Sunday, November 6, 2011

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.


-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 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!


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! 

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