Candles similar to the one I'm calling a potential Wyckoff upthrust appear all the time. Most of the time they represent a day of indecision and just become another candle as the markets move on. You will often see these type of candles, spinning tops, gravestone doji's, shooting stars, etc, at turning points but you can find them all over the charts and they are very often ignored. The current upthrust candle has yet to be confirmed or invalidated as the markets have moved sideways the last couple days. It's certain to be confirmed or invalidated soon, or famous last words.
SPX off 2pts on the week but what may prove to be more important is that we're back in and stuck in the previous month long consolidation that began in December, 2013. Buyers who bought in late December and early January are sleeping better these days and they'll sleep even better if the markets can move up and out of this rectangular consolidation zone. On the other hand, those same buyers aren't likely to want to sit through another pull back and may be exiting now and their selling may be the reason the rally has stalled. If this is the case, then the markets are absorbing that selling with little damage done but I do believe that at the first sign of overt weakness we will see more and more of those December/January buyers hit the exits and their selling will beget further selling as the market full fills its own form of self prophecy.
To avoid an increase in selling, the market needs to clarify its intentions early in the coming week because right now the market is sending a mixed message. Fer instance:
NYSI is rising and is now at its highest level going back to May of 2013 and this indicates that the market is moving up with broadening participation.
On Balance Volume remains bullish and is confirming this latest move off the early Feb lows.
VIX 5EMA is at 14.7, well above the 13-12.5 area where it has turned in the recent past.
But:
TRIN closed at 1.46 on Tuesday, the 18th, when the NYSE was up indicating a bit of stealth distribution. During the December/January consolidation, the TRIN closed above 1.xx on several days when the market closed green so if you're bullish you don't want to see something like this repeat.
P/C ratio closed at .69 on Friday which means that everyone is on the same side of the boat. During the December/January consolidation, the P/C ratio closed numerous times in the .7x area indicating a complete lack of fear by participants. We were not climbing a wall of worry and look what happened. So, again, we don't want to see too much bullishness from the P/C ratio in the early days of next week.
Despite the immediate above, I do believe that SPX will make a run for the 1850 area early in the week and I also believe that we could see SPX close out the week above that key level. Even though this is what I believe, the market may have other plans so stay on your toes until we clear this resistance zone.
GL in the week ahead.
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תגובות
Will_Wong
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Wouldn't you say that the trend is still bullish?
CurtisM
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All I know is that we're back inside the rectangular pattern and are not able to break out topside. We rally in the morning and then get sold off in the afternoon. The definition of resistance is that when trapped buyers have a chance to get out, they do so which stops the market in its tracks and that appears to be what is going on. Still, little damage done and SPX up 8pts on the week.
However, we have a problem with two key indexes and a third may be joining them. The Dow and transports are out of sync. While tech and SPX are pushing up at their respective highs, the Dow and transports just don't seem to have what it takes. I have seen times when transports lagged and the markets ignored this and roared ahead, but I can't recall a time when the transports and the Dow lagged so if this isn't corrected soon then I think we could be in trouble. And now SOX appears to be under pressure. OBV for SMH is showing negative divergence. It's not much of a divergence but any divergence is concerning especially given that the markets can't seem to decide on which direction to take. The RSI for SOX rose 71.26 last Thursday and so was showing an overbought situation that needs to cool off a bit either through price, time, or both. However, this seems to me to be an inopportune time for a cooling off period or correction in the SOX index as it means the loss of another engine and how much higher or for much longer can the markets fly if they keep losing engines? It's probably a bit premature to be concerned about the SOX index, maybe. Regardless, this needs to be watched closely in the next couple of days to make sure the recent action is merely a pause rather than the beginnings of a decline of one degree or another.
Be careful and stay on your toes until we clear this rectangular resistance zone. GL
Will_Wong
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Another higher high but couldn't seem to hold on to the gain. Scary market! I would say a lot of people lost money today and also a lot of folks made money too. Perfect market for swing traders who got it right.
Will_Wong
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Curtis:
What do you think of the action the last two days? Yesterday sell off recovered quite a bit by the close. The 4 hour candle was a bullish hammer. Today's action confirmed the 4-hour hammer from yesterday. I did took some profits off the table this morning just in case this Ukraine thing blows up.
CurtisM
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Hi Will, I thought the big decline was completely manufactured so I wasn't surprised to see markets reverse today. What does surprise me is the way they reversed. I think this was a huge overreaction to a non-event. However, this appears to be a legitimate break out to new highs so while I'm likely to be very cautious for quite some time, you have to go with the market.
I do believe we are in a bubble but that doesn't seem to matter to the markets now. No idea when it might matter.
Will_Wong
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Agree. There was hardly any let up today.
SimGlenn
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Every trading day adds another SPX point to the upper channel. Sideways movement in a bull market is generally bullish since potential builds.
biff
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all models on my algo curves show topping perhaps not THE top but the road to 1800 and DOWN If you need to feel good about retaining your profits with that rhetoric, I fully understand. But the time for selling is near and it will not be obvious until it is shoved at those who were greedy and could not see a market ready to fall. good luck
Will_Wong
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biff:
I understand you perfectly. I have been taking profits off in several tranche on the way up. Down to my last two tranche. You got to admit that the overall trend is still bullish though. Just yesterday we hit a higher high. Hard to go against the trend if you know what I mean.
SimGlenn
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Curtis - would you expand on CCI somewhat. Information on it is relatively hard to come by.
Thx - Glenn