Reason number 1,698,274 why when some chart guy talks in grave tones about a DEATH CROSS (of the MA 50 below the MA 200) having any lasting impact you should run, not walk the other way… quickly. This one actually was pretty well in alignment with the Semiconductor index’s mini crash, but if you look at the Dow, SPX or NDX you see that the signal came either right when it was time to buy or after.
The target on the SOX has been 700 or higher. I am still long (SMH) as the sector led the way down and has been leading the way up on the bounce.  Taking the profit on SMH and using part of those funds for an individual Semi stock speculation.
With respect to the S&P 500, this is an important question: Who wins, 2040/2060 resistance or the pattern’s measurement? It’s a simple question because it’s a simple chart.
We noted in an NFTRH update that the Semi’s were conspicuous in their strength yesterday. That was a good forebear for today’s broad strength. The Semi’s have been a leader since they brought the whole mess out of the late 2012 doldrums. Here is Semiconductor sector ETF SMH with an improbable (and very doable, market willing*) target.
SMH broke the neckline, tested it and popped.
* It is highly doable assuming that our view that the bearish stuff is probably in interuptus for several weeks at least is correct. In other words, it’s all part of the relief bounce scenario within a larger bearish picture.
We used to talk about Mr. Fat Head on the HUI (see chart at end of post). That was the big H&S targeting 100 that not many thought was doable back then. I was reminded of Mr. Fat Head when using the ‘Live Charting‘ link at the above right. There you can quickly manipulate charts and time frames thanks to TradingView‘s dynamic charts. It’s really cool.
The first chart is a weekly view, showing a potential H&S, the resistance that would put in its right shoulder, and the neckline. If actualized one day, it measures to 1600.
Then using TradingView’s handy tools we zoom out to a monthly view and find that voila, the H&S target is pretty close to rock solid long-term support on the SPX.
Continue reading Mr. Fat Head Returns? If So, it’s S&P 500’s Turn
As published at NFTRH.com, a historical look at the US stock market (SPX weekly charts)…
S&P 500: Is it This Simple?
Excerpted from this week’s edition of Notes From the Rabbit Hole, NFTRH 364…
In an age of Algorithms, High Frequency Trading, Quant-injected performance engines and every Casino Patron with an e-Trade account hyper-stimulating the market after each bit of news that is fed (no pun intended) to us by the financial media and Policy Central, the lowly individual can be forgiven for feeling small and vulnerable; for feeling as if the answers are beyond her, or that long-term success is out of his reach.
Indeed, this very publication has ground its gears pondering the fact that August-September market sentiment became historically over bearish in ratio to the relatively minor downside experienced thus far. That was a bullish, not a bearish thing. With sentiment now being repaired it is time to ask if we are giving the bulls too much latitude.
Continue reading S&P 500: Is it This Simple?
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.