Tuesday, March 27, 2012

Expectations for the Market

The U.S. Dollar- Daily Chart

SPX- Daily Chart

If the Dollar has enough power to rally from here, then the stock market may be in trouble, big trouble. The news outlets are beginning to talk about Europe (it could be July/August all over again). When will it be? Nobody knows, but believe me, a sell-off is coming. Why will it sell-off? That you won't find out until after it happens. The stock market is ahead of us by about 6 months, so think October-November until the news comes out. Could it have something to do with politics? Probably so.

Friday, March 23, 2012

Who's investing your money?

It's Friday and most traders were away from their desk. That would explain the light volume and dismal price action. One thing though, if the bears were going to drive this market lower, why didn't they? Was their not an incentive to break the upcoming support level that I pointed out yesterday? If the Bears don't have a standing chance, then what case can be made for the bulls? Next week or possibly the first week of April- hedge funds, mutual funds, and small finance firms will invest the fixed income of their clients money back in the market. All money managers must stay ninety five percent invested because they compete with other firms to generate the best possible return for their clients. If you are making 6% a year on your portfolio, but your buddy has made 8%, you'll probably ask your advisor why your not seeing the same type of return. It's this constant need for a money manager to stay invested or else he or she will feel useless if their position is in cash. Trust me, I've never known a  money manager who didn't feel uncomfortable when he or she is not invested. It's almost like they are not putting their skill to use. Believe it or not- cash is a position, and it may be a smart option considering how toppy this market is.

Now I've pointed out that the market is near the completion of this multi-month rally dating back since October. This time I want to bring back my indicators to give a better perspective on the Market. I've mentioned before that often times the MACD will give a smaller divergence within a larger divergence to complete a trending move. You throw that in with a potential Head and Shoulders pattern and you have a Tip toppy market. Look down below and see the chart that I have presented.

S&P 500- Daily Chart
On to the dollar! We have seen this sideways movement for several sessions, but nothing really. So I'll dive deeper and mention the moving averages for the bullish case. Below you'll see that the 20 day Ma has crossed the 50 day Ma. Since the 20 and 50 are so close to one another, they act as a confluence of support. Even though prices dipped slightly below this level today, the overall pattern is developing into an inverse head and shoulders bottom.
The U.S. Dollar- Daily Chart

We were looking for the metal to get a bounce and it finally came! Now that gold has broken out of its bullish falling wedge pattern, it could be that we rally for a few days to work off these oversold levels. Gold has been hammered for a while now and the sentiment out there tells me a short-term bottom is in. In terms of physcology, when everyone talks as if the metal is near its death bed, I find that to be actually an opportunity to pick up some shares.

GLD- Daily Chart

The last thing I want to talk about is the internal indicator known as Stocks above their 50 day MA. It reveals the participation among stocks within a specific index. I have chosen the S&P 500, and as you can see, there are fewer stocks above their 50 day MA now than there were at the October Peak. Why is this important? It means that fewer stocks are selected for purchase during this entire leg up. Once the demand dries up for the Apples of the world, where will they look to next? It won't be other stocks, it will be a liquidation process because the fundamentals of the market are questionable. The market likes good news, and it can deal with bad news, but what it can't deal with is... uncertainty.

Stocks above their 50 day Moving Average

If you want daily updates for the Market, then you might like my premium newsletter. It will include the trades from a model portfolio that took me 4 years to develop. It will be available in April to start off the month. For the price, I think it will be well worth the service to you. If interested,send me your email address so that I can begin making the subscriber list.

Have a great weekend,

Thursday, March 22, 2012

The Rules

First let me start off by saying that one day of selling does not constitute a crash waiting to happen. Prices must move in an orderly fashion by taking out one support level after another. I did, however, see that prices discounted the fairly positive economic data presented today. That may be an indication that the market wants to sell off because it's ready to. Prices in this multi-month rally did not want to sell off given the talks of greece, and other terrrible news coming out of Europe. Bottom line, when the Market is ready to roll over, it will be because its ready to, not because of a specific headline.

S&P 500- Daily Chart
The metal today held up fairly well in comparison to the other asset classes. That probably has alot to do with how oversold conditions have been for some time. Today's session produced a gap, but what type are we looking at? Is it a gap and go, gap and trap, or a gap and fill? I mentioned the confluence of support in the chart below, so it could be a make or break situation for Gold.

