S&P E-Minis
Yesterday I posted stating that the /ES had been forming a series of upward tails in combination with market breadth diverging downwards. Today's market action played into this scenerio yet again, on the S&P E-mini we formed another candle with a tail and a pretty bearish close.
SPX Cash Index
The SPX cash index looks a lot more bearish. We have formed what is called a bearish outside day reversal, when prices reach higher highs then yesterday and then end up closing below yesterday's low. The last time we had this occur was 09/23/09 and we all know what happened there. Its amazing how similar this month has looked compared to the last. We had huge drops on the 1st of the month, slowly rallied up to make new highs, "broke out" of the last trendline resistance (blue line charted above), drifted sideways with downward volume picking up, posted bearish outside day reversal patterns, and then sold off (assuming this occurs tomorrow or Friday). It seems this last rally was pushed higher by gaps higher in earnings. However not everything participated and made new highs.
Dow Transports
Dow Transports never confirmed the Industrials new high and had a huge selloff today fueled mostly by the Airlines. You cannot look at that chart and say it looks bullish whatsoever, looks like a clear double top to me.
The Dollar
I won't go over the VIX because it was already covered in a previous post, however the dollar is due to breakout here sooner or later. It is sitting right at support, making what Elliott Waver's believe to be its last moves before a major rally. If this market can go down today with the dollar going down, just wait until [if] the dollar starts to pick up some steam. Tomorrow I would like to see a rally to confirm a push lower in equities.
1938 vs 2009
Two posts ago, I mentioned how I would like to see the NDX-100 futures hit its 61.8% retracement. I was hoping that the target was hit but after yesterday's post it appeared as if we hit some resistance. Although I was looking for a bit more upside, I believe that scenario is thrown out the window unless we see the highs of today taken out by the end of the week.Although it doesn't chart as nicely, if you pull up the NDX-100 Index (charted above) you will see we came within 0.30 of the 61.8% retracement (1780.83 vs 1781.13). Thats good enough for me. I believe this is a huge development and it plays out nicely for the bears. Charted above is the NDX-100 vs the Dow Jones Industrials of 1937-38. The 1938 retracement rally came up to the 61.8% retracement before heading lower. In addition the SPX of 1938 went to its 50% retracement, which is pretty similar to what has occurred in today's market as well. In addition if you match up the march lows in both charts, our high was supposed to come in around 10/18/2009. So time and price match up on the weekly scale.
Cycle Chart
Here is an update of the cycle chart I posted. When I originally posted I mentioned this chart has defined many of the major key reversal dates in the market. The only one that didn't work to perfection was last May. It happened to mark a high but prices quickly rallied higher to the major bear trendline charted above in red. This happened to be the ending of Wave 2 of Primary Wave 1.It is possible that we are nearing the end of Primary Wave 2, and today's date would play in perfectly for a similar scenario to play out. There has already been some talk of this important fractal within the Elliott Wave community. It is funny I can remember being pretty bullish on Apple during last April/May, after what I had thought had been a pretty significant decline in the indicies. They ended up posting good earnings along with Google and both stocks seemed pretty bullish at the time. Soon after, a high was made and Apple never looked back, and the market sent it to $78 a share. Now prices are even higher than last May after even better earnings, but it may be time for it to go back down again.
Lubrizol Update
LZ which has been my short candidate that I've been covering has really underperformed in the past week. It broke its trend and could not regain it. This does not mean a breakdown yet, but the trend has slowed. A possible double top might be occuring. Huge resistance is defined by the red line. If prices started drifting below there it might be time to start a position.
On one last note, I forgot to look at Sequential today to see where we are at on the count. I should have an update on how the indicators look tomorrow.
-MarketMike
StockJockz.blogspot.com
2 comments:
MarketMike, what are your predictions for the next 2 weeks on SPY. Based on the 1938 to 2008 comparison (great charts btw), it seems like we will be going down. Do you confirm this?
I've been a follower (and believer) of the 1938 pattern since December. See this post: http://social.stocktock.com/profiles/blogs/historical-analysis-mirror I like using historical analysis because I view prices as a way to chart human pyschological reactions to events in history. For example how do people react after we've just gone done 60% in a matter of 2 years? I do not understand people who try to say we are in a bull market because of the way our rally has reacted when compared to the major bull markets since 1950. This time IS different, 2008's most comparable year in history is 1937 and it surprises me that not enough people are paying attention to what followed because "history doesn't repeat itself". If that was true, our correlation to that time period wouldn't be 0.90.
I'm just trying to come up with good reasons to support my overall analysis. Yesterday's outside bar, amongst other things looked like a great day for it to start going down. Tomorrow we can rule out all of that if we break yesterday's high.
So with that said, I do believe we go down. It is just a matter of time. In fact I'm not sure if you can find a reason in Technical Analysis to be bullish because we've needed a correction for a long time now. This is by far the biggest rally in history. We've blasted through so many important resistance levels and appear to be extremely overbought on all timeframes but momentum has continued to push us higher. Its hard to come to the conclusion and predict that in 2 weeks we will be down when we're up what seems to be 75% of the time. But there are a number of different resistances overhead that even if we are up tomorrow lead me to believe that in 2 weeks we will be lower than 1090.
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