Market Mondays

I hope everybody had a safe new years eve. Let's start out the new year with a look back at all the indexes starting with the NASDAQ.


There are two trend lines for the QQQQs. A -- which the index broke in September and B which is still good. However, also note the declining volume for the rally (C). This is very important because it tells us that people are less and less excited about the market.

However, consider this longer term chart (which you will have to click to see the point):



Above is a chart that highlights the QQQQs daily volume over the last 6 years. I have drawn a red line from the lower points in November and December of this year going backwards. Notice how the low point in this rally's volume is consistent with volume prints from 2004 and 2005. In other words, you could argue that from a volume perspective we're returning to normal.



There are two sets of consolidating patterns. The first (A) occurred around the 200 day EMA. The first consolidation pattern -- a triangle -- occurred right around the EMA, which the second approached the 200 day EMA from above. The second set of consolidating patterns are simple corrections and consolidations that occurred within the overall upward trend.


A.) Momentum has been decreasing since August, although the MACD moved through the trend line recently.

B.) Note that for the last 4 months we haven't seen a big move into or out of the market -- the overall A/D line has been in a very narrow range.



The EMA picture is bullish: the shorter EMAs are above the longer EMAs, prices are above all the EMAs and all the EMAs are moving higher.


The A/D line dropped in October and has stalled since then. But


The new high new low line continues to rise.





Let's wrap up:

The good: there is still an uptrend in place and the EMA picture is bullish.

The neutral: while the MACD has broken through resistance, we need a bit more time for the trend to be real. In addition, we have a neutral Accumulation/Distribution line. The advance/decline line is borderline neutral bad.

The bad: declining volume for the entire year. However, we could also look at this as a return to more normal volume prints if we compare the volume.

Today's Market

A.) Prices gapped higher at the open on strong volume. Prices then found support at the 10 minute EMA and moved higher.

B.) Prices hit resistant at the 200 minute EMA and traded there for about an hour. They eventually moved through resistance.

C.) Prices continued to find support at the 10, 20 and 50 minute EMAs for the remainder of the day.



While today's rally is good news because it takes us away from the precipice, the chart shows we are not out of the woods by any stretch. Prices are still below the 10 and 20 day EMAs and the 10 and 20 day EMAs are clearly moving lower. In addition, today's volume isn't as impressive as the volume we saw on the sell-off over the last few days. In addition, consider these two other charts:


The Russell 2000 is still in serious trouble. It's printed a double top and prices are simply hanging on just above support. The 10 and 20 day EMAs are moving lower and the 10 day EMA has crossed below the 20 day EMA. In addition, prices printed long bars on the way lower on high volume.


Everything regarding the IWMs above applies to the Transports with the added caveat that the 10 day EMA is about to move through the 50 day EMA.

Today's Market

Or more importantly is the rally now in trouble? When looking at the market it's very important to consider a variety of markets; only looking at one index like the S&P 500 just doesn't work. With that in mind, consider the following charts. As always, click on all for a larger image:


A.) The SPYs have broken a long upward sloping trend line.


A.) The QQQQs have broken a long term trend line.



B.) The Russell 2000 has formed a double top and has broken a long term trend line.


A.) The transports have formed a double top and B.) have broken a long-term trend line.

We have four average that are breaking long-term trend lines. That is not good.

Today's Market

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A.) Prices opened higher with a series of stronger bars on decent but not great volume.

B.) Prices sold off in a disciplined manner to the 50% Fibonacci level

C.) Prices bounced along the 38.2% Fibonacci level.

D.) Prices dropped hard on extremely heavy volume. Notice the strong downward moving bars.



A.) Notice there is a large amount of technical support at this level.

Market Monday's

Click for a larger image.

1.) There are two possible trend lines. The highest one here simply connects more low points, thereby making it stronger. The lowest one connects is the absolute lowest points throughout the week.

A.) The main action in the early part of the week were two sell-offs on high volume.

2.) On Tuesday prices consolidated in a triangle pattern

B.) Prices gapped higher on Wednesday and

3.) Formed a secondary uptrend for the week.

C.) Prices gapped lower on Friday morning but found support at the trend line.




There are two important points on the daily chart:

A.) Prices have broken through resistance and

B.) There is an overall uptrend in place

Today's Market

1.) The market has been in an uptrend for the last 10 days.

2.) The market has consolidated gains at A, B, and C.

3.) The market is in another uptrend slightly above the longer trend line (1). Markets do this a fair amount.

However,


A.) The Russell 2000 has not made a new high, and it's recent rally

B.) Has occurred on declining volume.

Remember yesterday I noted the transports were also not at a new high.

There are not fatal problems. But, they do raise eyebrows.

Today's Markets

Which is actually yesterday's market, but who's counting? Click for a larger image



Yesterday's action was a clear consolidation pattern, with prices moving between upper and lower bands.

A.) Prices sold off hard at the opening -- note the long candles and the heavy volume.

B.) But prices rebounded from low levels and eventually rose to their opening levels.

C.) Prices then sold-off again, this time on far lighter volume. Also note the support that prices received from the EMAs. Prices did not reach the level of previous lows before rallying.

D.) Prices again rallied to opening levels.

E.) Prices sold off at the end of the day, but note that despite increasing volume prices maintained support at the EMAs. Finally prices rose a touch at the end on a large volume spike.

