warming up with positive divergence although the MACD line would like to see yet another lower low. There is also a sideways texture too it currently. RSI is at 49, which is a single hair on the bear side. VIX is negative which is bull friendly.
KS, thanks for all the great updates and posts yesterday and over the weekend. GREAT reads, very informative and interesting.
ReplyDeleteI was glad to see keybot flipping to the shortside yesterday. Personally I am short since the SPX 1470 level. Not doing shabby so far :-)
From an EWT perspective, and the FEDs $85B per month liquidity injections through the end of 2012 and than $40B/month (operation twist end's 12/31/2012), the bullish count is now on the table. Interestingly, it has the SPX top in the mid 1500s, which is inline with your recent 1525ish prediction based on the diminishing returns for each subsequent WE, LTRO, OMT program. So I am thrilled to see that "classic" TA and EWT are seeing the same end result.
For now, either the market is working through a lower degree 4th wave, with a lower degree 5th wave to ~1480 to come, before a higher degree 3rd wave is finalized. The current 1456-1461 area is key, as it provided support/resistance into Thursday's close, and often 4th waves of a higher degree travel back to previous 4th waves of a lower degree.
Either way, upside is going to be limited, because if the market makes it to 1480s, and finishes the higher degree 3rd wave, a higher degree 4th wave will start and that could bring the markets back to 1440-1400 are.
But one thing at the time, let's see if the bears got game and if this higher degree iii wave is in. Never a dull moment in the markets! love it!!!!
Interesting stuff Arnie. The tricky part may be how low does the SPX print before it may want to come back up to the 1500, 1525 or higher. The bear case will be the good side to be on this week as long as UTIL stays under 478.48. SOX 396 would give the downside extra steam. We may be be in for some wild action ahead. Can only take it day to day but the time to go long with the QE3 plays may be in October. By then the markets may be far lower, so everyone that ran in to buy all the QE3 plays will be underwater, as all the long players that just bot from 1458-1475, they are all underwater now, so they will be hoping for markets to recover. Then the shorts that gave up after the bazooka's blew them out of the water, has chased them away, so they miss the move down. Then the traders that ride the downside on the short side, perhaps to high 1390's and low 1400's, can cash out, then flip long with the QE3 shoppping list in October, ride it all back up, then jump ship at the next top as the year draws to an end. It all sounds good ahead of time, until the whole plan blows up as time plays out. LOL
ReplyDeleteKS, you read my mind exactly and that setup may very well come to play since the market strives to hurt both bulls and bears as much as possible. It was really hard personally not to go long on Thursday, and actually go short on Friday. Everybody and their mother's neighbor went long. Perma-bears' stops got blown out etc. But going against the current can work, not always. QE infinity is here, there is thus no more new QE to be expected so markets don't anticipate anything new anymore... FED may have shot them self in the foot as even liquidity gets you only do far...
DeleteMy first target is 1440s, if the market goes below that (the pre-QE3 level) than everybody will go short, that will last a little while and thus you and I know that we should consider going long... Hehehe.
Given that this may be the 3 of 3 up, then we're halfway (time wise) and that means the market has around 3.5 more months to get to low to mid 1500s, wave 3 up started from the June 4 low; which is 3.5 months ago. That would thus suggest this wave is done end of the year. Exactly as you predicted!! Nice huh!? Q4 is often a strong quarter for the market so the end of year target makes sense from that perspective too.
KS, it does not look like the 1455-56 area will be breached on the SPX. It seems that markets are simply burning off the excess over bought conditions slowly. VIX and VIX futures are still be pushed down and there does not seem to be any conviction in VIX in the last couple of days of trading. The next couple of days should tell the story with Friday being more volatile due to triple witching. All in all, I just get the feeling that this is as good as it gets for the bears at least for the short term.
ReplyDeleteNice call on the bear side, we seem to have had a massive sell off in QE3 terms...red all over the place...not really...bears this is all you get
ReplyDeleteGreat observations. The dealio probably has more to do with Spain and the bailout drama. If Spain asks for a bailout, the markets will rally. Draghi shot his bazooka, but the only way it can be used is if Spain asks for the bailout, they have been hesitant since they do not want to lose sovereignty, and they know some type of conditionality will be attached. Housing Starts are important in the morning. Then Wednesday night the China PMI, followed by PMI's in Europe Thursday morning. But Spain is likely the trigger. Perhaps overnight we see clarity, either Spain is going to hold off for a while, or, they are going to go for the bailout. The former is a market sell off and the latter is a market rally. Remember, for the bulls to regain their momo, they must push UTIL up thru 478.48 this week and then position it by the Friday close up around 483, so watch the utes as a signal.
ReplyDeleteUsually, the OpEx shananigans occur more towards the center of the week, so once thru Wednesday, the market affects will be minimal, although as mentioned, Friday may see some jumpy behavior. Listen for Spain.
This link probably won't work, but here's the URL:
Deletehttp://www.economist.com/node/21562986
The Economist reports that opposition politicians in Spain are accusing Rajoy of wanting to hold off on any bailout request until after the 21st of October election in the province of Galicia.
That is interesting, they probably do not have the luxury of time to wait that long.
DeleteKeybot might whipsaw tomorrow. BOJ just announced QE! It's a QE driven market these days.
ReplyDeleteKeybot may flip back to the bull side but the UTIL 478.48 number is actually far more important than the actual SPX number or where the markets are at. The markets may had higher but if UTIL does not go over 478.48, Keybot will likely remain on the short side. These days, anything can happen.
ReplyDelete