I don’t know what can be said about this other than it’s bullish (duh) and they are winning… (duh).
Nasdaq 100 daily, click for full size
Yes there are negative divergences from the small caps, the emerging markets, the Tranny and even the Canary’s Canary (AMAT vs. SOX). There are negative divergences on most indexes by RSI and MACD. But this is bullish until it is not. Standing in the way of it has brought pain down on the bears just as standing in the way of a downtrend has to gold bugs.
This market will change one day, and I think it will be soon and it will be abrupt. But right now? It’s more of the same.
Is the NDX (QQQ) in a progression of higher highs and higher lows (yes, so far) forecasting new highs or about 80% of the way through completing an H&S top? I ask because I really don’t know. I’d say that the H&S is just conjecture and speculation while the series of higher highs and lows is fact. So there, I guess that’s the answer.
We have been watching the leading NDX in ratio to the lagging SPX in NFTRH for weeks now. Here is a weekly view showing the ratio having dropped below a formerly supportive moving average, MACD gone red for the first time since the ’08 crash, RSI below resistance and AROON on a weekly downtrend. Also, a trend line is tossed in for good measure.
Why then am I not short the US markets? Because as has been the case so often in this wretched year of 2012, policy makers and politicians are too heavily in play. But taken at face value, this chart sucks; as do the US markets when you factor in smart/dumb money data and a degenerating sentiment backdrop. Now let’s see what the conspirators in Washington come up with in the can kicking sweepstakes.
I’ll not stand in the way of it uttering ‘but but but… it’s not a Hammer’ all the way to a significant loss. It’ll be limited by this boundary.
I would not confuse these candles showing up as Hammers. A Hammer is technically a bullish Hammer only after after it shows up after at least a short-term downtrend. It is a reversal candle after all.
More often than not in my experience these candles prove to be ill-fated little ‘buy the mini dip’ exercises if they show up just after a market starts to break. There’s the key resistance shown on the chart of QQQ. If it gets through there I guess it will have been an okay candle, but not a reversal candle.
I bought QQQ as a potential multi-week trade and the 3x leveraged TECL as a short-termer. Recall last week’s posts about the QQQ’s Hammer reversal.
I’ll let QQQ breathe for a bit longer, but TECL is released for +9% as I am rediscovering my inner trader by using a small, high frequency trading account. It’s good to trade and remind oneself of the disciplines involved; like never fall in love with a position.
QQQ is getting up into a congestion zone and while I am thinking that December could see the start of a bullish phase in the market I am not at all sure there will not be some real grinding and churning going on until it conclusively begins.
Traders who were brave enough to buy the Hammer reversal might think about taking profits… 9% or so is not bad for a week’s work in a temperamental market.
Thank you market for this small gift. I will not look you in the face.
Last ditch support, a gap and a… HAMMER. So is the world ending or is NDX providing a great opportunity for a trade? Ladies and Gentlemen, place yer bets! [edit: still much cash, but longer the precious metals and even the NDX... maybe just for a day].