As unbelievable as it seems, the [[SPY]] and Nasdaq are back above their 200 day moving averages. The SPY is about 4 points away from going positive year-to-date. By any measure I am aware of, we are no longer in a bear market. Although the Dow Jones is still just beneath its 200 day average, is their any doubt that it will not soon overtake it?Â
Since the bottom in March, the indexes have gone straight up, with a few pullbacks along the way. This kind of up trend is confirmed by the VIX, which is near its October lows. “Why be fearful? Just get drunk and buy stocks!” says the VIX.
The Nasdaq has put in a beautiful saucer-shaped bottom. Except for the index going straight up, for 2 months in a row, I can’t find much to be bearish about, technically. The RSI(2) is at levels that typically coincide with pullbacks, but as of yet, there is no indication that the market wants to do anything but keep going straight up.
Yet, there is still something that doesn’t feel right about the whole ordeal.
I mentioned a month or so ago that I would not be surprised to see the indexes get close to positive, suck everyone back in, and then reverse. The Nasdaq has ran up 15% since its bottom in March. MACD is not confirming the move, and we are entering a period of seasonal weakness. Today’s close on the Nasdaq and SPY put both indexes above the upper Bollinger Band. For these reasons, I’m expecting another quick pullback, in the short term. Longer term, my guess is that the indexes will not get very far into positive territory for the year before experiencing a significant pullback of 5-10%.
FWIW: The Elliott Wave Lives On says …
Support for the SPX notches up to 1410 and then 1383, with resistance at 1438 and then 1462. Short term momentum is getting overbought, as well as, the near term indicators. Ever since this uptrend began in mid-March every selloff has been met with buying, as the market has continued to edge its way higher. The next significant resistance is at SPX 1438. This OEW pivot provided support for the market in Sept/Nov/Dec, which is now resistance. Tomorrow’s expiration friday, and it could be quite wild. Best to your trading!
MEDIUM TERM: uptrend makes a marginal new high at 1424
LONG TERM: bear market
http://caldaroew.spaces.live.com/
Of course there’s something that doesn’t feel right… it’s called “time.”
“Saucer shaped bottom?” Are you kidding me? Saucer bottoms need more than a couple of months to form, my hasty friend. Maybe you can all it a cup, but even that’s not all the way formed.
I think it’s more like a bear wedge off the March lows… soon to crumble, with all these shallow pullbacks not ever giving the market real time to base.
This is “forced march” trading, courtesy of the Fed… and the center shall not hold!
Jake, you say tomato…
Anyway, sure, cup, saucer, whatever. The point is how smooth it has been.
A bear wedge? Could be, and I don’t particularly disagree with that assessment except that the volume should be decreasing more for a good bear wedge.
Most technical analysts believe this to be a double bottom. Furthermore, there is testing that shows breakout systems to perform much better when the Nasdaq is above the 200 day average.
I still feel bearish as well, but ignoring the obvious here could be damaging to the wallet.
Left, right, up, down, flying saucers or alien spaceship cups, when I fucking go to the gas pump I am paying fucking $100 to filler up. When I get a small piece of metal I have to take out a loan. When I buy an ear of corn I am paying $3 – $4. Even my local Mexican’s are raising prices. That said please tell me how the fuck we can continue this shit higher. March in line soldier and don’t question your sergeant. Yes Sir! Mr. Bernanke Sir!
Gapping, I feel the same way. Just filled up today, and everyone around me was talking about the high fucking prices. How long will it take for this shit to hit earnings? I think it will have to get priced in to next quarter earnings. I read daily how consumer oriented companies are giving poor guidance. Is high gas prices already priced in? I don’t know.
Wood,
I remember the 1970’s oil crisis, and me old mum waiting in queue to get petrol.
Not that bad…..yet.
jog on
duc
My question is everyone keeps saying “its priced in”. This magical pricing in must allow the market to keep going up uninterrupted. I don’t get how you can price something in without taking at least some kind of actual write down. Also on a more serious note, how are all of the mortgage losses “priced in” if they can’t even be marked to market or they are unknown and constantly in flux due to consumer outlooks drastically changing for the worse. I just don’t see what I am missing that others seem to be getting. I don’t get how everyone on my street has multi-million (1-3) dollar houses but me? Where the fuck do these people work? Does everyone out there make 400 to 500k+ per year that are age 25-35? Fuck I must be the poorest fuck on the block or I don’t know what money tree to shake. By the way, I have absolutely ZERO debt, am I fucking doing something wrong and being punished by this? Is there some man in a helicopter that gives free money to people with debt that I don’t seem to be getting? I am starting to wonder if aliens are coming to meet me and I am the only one who didn’t get the invitation.
iBC machine update:
The iBC Machine is showing relatively weak buy interest up here, and though we remain in an intermediate term (quarterly) uptrend, the more opportune time to add to positions or engage in momentum trading is when the Monthly oscillators become less overbought, or we have a high conviction buy day. While is is not uncommon for overbought conditions to persist for days following the first reading, they always resolve in one of two ways–The indices trade lower, or the indices flatline while overbought conditions are worked off.
All these factors mean that the edge is to NOT PUT NEW TRADES on, and be quick to take profits on the recent profitable trades you may have made. Conversely, you could cut the risk in half on trades, or, at the absolute minimum, prepare your stomach and mind for your positions to trade off over the next week.
Duc, what happens if you can’t afford to get in that line?
Boone, I just left you a comment on your blog about the machine.
g&g
Hmmmm.
After much deliberation, and weighing of the alternatives, I came to the conclusion, that in all likelihood….
You’re fucked.
jog on
duc
Excuse the shocking language.
Shed – thanks!
duc – I don’t think I’ve ever read [heard?] you swear. Bloody fucking hell!
Duc, any luck on the monte carlo “for nowt”?
Wood,
Possibly, had to check with a third party….should know next week.
It may come as a CD, so I’ll have to copy one and post it to you [if it eventuates]
jog on
duc
Don Juan,
That was el-midge, tampering with my posts…again!
jog on
duc
Below are the gains, by industry, since the Bear Stearns fiasco, through May 16th. These are monster gains for a year, let alone two months. Participation has been very broad.
This market has a feel similar to the move that began in July 2006. Like this move, the move then was on weak volume and began in a seasonally weak period for stocks. Technicians pissed all over it because volume wasn’t confirming the move. That market didn’t really have a decent pullback until late February/early March 2007.
All that being said, I find it difficult to believe we will not have a decent pullback, soon.
Industry Symbol Gain
Oil Services $OSX 37.30%
Brokers $XBD 34.62%
Nat Gas $XNG 32.01%
Semis $SOX 26.81%
Commodities $CRX 26.60%
Oil $XOI 24.63%
Transports $TRANQ 22.84%
Internet $IIX 22.75%
Homebuilders XHB 22.61%
REITs $DJR 21.74%
Chemicals $DJUSCH 21.32%
Networking $NWX 20.39%
Disk Drives $DDX 20.37%
Hospitals $RXH 19.83%
Computer Tech $XCI 18.22%
Retailers $RLX 17.98%
Computer Hard. $HWI 17.56%
Telecoms $XTC 16.60%
Biotechs $BTK 13.23%
Gold $XAU 11.24%
Banks $BKX 10.26%
Utilities $UTY 9.31%
Pharmaceuticals $DRG 5.59%
Insurance $INSR 5.02%
Paper $DJUSPP 4.76%
Healthcare $HCX 4.11%
Airlines $XAL -0.04%
VIX $VIX -53.74%