SPX has popped to resistance at the top of a ‘W’ pattern and halted there. This is a valid termination point. The chart however, has higher levels where the bounce, which was anticipated since before the Tinder Box post, can terminate. The 2000 area, 2040 and a measurement of the ‘W’ to around 2120 are the next levels.
As it is, the bounce has gone high enough to get CNBC and Cramer to start rethinking the well publicized bearishness.
Continue reading Market Happenings
In the interest of maintaining the tradition of highlighting my failures I will note that there was an NFTRH+ update on Intel based on the H&S pattern. My personal risk tolerance was above 29 (neckline), which was also noted as a tight stop loss level in the update (it is critical to limit losses because they sure are going to happen) and so I took a small loss.
But the bull case is not yet proven either as the baby Inverted H&S, while cute, has not broken above its neckline. It’s target is around 33 if it does break through. MACD and RSI look good.
You may recall that we were bullish on Intel and the Semi sector since before anyone started getting excited about the Semi’s, as Intel broke above a 14 year resistance line. Now I am neutral on Intel and indeed, the Semi sector pending the broad market view, which continues to go amazingly well to our post-August layout.
I was going through my chart lists and stumbled upon this monthly chart of the BTK-NDX ratio that was created many months ago to show the secular bull market in Biotech sector leadership (over large, varied tech), which at the time had gotten too far above its monthly EMA 30.
The orange box was created at that time and despite all the hoopla going on now, wouldn’t you know that BTK-NDX has simply reset to its 20 month moving average (mid-Bollinger Band)? Let’s hear it for Hillary’s tweet! Maybe she saw this chart and decided to help it along.
We drew the parallel in NFTRH 362 using a weekly chart like this one. As it happens, the ‘quants’ are on this theme as well. As B.I.G. points out, it’s been one of the longest runs on record (1,326 days) without a 10% correction. Well it is here and it is remarkably similar to 2011’s correction.
Blow the chart up by clicking it. You’ll see a similar price pattern below the EMA 70, which is starting to turn down, similar MACD, over sold RSI and AROON down. A difference is that 2011 had big down volume bars and this one does not have capitulation type volumes yet.
Now, will history repeat? I am certainly open to it. But the very fact that it’s been 1,326 days without a 10% correction is a negative, not a positive. Something about pressure buildups and the like.
The volume after Hillary Tweet day has been incredible as investors, traders, momo’s and substance abusers scramble to dump what they were absolutely in love with not even 3 months ago. On Friday IBB actually closed lower than at any time during the August mini-hysteria. Today they are really laying the wood to the sector as volume has the look of rats scurrying off the decks.
The weekly chart lost its upward Arc, which we had been following in NFTRH for months until it finally broke down over the summer. This is a whopper of a correction, but its bull is not dead until it loses the October 2014 low, which is still way lower at 247.82.
The market’s graveyard is littered with the corpses of people who tried to bottom feed impulsive declines. The 250 area does have a pattern that could be supportive along with said October low.
Soon it will be more Biiwii, and either less other guys or it’ll just seem like less other guys due to improved posting volume. Things are just too interesting for me to say shelved forever.
So please pardon the lower posting volume on my part, and erratic nature when I do post. This is a temporary condition because my personal schedule is so full right now that all – and I do mean all – available market observations I have must go to updates at NFTRH.com. When daughter #1 gets her driver’s license things will start to calm down again!
What I will say, if I may fly by with a quick observation, is that nothing has changed in the broad market situation. The gold sector is still improving its fundamentals, slowly but surely and still nowhere at all, technically (except for some quality outliers). Commodities are bouncing but in down trends, the global picture generally stinks and the US market is dancing to a script that is thus far working out beautifully, right on down to today’s bounce after some Hammer candles showed up yesterday.
On the US market, the trend is down on daily and weekly time frames and up on monthly. Problem for bulls is that the monthly does nobody any good over intermediate time frames. We have set parameters for this bounce we’ll update the situation in NFTRH this weekend. But the bears still have the ball, especially since the post-FOMC bounce – which also had been very much expected – failed with SPX below 2040 and other indexes at their 50 day moving averages.
If the current plan unexpectedly changes, so be it. Until then, the next stop appears to be a test of the August lows, bounce or no bounce. Keep yer heads out there and keep perspective on things. We have been on a changed course since August and really, in going sideways before that, for all of 2015.
Any given day can be ‘euphoric bull bounce up’, ‘James Bullard or Richard Fisher Jawbone down’ or even ‘Hillary Clinton Tweet up, down, up and all around…’ but the market is going to get where it is going, ripples or not.
One thing that has not rippled since August has been the VIX. It has remained on a steady, post-(mini) panic Flag consolidation; a bullish-looking consolidation. VIX stabbed the support zone last week as we noted at NFTRH.com. This has remained a visual representation of players settling down and getting their psyches back in order. 
Here is the weekly view that we have been using in NFTRH. It was produced before the big upside event (stock market downside) as the former calm was just rippling toward the coming event. Click on this big boy, it’s a cool chart.
Continue reading VIX and the Stock Market
I shorted TQQQ on the post-FOMC euphoria bounce per an NFTRH+ update on the QQQ, that used this chart to show the short setup (ahead of time) at the SMA 50 and dotted trend line. This is the point where in service to keeping things real around here, I also note there was also an ill-fated long idea on the KBE Bank ETF last week. The key is in limiting losses and letting winners run.
So back to TQQQ, it was shorted on the bounce to a low risk setup and I turned away from the market this morning and did not get whipsawed out of the already profitable short. This was in keeping with preferred scenarios for the near-term, per NFTRH analysis for the US stock market.
Here is the daily chart from NFTRH 360, which also used weekly and monthly charts of SPX to make its points, along with weeklies of several other indexes.
Here is a short clip from the analysis that accompanied it. There was a lot more in-depth analysis, including 4 near-term scenarios listed from most to least probable (in my opinion).
“It is getting a little monotonous to report, but the bounce is still intact, although it continues to lurk at resistance #1. With the Death Cross of the MA’s 50 and 200 the typical reaction is to burst upward to screw over everyone who took action based on this over hyped TA signal, but as yet the market is consolidating after the initial bounce.”
Any given day could terminate the proceedings, but thus far the market is doing exactly what we laid out for it, which was a bounce to either Resistance #1 (check) or Resistance #2. Here we recall the ridiculously over-bearish sentiment data from Small Speculators and Investors Intelligence (Newsletter writers).
The other side of the plan involved the VIX, which was hysterical at the time of the correction. We planned for a pullback to to the 20-22 range (check) and after that was hit, refined a range of 18-20.
It was hard to project a strong bounce in the US stock market, let alone a big decline in the VIX in the heat of the moment, but project them we did. The market has become considerably less exciting now.
As the fireworks were going off I covered shorts (too early of course), shorted the VIX (very profitably) and have since longed the market with one quick short in there as well. But mostly, it is back to the boring stuff (don’t tell me about the FOMC and its 1/4; that is a circus) as we await bounce targets (pullback targets on the VIX). The next phase of excitement, per the probabilities we are tracking and updating, should be coming fairly soon.