My "watch" list

Market bounced up from the uptrend line as expected. It will probably continue for the rest of the week but after that is hard to imagine market will go back to 1280. We'll see!

For tonight I decided to share with you the stocks I have on my watching list. They are very strong stocks with very nice uptrends but some of them show signs of fatigue. The idea is that if I see the 2009-2011 uptrend line broken I am going to short them. They are all weekly charts. I decided not to show the EMAs but instead SMA200. This MA is not really a good timing indicator, especially for individual stocks. However, if stock is bellow SMA200 and also SMA200 is starting to point down the chance of a false sell signal is minimal.

Don't even think about shorting the following stocks right now. They may become good candidates in the future.

Some of them show double or triple tops.

Others are in a "symmetrical triangle formation" meaning that there are both an uptrend and a downtrend line. Stock may break either line but most likely they are going to break on the downside.

One very bullish, actually too bullish and too far away from the trend line.

babaro

Trend line

Market moved another 60 points down since my last post but bears may take a break here. I told you last time that if market goes bellow 1220 the next stop is going to be 1120. Well... I didn't realize that the new 2009-2011 uptrend line (the 4th so far) is around 1160, the level almost touched today.

These bull market trend lines are very important. Once they are crossed they spell trouble for the market. At the same time they are good support levels so if you are in the bears' camp (and I hope you are) you may be carefully here since a bounce on the upside is possible. Even if the market is going to bounce up from here I don't think is going to be for real, meaning that market will eventually go bellow the uptrend line.

Looking at the weekly DMI I can see that there is plenty of room for more downside movement since the red line is far from forming a peak.

The two hours chart give some useful information as well. The sell signal generated around 1220 was real but DMI is forming a peak so, again, we may see a bounce up from here or at least a few flat days. It all depends on your time frame. If you are a fast player you may need to take in consideration these signals, if not you don't need to bother too much since the market most likely is going to resume its fall after a brief move on the upside.

I am going to stop here, my hand still hurts after my accident.

Happy Thanksgiving!

babaro

Testing the trading range

I am going to be short since I can't write very fast (had a small accident on my right hand). SPX is once again testing the upper edge of the former trading range. Last time it touched this level market bounced up to 1,275. This time it may be different. If market goes down tomorrow and the next week, the next support level is very close, 1,208 (SMA 50). I can hardly see any support level from 1,208 to 1,120, the lower edge of the former trading range.

On weekly chart, notice that SPX went a little bit bellow SMA75 and that DMI continues to stay on red. It turned negative in July around 1270 and never turned green afterwards. Also notice that the "death cross" is still present.

As you remember the only time frame that gave some decent buy and sell signals was the 2 hours chart. Notice that EMAs are slightly crossing on the bearish side and that market is bellow SMA 120.

Tomorrow is a key day. If market bounce up bulls are saved once again. If it goes down most likely we are at the beginning of a new "wave" on the downside. Sure some of you may say the best entry for shorts was yesterday at 1260. Well... remember that my timing method doesn't catch neither the tops nor the bottoms but enough to make a profitable trade.

all the best!

babaro

Above rising SMA 75

After giving up 70 points in two days bulls pushed SPX up again to 1260 just to lose a few more points on Friday. The bullish news is that both SMA 75 and the upper edge of the former trading range behaved like a very good support level. SMA 75 is rising once again, another bullish signal.

Another indicator I haven't talk in a while is MACD. I usually look at MACD histograms for possible negative or positive divergences. This time I am going to talk about MACD by itself since I noticed that this indicator just gave a buy signal on weekly chart.  The signals on weekly chart are usually very good, not so much on daily chart (many whip-saws, more than EMAs crossing) so please take note that it turned bullish after giving a pretty good "sell" signal in March (!) well before weekly DMI or other indicators turned negative.

Looking at the bigger picture (2007-2011) I can easily draw the new uptrend and downtrend lines. The downtrend line is around 1,330 and the new uptrend line is now around 1,150. With all this uncertainty it is possible to see market bouncing in between these levels, kind of lateral movement.

Every time the uptrend line on weekly chart was crossed the market dropped 100-300 points, the last drop being the worst from 1,370 to 1070. We are now looking at the fourth uptrend line using the new temporary bottom around 1135 on weekly. It may take a while before we are going o see this uptrend line crossed but expect a big drop as well. Just because we saw SPX at 1070 just a few weeks ago it doesn't mean a new drop to that level is going to be as benign as the last one.

To summarize here are the bullish and the bearish signals on different time frames.

Bullish:

-SPX above rising SMA 75 on weekly
-rising SMA 75
-bullish MACD on weekly
-positive daily DMI
-powerful bounce once SMA 75 was touched

Bearish:

-bearish EMA 20/EMA 40 crossing on weekly
-"death cross" (SMA 50 crossing SMA 200 on daily) still present
-MACD almost giving a "sell" signal on daily
-slightly negative weekly DMI
-SMA 200 slightly pointing down on daily

Have a nice trading week!

babaro

P.S. Like I don't have enough problems I've got another reason to get upset today. I am coaching a 7 years old football team (or soccer as it's known in US). I know this sport is supposedly not very popular in US but trust me the people involved, kids, parents, coaches are really enthusiastic during the games. We had a tournament in the last 3 days and we did very well, we won all the games until today. In the morning we won another game and qualified for the final. In the final we met a better team and we lost 3-1. I was actually very pleased with the result but the kids (all of them) started crying at the end of the game. They really broke my heart! 

Two ugly days

Just when I was ready to admit that I was wrong about the long term bearish view SPX moved down almost 70 points and found support only at the upper edge of the previous trading range. This is slightly bellow SMA 75 on weekly chart, a level I always have in mind when looking at the big picture. Bulls did all the right moves, pushed SPX above the trading range, then above the resistance level around 1270 where the plunge begun. They even pushed the market above SMA 200.

EMAs still show a bearish crossing on weekly chart despite the fact market rallied more than 200 points last month, from the 1075 bottom to 1290 top. Weekly DMI continues to remain bearish but also daily DMI has turned negative. Bulls still have a chance to turn the table in their favor on long term if and only IF they manage to push SPX above the trading range and SMA 75. This is bulls' best support level. If market re-enters the trading range the next good support level is 100 points bellow, around 1120.

The news are driving the market these days. After getting help from Europe the Greek population most likely is going to reject it since the help is going to come with some strings attached, more austerity. Personally, I think Greeks are shooting themselves in the foot long term with their refusal but it's their choice. Overall the European picture is not that great. Keep in mind that Greece is not the only country in trouble is just the most affected by the crisis. Ireland, Spain, Portugal and even Italy are not far away.
From what I am reading the referendum is not a done deal since the Papandreou government is almost collapsing but uncertainty is also a market killer.

The dollar is also killing the market. UUP jumped for a third day in the row and now is touching the upper edge of the trading range. Yes, the dollar was also trading in range since March. If you look at it's chart is the reverse of SPX (no surprise here).

Let's see how the Greek drama is going to end. We are going to know this on Friday when the Greek government is going to endure the confidence vote. Meantime most likely the market is going to move down but maybe not as violent as in the last two days.

All the best!

babaro