Wednesday, June 2, 2010
As I said yesterday, I did expect bulls to defend the 1,067 support level and that's exactly what happened today. Now we are getting closer to SMA200 one more time. Are bulls going to push SPX above SMA200? Are bulls going to push it above 1120 and give another shot to 1,220? Is the selling going to resume after hitting 1,100-1,115? These are questions we may find the answer soon. We may be very well stuck in the 1070-1,100 area for a while (or a little bit wider range, 1050-1,115). Personally, if SPX goes over 1,120 I am going long, bellow 1045 I am going short again. Keep in mind that while support levels at 1,070 and 1050 stay the same, SMA200 and trend lines breaking points change every day a little bit.
Now let's look at some static support and resistance levels based on "volume at price". I am going to use only the February-June data that corresponds to the beginning and the end of the last mini-rally. As you noticed the largest volume is at 1045, 1100 and 1165. These are levels or both support and resistance meaning that as long as we stay bellow a certain level that level represent resistance, once we move above is going to act as support. Now we are stuck in the 1045-1100 area. Once we move above 1100 we will enter 1100-1065. It doesn't necessarily mean we are going to be stopped at these levels, what it means is that most likely many bulls were trapped at those levels and after seeing market plunging 50-100 points bellow their entry point they will be happy to get even and they would probably start selling. Looking at the whole 14 months rally you will notice a huge volume around 1100 so this may a more important level that we may realize (I had to shrink the data legend and you are probably not able to see the values on the right but trust me they are exactly what I say. Hey, you trusted Moody's ratings, why not me? LOL ).
NASDAQ is the best performing index right now. Is the only US index above SMA200 and a little bit above the downtrend line. even if markets turns bullish from here I am sure the is not going to be the last downtrend line, meaning most likely we are going to have at least another small pullback before going up. The reason I am saying this is because I don't have a confirmation from DMI (lower panel) which is still in red. When the trend is going to be for real you will see DI+ (green) crossing above DI- (red). This indicator is a bit "lazy" but when it turns either bullish or bearish you better pay attention. There is now a small uptrend line, we do have a higher low and two higher highs. Don't get too excited!
On 30 minutes chart NASDAQ looks also pretty good, the price managed to climb above 5 day MA for the first time since the start of the correction. Of course a drop tomorrow will correct this "performance" but is still something. Still bearish is still the fact that 5 day SMA is still descending but also notice EMA50 slightly crossing EMA100. So we have a mixed picture here. I must admit I have chosen QQQQ and not .IXIC just to make bulls feel a bit better since QQQQ looks just a tiny bit better (see, I am manipulating you!).
In Europe the majority of the indexes advanced more than 3% but all markets are extremely bearish long term. The only exception is Sweden (the ETF is called EWD if you want to play it) which advanced over 4% today and is probably the most bullish market in Europe right now. Notice a pretty decent uptrend line, price above a flat 5 day MA and also EMA50 crossing EMA100. Have they joined the Euro? Probably not! These are encouraging signs for the bulls but they should not get too excited yet. This is the most bearish momentum since the beginning of the rally in March 2007.
P.S. I think it's fair to let you know that clicking on the adds on this blog is going to bring me some revenues. How much? I don't know yet. So far I earned one cent (LOL) so if the "cash flow" is going to be as spectacular as it has so far you may be able to buy me a cup of coffee every couple of years! Anyway, if you like my analysis feel free to click on the adds if not don't do it (coffee is not healthy anyway). The main thing is that we can have here a nice discussion so we can have a better chance to beat the market together. Unlike MW board here I can also add charts and I am sure it's much easier for you to follow me. Feel free to leave a comment!
Posted by babaro at 3:42 PM