A review of the S&P 500 bounce scenario
 Took well earned profits on AMZN, BBRY and XLE while holding a few other well protected (via shorts on relatively weak areas) longs, including SPY.
If you ask me, a perfect bounce in the stock market would be one that goes high enough and/or lasts long enough to get former, recently bullish participants hot under the collar for fear of missing out. The sentiment backdrop, extremely over bearish near, but not quite to the level of last summer’s puke fest, would seem to indicate the S&P 500 could get back to 2000 (+/-) for a re-test of the key breakdown. A bounce that grinds its way up there over the next week or two would be optimal.
Below is the daily chart of SPX again, with everything (volume, indicators, etc.) stripped out of it. This chart is from Friday’s pre-market post at NFTRH.com, which included this:
“First, SPX has to break the Wedge. In that case, the downward spike below support would be a scout for future bear activity. Meanwhile, much will depend on incoming technical, macro and sentiment data. A bounce to SPX 2000 would be a gift for would-be bears.”
We have noted often in the past however, that the Rising or Falling Wedge is the most hyped thing in TA (this side of Golden & Death Crosses). The Wedge break below for example, in retracing nearly 38% of the 2016 decline, has already fulfilled all it is required to fulfill. On a daily chart, these are very short-term patterns. Other things need to come into play now like down/up volume, sentiment and extraneous news events (this is the stuff of relief bounces, after all).
Continue reading S&P 500: A Perfect Bounce?
Us stock market at a logical bounce point
Sometimes it really is this simple. It looks like a bounce point, doesn’t it? Of course it does. It also looks like a new downtrend. That’s just a chart. There is a lot of other information that goes into the plan, but the chart is on plan (including its potential to bounce).
A post on Wednesday wondered if 2040 to 2060 resistance or the pattern’s measured target* of 2100 would win out. Barring a quick reversal, it’s going to 2100 short-term.
Doesn’t it always seem to go this way with the stock market? In the depths of despair such a thing is unimaginable and now the wise guys are all out with sermons about why people should not be doom and gloomers. And so far they are right. Now what about comps 1, 2 & 3 that we reviewed by weekly charts? 2 out of 3 (2000, 2008) are bearish and 1 (2011) is very bullish.
Interestingly, I have noticed a lot of technical chatter out there about the similarities of the current situation to 2011 but not nearly as much talking about 2000 or 2008. Funny how sentiment works, eh?
I am trying to learn to adapt my bottom feeder ways and somehow stomach the momo environment, unhealthy sentiment and all. I started by rotating out of what big momo’s I had and settled into some laggards/chart spec’s.
* Speaking of measured targets, STOX/HEDJ are already a big chunk of the way there and I am not chasing that momo at this time although I still want to write up Europe this weekend for future reference.
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 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
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.
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.