Market Mondays

The markets rose last week. On Monday prices moved in an upward sloping trend line (see number 1). Then on Tuesday prices jumped to a higher level (see point A) on higher opening volume. Prices then moved sideways in for two days (see box 2). Prices again jumped higher on Thursday morning (see point B) and then moved sideways for the remainder of the week (see point 3). Finally prices rose at the end of trading on Friday on good volume (point C). This last point is important as it indicates that traders were comfortable keeping positions over the weekend.



Click for a larger image. Ignore the last candle.

A.) Prices are in a slight uptrend. There are also key points of resistance at points B, C, and D.

E.) Notice the EMAs are in a very bullish posture. The shorter are above the longer, all the EMAs are rising and prices are above the EMAs.


In the latest correction, notice that prices moved downward but used the 50 day EMA for support. Also note the correction was about 5%.

Today's Markets

Click on all images for a larger image



Big day. First, we had a really big volume swell. In addition, prices fell through the 10 and 20 day EMA -- both strong technical developments. Finally, prices broke through the upward sloping trend line that started in mid-July. Here is a chart that shows where all the technical support lies:






The big issue on the daily action is the price chart in the morning; prices dropped about 2%. Then they meandered sideways for the remainder of the day.

Market Mondays

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The SPYs are a bit overextended right now. They have crossed over the 200 day EMA and are also above all the EMAs. The 10 and 20 day EMA have crossed through the 200 day EMA and are moving higher. The 50 day EMA is about to do the same. However, the recent price trajectory is extremely sharp and won't last -- actually, can't last.


The QQQQs have also covered a lot of ground in a short period of time. Prices are above the 200 day EMA indicating a bull market. Prices are also above all the EMAs, the shorter EMAs are above the longer EMAs and all the EMAs (even the 200 day EMA) are rising. While prices are over-extended at current levels, that simply means they have moved up quickly and will probably pull back from these levels.


Like the other two averages, the IWMs are also over-extended. However, notice the EMAs are taking on a very bullish orientation as well -- the shorter EMAs are above the longer EMAs, all the EMAs are rising and prices are above all the EMAs. Also note the 50 day EMA is just crossing the 200 day EMA.


The transports are confirming but there are two technical points that raise concerns. The first is the 50 day EMA is lagging the 50 day EMA of the other averages. In addition, prices have not advanced as strongly as the other averages. However, these are minor points.

Ideally what the bulls would want here is for the averages to consolidate for a few days. The -- assuming a good jobs report on Friday -- again moving higher after a few days of consolidation.

Today's Market

I look at the following charts and I see a rally. Indexes are above 200 day EMAs, prices are moving higher, EMAs are rising, technical resistance levels are being breached. Simply put, these charts look good. I'm going to delve deeper into them over the weekend to see where the problems might be. But, on the surface these are impressive.

Click for a larger image.

Also -- if you see something I don't, please chime in.

Today's Markets

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I boxed in an area around 95 where the SPYs had a really difficult time technically about a month ago. To make further moves they need to decisively get through this area.



The QQQQs may pave the way. Notice the strength of their rally right now -- prices are basically up, up and away.

Today's Markets

The markets rallied again today. Notice how they continue to move higher after moving through important resistance levels.

I will add that one of the main problems with this rally is the ever declining volume on the rally -- as prices have increased starting from early March to the current level volume has decreased. I think some of that is due to the summer months also called the summer doldrums. I also think there is a fair amount of concern about the validity of the rally in light of the economic backdrop.

However, it's important to note that no rally is technically perfect -- you're never going to get everything you want in a rally.

Click on all images for a larger image.

Market Mondays

Below are five charts of the major ETFs. All of them have the following points in common.

1.) They all demonstrate a bull market upward move followed by a bull market flag/pennant pattern over the last few months.

2.) All have a buy signal from the MACD

3.) But all are also experiencing a very tight SMA patter -- that is, the 10, 20 and 50 day SMAs are all in a very tight configuration indicating a lack of firm direction. This pattern shouldn't be surprising considering prices are just coming off a period of downward consolidation.

What happened last week was very interesting because it illustrates why it's important to know the technical and fundamental picture. On Monday everybody (including me) we expecting the market to drop because of the head and shoulders formation on the SPYs. However, the fundamental situation changed when Goldman and Intel reported better than expected earnings. This got the market very excited about the possibility of a better than expected earnings season and it lead to a rally. Because everyone was short everyone started to cover their shorts adding upward pressure to the rally.

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Today's Markets

On Monday I commented the markets were taking a defensive posture and would probably be moving lower. The was part of a continuing increase in overall defensiveness that I had noted for about 2-3 weeks. This just goes to show that the market will make an ass out of you whenever it can. So -- let's see what the charts are saying now after a few days of strong gains.


The main reason I thought the market was moving lower was the completion of a head and shoulders formation which usually moves lower. However, this time prices moved sharply higher. My reasoning behind the downward call was also based on a declining MACD and RSI along with a simple belief that traders would want to start taking some profits from the rally. In reality, we're gotten better than expected economic and earnings news and (probably) some short covering driving the market higher. The SPYs have broken through the upper trendline and are now just below the 200 day EMA.


The QQQQs have also moved through upper resistance on strong volume with a big gap higher. This was largely the result of Intel's announcement today.


Prices on the IWM are still contained, but today they gapped higher on strong volume.


The transports are either in a triangle consolidation pattern or a downward sloping pennant pattern. Either way they are still contained for now.

So -- we have two indexes that have moved through upside resistance and two more that are still contained. In addition, the transports hasn't broken through upside resistance yet. I think this is key because we need people to start trading like we're going to move more stuff from point A to point B in order for the economy to start growing again.