Monday, July 23, 2012

Still inside the trading channel

SPX moved down recently but remains inside the trading channel. The futures are havily down and I am not sure if SPX is going to remain above the lower edge of the trading channel (1,350) after today's action. Even if market is going to move bellow 1,350 bulls can still, technically, make a turn back if they manage to keep SPX above the most recent low, 1,335. Bellow 1,335 bears are going to be in control for sure. Another slightly bearish sign is that SPX did not manage to touch the upper edge of the trading channel (1,390).

On hourly chart the EMAs crossing gave two whip-saws recently. At this point I would rather trust an EMAs crossing on two hours chart, one that gave only one whip-saw since February. Of course by chosing 2 hours chart over one hour chart all the signals, buy" or "sell", are going to be delayed. On two hours chart market still looks bullish, with SPX above rising SMA 120 and no bearish EMAs crossing yet. This could change of course if market moves today 10-14 points down and is going to go down for the rest of the week. But, as usual, I don't like to anticipate the next market move, I would rather react to its moves so let's see how is going to end today and for the rest of the week.

Longer time frame remains bearish, with weekly DMI still in red but we should take note that last week ended up on the upside and SPX is close to its higher level in two months. Also SMA 50 is not going down anymore but SMA 200 is still rising making a "death cross" posible soon. As I mentioned in the past despite the fact that a "death cross" is bearish, all "death crosses" happened since March 2009 were actually buying opportunities. 

Tuesday, July 10, 2012

Trading channel

Market went both strongly up and strongly down since my last blog. I noticed a two months trading channel on daily chart. Market is now almost touching the lower edge of the trading channel so this may be a good buying opportunity. However, if the lower edge is not going to hold we are going to see a pretty drastic pullback. Tomorrow we may have the answer. In the absence of any news SPX should go up tomorrow or at least remain flat for the trading channel to remain intact. This is a junction point also self evident when looking at the daily DMI that is now neutral.

Looking at the hourly chart I see SPX slightly bellow SMA 120 but no bearish EMAs crossing yet. Also notice that SMA 120 is still rising so the bearishness noticed in the last few trading days is not that clear on charts.

Weekly chart doesn't give up too many clues as well, except for the weekly DMI that remains on red, meaning that the long term time frame remains bearish. SPX moved today slightly bellow a flat SMA 50 but SMA 200 continues to rise and is now around 1,320.  SMA 50 and SMA 200 are pretty close to each other so a "death cross" between these two MAs is possible in the near future if market continues to move down.

Let's wait for some clarifications before drawing significant conclusions about the market direction. This week we should get an answer.

Meantime precious metals didn't make any progress, they are still very vulnerable. Gold has moved slightly bellow the good support level around 153 in GLD. Is not a big deal since is barely bellow this level. However, gold bulls should keep a close eye on this level since it may turn ugly if the support is going to be clearly violated.

Silver pretty much in the same situation, still inside a downtrend trading channel but is very close to a multi-year uptrend line. This is a very big junction point for silver. It may very well move up and keep the multi-year uptrend intact but if it moves bellow this level (around 25.5) it may turn ugly. Sure both gold and silver bulls have a good friend in Ben and the rest of the Feds that may decide another round of QE at any time.