Good follow up...

... but not enough to change anything significantly at the technical level. SPX managed to climb a bit above the downtrend line and above the declining 5 days moving average. This is the first for SPX since April so the bullish intermediate term momentum is improving.

I want make it clear one more time that the buy/sell signals generated by EMA50 crossing EMA100 on 30 minutes chart are on intermediate time frames (usually I am getting a buy or a sell signal every 3-6 weeks, depending on the market conditions). This is the time frame I am comfortable with. This way I can sleep better at night knowing that day-to-day volatility doesn't affect me. I am still watching my charts every day but only to update my view on the intermediate time frame trend.Mixed picture on NASDAQ as well. We do have a declining 5 day SMA (bearish) and a price above this MA (slightly bullish). On daily chart we can see the price a little bit above SMA200 (neutral, long term), a negative DMI (bearish) and we may see another attempt to climb above the second downtrend line. Long term, NASDAQ has the best looking chart. DOW and S&P500 are slightly bellow SMA200, while Chinese and European markets are the worst, bellow a declining SMA200. Brazilian and Russian market fell somewhere in between. However, on short/intermediary time frames US indexes are lagging so try to figure out what is your time frame.



Looking at FXI, I must say this looks like a "buy" to me. Remember a week or so ago I mentioned a buy signal on FXI. Unfortunately, the buy signal was not confirmed immediately on 60 minutes chart and as expected it gave a sell signal making a potential buyer losing a little bit. When I am getting whip-sawed like this I am going more conservative and look at 60 minutes charts. If I am getting whip-sawed again I am taking my loss and stay in cash because in this case market is trading in range and my timing system doesn't work in this situation. So don't be afraid to take losses here and there. That's OK, it's part of the game. I do accept to be whipsawed on 30 minutes chart, this happened from time to time but if I get whipsawed on 60 minutes chart I am getting out right away and calmly wait for the stock to get out of the trading range.

Look at the UNG chart to see how you can get whipsawed. It traded in a very wide range for two months and finally managed to get out of the trading range a week ago. It is possible that this crappy ETF finally found a bottom?



So let's look again at FXI on 60 minutes chart. As you can see EMA50 just crossed EMA100. This is great, this is what I want to see on SPX. The price is now above a rising 5 day moving average, another positive sign. I want to be clear here, overall, on long term time frame, FXI looks worse than SPX, we have a slightly rising SMA200 for SPX and a slightly declining SMA200 for FXI just a name a major difference between the two. But I don't care about the long term since I am trading on intermediary time frame. Normally I wouldn't think twice about going into an ETF that technically looks like FXI. What makes me a little bit nervous is that the Chinese market reacts too much to the US market. If it's a sell off on Wall Street you will see a sell off in China, if it's a rally in US there is going to be one in China too. So I want to see the US market giving a shot at a rebound. A temporary rebound it's OK for me. I don't like to anticipate breakouts, it's worth waiting for SPX to get above 1,100 and above SMA200.

babaro

P.S. Use the comment form to let me know if you have a stock or an ETF you want to have a look at.

Spanish, Chinese and Brazilian markets

Have a look at these ETFs, the momentum is pretty good but you need to be a bit adventurous to buy them, especially the Spanish ETF. The Chinese index, FXI looks the best. Notice that I switched to a more conservative time frame, the charts are on 60 minutes not 30 minutes I usually show. I'll come with details later.

Strong companies

Have a look at these companies that didn't care about this recent market plunge:

I've seen this movie before

Very good action bullish today but not too much has changed at the technical level. SPX has managed to overcome the resistance around 1075 and closed exactly at the major downtrend trend line. We need to see SPX above 1,107 (where the SMA200 stands now) to give bulls a chance on intermediary or long term time frames. On 30 minutes chart we have conflicting results, price is as close as ever to the 5 day moving average (bullish) but the MA is declining so be very cautions out there.



NASDAQ it's one more time a little bit above SMA200 but we need to see both DOW and SPX doing the same thing. Briefly climbing above SMA200 doesn't mean anything, staying above SMA200, that's the challenge. Again I am not overly excited about today. I need to see more bullish action to make me go long again. What bulls need to do now, more than thinking about going above SMA200 is to defend the lows seen this week. Keep an eye on 1055 and 1045, the most obvious potential support level also on 1,100-1,110 where there is a huge resistance.



All the best!

babaro

Bearish momentum continues

As I said yesterday one should not get too excited about one up day since the support levels are weak and the resistance levels strong. Today SPX bumped into the 1075 resistance level then went down like a stone, and 1075 wasn't even a very good resistance level, just a decent one. At least SPX did manage to stop exactly at the February low, 1055. For now!


As you probably noticed on the daily chart, EMA50 has started crossing EMA100 from above. This is extremely bearish long term. My first sign that an index is turning bearish on long term time frames is when DMI is getting negative on weekly charts. The second sign is the price slipping bellow SMA200. The third is EMA50 crossing EMA100 from above on daily chart. If on top of this 3 signs SMA200 is sloping down the index has slipped into a bear market almost for sure.

Let's compare now the 2003-2007 bull market with today's market (weekly charts). As you notice the bull market started in March 2003 and run without any problem until March 2004 when started showing signs of weakness. First you can see DMI turning negative, then the index slipped bellow SMA200 and finally EMA50 crossed EMA100 (EMA10 and EMA20 here since we are weekly charts). However, SMA200 continued to rise a little bit. The market traded in range until the end of the year then went up again. We MAY see a similar scenario here. I know the anti-technical analysis crowd will complain again "history doesn't repeat" and indeed history doesn't repeat but it rhymes. Of course every recession is different so the fundamentals are different but the crowd's psychology remains the same. The fact that SMA200 is still rising right now is a very good sign for the bulls who may worry a new bear market is knocking at the doors but I want to warn them that it takes time for SMA200 to change direction so only time will tell if the plunge we are experiencing now is a very strong correction or the beginning of a new bear market. So let's keep a close eye on SMA200 for the next 30-60 days to see if is going to slope down or not.