Another day, another record high

Forth week in the row on the upside and market, once again, claims record highs. This is one of the longest rally since the March 2009 bottom, 6 months old and no less than 300 points on SPX.

However, looking at the charts on all time frames it looks like market is getting overbought. Look on daily and weekly chart at DMI, they are all positive, of course, but notice their value, quite high I must say.

Also notice that SPX is almost 100 points above rising SMA 120 on 4 hours chart. I don't remember when was the last time I saw such a big difference between price and SMA 120.

So, I have reason to believe market may cool down a little bit. It doesn't mean we are going to see a drop, it means that the market may suffer a lateral consolidation rather than going straight up. This is my guess based on how charts are looking at the moment.

The rally we are seeing don't look like short squeezes to me, it looks more like new money is entering the market.

Gold got crashed this week and we should not be surprised since technically it's in a bear market, meaning rallies are short lived and fresh lows are expected. Metals and mining stocks (X, CLF, WLT) are also down this week but not as much as gold or silver. If you want to short gold you can try GDX instead of GLD.

All the best!

babaro

Here we come again

Somebody please help me take the foot out of my mouth! Another bad call from my part, here is the second whip-saw in the row (third actually but I didn't fell for the first one) during this crazy rally. It never happen before, I mean yes, I've got whip-saws but not three of them during the same rally. This is the most volatile rally I've seen in years. OK, bulls, I understand you are very confident, very powerful these days but why are you letting SPX slipping 60 points in a matter of days? Just to annoy me? 

I guess I have no other choice but rely on 4 hour chart which, once again, did not get whip-saw. Or even better I should forget about making money on the downside and focus on the next rally whenever is going to happen. 

The most interesting chart at the moment is the weekly chart. There is there a very nice support line that was actually crossed during the fake plunge but only for one day. Some people may argue that market is developing a "head and shoulder" with the support line I mentioned above as the "neckline". Well, this pattern is possible with one condition, that the "neckline" to be crossed before SPX making another all time high. 

It doesn't look like a textbook "head and shoulder since the right shoulder it is supposed to be shorter than the left one (not the case here) like it was in the case of AAPL which predicted a drop to 360 (AAPL actually dropped to 380, but this was a good enough prediction).

All the best!

babaro

Really frustrating

After getting a sell signal yesterday, there was no continuation today and SPX is now once again above SMA 50 on daily chart. Even worse, bulls managed to push SPX just above the support level on weekly chart.

So, despite EMAs bearish crossing, bulls remain slightly in control. Another bullish day on Monday with SPX climbing above SMA 120 will cancel the sell signal.

Let's look now on a longer time frame, on 4 hours chart. As you can see EMAs are not crossed on this time frame and price is above rising SMA 120. EMAs are closer to each other than was on February when I've got the fake sell signal, meaning that indeed there is more bearishness this time around but not enough to call the game in bears' favor.

Let's wait for Monday to see "from which direction the wind will blow".

babaro

Sell signal

The correction seems to be here! Another day on the downside and  EMAs are giving a bearish crossing on two hour chart. We've seen EMAs crossing before and the market refused to correct but this time bears also managed to push SPX slightly bellow SMA 50, an event that didn't occur during the 5 months rally. 

SPX broke bellow support levels on both daily and weekly chart. In general, the most valuable support levels are those seen on weekly chart. Unless tomorrow is going to be a very bullish day I think this is the beginning of the highly anticipated correction. 

It will be really annoying to get the third whip-saw in the row during this rally. While a whip-saw is not impossible, I think won't be the case this time. Bulls should not be too upset if a correction happens here. They are in control on longer time frames and corrections are followed by powerful rallies. 

All the best!

babaro

Some bearishness

Monday was a pretty bearish day with SPX losing over 30 points but there was no continuation since on Tuesday market regained 2/3rd of previous day loses. Yet today was another bearish day letting one wondering what is going to happen next. Are we going to have another fake move on the downside or this time we are going to have the long waited correction? 

EMAs are almost about to give a bearish crossing but we saw that before without seeing market crashing. I must say this time is technically looking just a little bit more bearish than before. Compared to the last few instances when EMAs gave a bearish crossing and price moved bellow SMA120, we have now a pretty flat SMA120. During this rally SMA120 was crossed 3 times, but every time SMA120 was rising. 

I am not going to make a big deal about this, more important I think is to see if market manages to stay above or plunges bellow the support line on weekly chart. Also pay attention to SMA 50 (SMA10 on weekly chart), a level that was not crossed during this 5-months rally. Actually, in the morning, SPX moved bellow SMA 50 but ended the day above this level.

Obviously, there is a 5 months uptrend line that was not crossed during this rally. A move bellow this uptrend line may send a very bearish signal, even more bearish than EMAs crossing. SPX is actually slightly bellow this uptrend line but not enough to consider it significant. If tomorrow is going to be at least as bearish as it was today we may see all these support levels on all time frame charts being conquered. 

The daily chart doesn't give up too many clues, just another support level, somewhere in the 1,547 area.

Gold was hammered this week and has lost now more than 20% since its top around 1,900, meaning that we should expect further move down. I made a little bit on money by shorting GDX (via options) but unfortunately I closed the transaction way too soon. Options are a different kind of "animal" compared to stocks, you can win or lose 20-100% in a matter of days, or sometimes in a matter of hours. I was glad I made a 100% profit in a couple of days. Today the same "put" was valued 10x my initial investment. Wow! 

The key support level on GLD was $152. Once this level was surpassed the gold was in free fall. We are most likely to see fake rebounds but overall gold and silver are going down. At least for a while. 

AAPL suffered another set back today but I don't understand why are people surprised. The stock is in a bear market so moves like this should be expected. I don't venture in guessing where AAPL could stop declining, I am just repeating something I mentioned before, the "head and shoulder" pattern predicts a drop to $360. I mention this because the it was a very clear (text book) head and shoulder.

In conclusion, market remains strong on long term but shows signs of weakness on short and intermediate time frames. We may have an answer about market direction as soon as tomorrow. If this is going to happen I am going to let you know.

All the best!

babaro