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.
It is not yet actionable in its bearishness. It is bearish on a risk vs. reward basis and in comparison to certain global markets after the world supposedly ran to the safety (ha ha ha) of US assets in the wake of the Euro crisis.
The broad US market is bearish because…
- Sentiment is becoming over bullish to an unhealthy level as (I assume) the public and its professional fund managers* come streaming into the market to chase the trend and the would-be profits.
- Technical parameters are within sight, with SPX targeting 1550 or so at a potential long-term triple top.
- This chart may be rolling over…
NDX-SPX has rolled out of a trend channel
The Nasdaq 100 has led the S&P 500 all the way out of the 2009 recovery. We have been noting for weeks in NFTRH that it has been rolling. Bears are not actionable yet because support still holds and because SPX looks like it has a real thing for the 1500′s.
* At Thanksgiving I was informed by a family member who is a CFA that all the best fund managers he dealt with were in cash because a Fiscal Cliff related crash was coming in December.
It sounded like a contrary indicator to me then and now a re-entry to the markets by these fund managers – who are no doubt under performance pressure from clients – would be 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.
The Nasdaq 100 will at least boink the upper Bollinger Band and then grind around into a new rally leg if past is prologue. The US indexes hit a point of short-term over bought, but resumed climbing right away to new highs after a quick hit. This has to be considered bullish activity. Maybe we grind though the Fiscal Cliff ™ noise and the upcoming FOMC and then get some Santa going?
The caveat (isn’t there always one?) is that this assumes NDX is not just filling a gap. It must stay above the green line.
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].