Friday, May 31, 2013

Second straight week on the downside

It was a quiet, boring trading week until today, or more exactly until the last hour of trading when SPX lost 24 points. The week ends with a 22 points loss but on monthly basis SPX gained over 30 points making this month the 7th straight month on the upside, a pretty solid rally.

The bullish momentum is still intact on all time frames. The 4 hours chart still shows a bullish EMAs crossing but the price crossed today both EMAs. SMA 120 is at pretty safe distance, 40 points bellow but remember that not too long ago the difference between price and SMA 120 was no less than 100 points, one of the biggest difference since the March 2009 bottom. So the market remains bullish but not as crazily bullish as it was a couple of weeks ago.  Notice that the 7 months rally uptrend line is also around 1,590 so this is the best support this rally has.

Just above SMA 120 and rally's uptrend line is SMA 50 on daily chart, a level that behaved as a very good support in the last 7 months, so somewhere in the 1,590-1,600 area we should see a fierce battle between bulls and bears.

Weekly chart shows a very bullish picture, with weekly DMI still at a high level.

In conclusion, SPX remains bullish on all time frames. To change the trend bears need to push SPX bellow the 7 months uptrend line that is now around 1,590. Sounds easily done since SPX lost no less than 57 points since its all time high around 1,687 but it may not be so easy. Bulls have bought every single dip in the last 7 months and I will not be surprised if they are going to defend the 7 months uptrend line once again. 

Have a nice week end!


Friday, May 24, 2013

Slightly down

After touching a fresh intra-day high of 1,687, SPX pulled back no less than 30 points the same day. Two attempts (yesterday and today) to push market further down were unsuccessful. After going down to 1,637 in the morning SPX rallied to 1,650 bringing the total loss this week to 15-17 points. this drop was not sufficient to bring any major changes at the technical level. Market remains overbought on short term in my opinion and further lateral consolidation is the most likely scenario.

Despite the 15 points drop the weekly DMI did not move down.

However, daily DMI moved down considerably, now being only slightly positive. 

The four hours chart shows little change. SPX is just barely bellow EMA 25 but SMA 120 is far away, around 1,580. Around the same level you can see the 6 months rally uptrend line.

Gold and silver moved up a little bit this week but they remain vulnerable on long run. Notice the weekly DMI deeply in red.

Overall, market will probably cool down again next week. SPX remains overbought in all time frames and it will be easy for bears to chop another 10-15 points. But, again, this will not change the big picture. To make a big dent in the rally bears need to push SPX bellow the 6 months uptrend line. That would mean a loss of 70 points on SPX. Not an easy job.

Friday, May 17, 2013

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!