GLD- Daily Chart

Now, the U.S. dollar. Earlier this morning we experienced what is called an impulse bar. Impulse moves occur in the direction of the current trend. In the chart below, I have illustrated this particular candlestick where a rush of buyers came in. Almost always there is a period of consolidation shortly after before another thrust higher. If that were to take place, could it mean lower prices for the stock market in the days to come? 

U.S. Dollar- Hourly Chart

Does this mean that fear will creep back into the market? Absolutely!- assuming the sell-off has begun. We don't know yet, but we can see more and more of the patterns developing that may infer several things. One- just like the head and shoulders topping pattern on the S&P, the opposite is taking place on the VIX daily chart. And two, is it okay to just say that nothing goes straight up, and  maybe the fact of the matter is the market is due for a correction? Like I said before, buying opportunities come when fear sets in the marketplace, not complacency. We need to recycle the sentiment that exists in the current market for that be in our favor. That still doesn't mean betting against the market is not profitable too.

The VIX Daily Chart

Wednesday, March 21, 2012

Do you agree with this market?

The price action in the market averages continue to climb higher on ligher volume because the retailer becomes more selective in each individual purchase of stock. To say the least, Apple is the fundamental driver of the current stance of the marketplace, and will continue to be until this parabolic move breaks. At that point, we can safely say that the retail investor will question the fundamentals of the marketplace, then begin liquidating their portfolios. If you could chose a stock better than Apple, what would it be, and would others buy that same stock? The liquidating process will take in the form of a domino effect until enough fear in the market can establish the next stock market bottom.

Apple- Daily Chart

As oversold as the metal has become, I wouldn't be surprised to see a bounce from here. The four hour chart that you see below gives a more accurate measure of price action for both intra-day and daily time frames. If you notice, each swing low is becoming less dramatic, which indicates that the sellers of gold are diminishing in the short-term. Do take in mind that prices still may want to go slightly lower before establishing a short-term bottom.

GLD- Four Hour Chart

The U.S. Dollar appears to be backtesting the recent breakout resistance level at 79.30-79.50. Once prices re-visit this level, buyers will find attractive entry points during this intermediate uptrend. The buying pressure can be better defined by the type of candlesticks that form during each pullback.Today's candlestick is known as a spinning top, which often mark reversals when are formed at an establish support level. However, confirmation of the candlesitck cannot be validated unless a confirming close above the intra-day high of tady's session takes place. That particular level is 79.83 and will be something I'm watching for.

The U.S. Dollar- Daily Chart

I've said it before, and I'll say it again. I believe the market is carving out the Head of a Head and Shoulders Top. Do understand that it takes time for these patterns to fully play out. Plus, following a multi-month rally in stocks, it only makes sense to look for a topping pattern given the overbought and diverging indicators that you see in the chart below.

S&P 500 Daily Chart
Finally, stocks making new highs does not seem to agree with the price action of the overall market. This particular internal indicator reveals the anatomy of stocks within the stock market averages. The chart below reveals a notable divergence of stocks making new highs from the October peak.

The High-Low Index

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Tuesday, March 20, 2012

Short notice

In replace of the video, here are several charts for you to review. Since I will be unavailable tonight, I posted these charts at roughly 1:45 pm E.T.
Thanks For understanding,

GLD- Hourly Chart

U.S. Dollar Index- Hourly Chart

S&P 500 Cash Index

Monday, March 19, 2012

I think I see the Head

The current pattern of the market appears to be a premature development of the Head and Shoulders Top. To be more precise, I personally believe that we are now carving out the head/peak of the overall structure. I explain several forcoming possibilities that are based on physcology and specific chart patterns. The physcology of the market speaks to us in a language that is different from the language of the Market itself.

Saturday, March 17, 2012

Are we there yet?

In this particular video, I review the importance of two internal indicators. I have also made plans to include other aspects of technical analysis for you in the future. The commentary behind each video is my own interpretation of the overall topic. I hope that I can help expedite your learning curve for technical analysis as well as the current stance of the market.
Have a great weekend,

Friday, March 9, 2012

Friday's video

For some reason the first 30-45 sec. are not as audible as the rest of the video. You might want to turn up the volume for the very first part. Anyways, enjoy the video and have a good weekend.

Monday, March 5, 2012

Video Post

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