This week was probably the most volatile up-down, down-up type of week in over a month. Volatility isn’t just about downside movement in the market. I’m talking about massive swings in both directions where it would be nearly impossible for both bulls and bears to make a decent profit if they were to hold for longer than a day. If you survived this week, congratulations. That is an accomplishment of it’s own.
Let’s take a look at the SPY for a moment (15-day/60-min chart):
1) Moving Averages
-a) 325-period (blue) = 50-day SMA, resistance
-b) 195-period (red) = 30-day SMA, resistance
-c) 130-period (green) = 20-day SMA, resistance
-d) 65-period (pink) = 10-day SMA, resistance
-e) 32.5-period (purple) = 5-day SMA, support
2) Solid green line is intermediate resistance & upper line segment of a symmetrical triangle.
3) Solid sky blue lines at 80.50 and 84 mark the neutral channel (or 805-840 on the SPX).
4) Ascending lower line segments for the symmetrical triangle. Two meeting points, one at 81 and the other at 82.75. Both have been used as support for the past 3 days.
5) Notice the volume spikes on the way down for both positive and negative days in the “blue zone” (75M or more shares or more).
Finally, the various selected indicators below the SPY show an obvious divergence that is positive for the market when using the neutral channel (3). We’ve gapped down and rebounded for 3 consecutive days on stable volume. I do not know when, but it looks like the market may be setting up for a short-term bounce. I’ve covered the vast majority of my positions and added some long positions, including oil via DXO (I never trade oil), and hold a large cash position.
My rule right now is to not hold much overnight because 1) we are still in earnings season, 2) this market is once again emotionally-charged and news driven, 3) the uncertainty of the financials doesn’t give me much comfort (more immediate bailouts on the way?), 4) overhead resistance, 5) the downtrending sell-off has been halted, 6) the past two days’ candles are forming long shadows, or tails (typically bullish), and 7) “WTF” chart patterns have been appearing in the morning, mid-day, and/or end of day, causing extreme whipsaw and headache to traders everywhere.
As you can see, there are too many mixed signals that will kill both bulls and bears if you are not hedged or have an ample cash reserve. There’s no rush right now, and I’m not going to rush it. The key right now is capital preservation.
That’s all for now. gtg!
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great post chart addict. Thanks
Nice piece. Thanks for all you do here and @ twitter. Kept my above head water last week, but didn’t gain much ground.
Out of a triangle, Don’t the break outs occur to the downside more often than to the up?
How do you say we have positive in near future?
Damn it CA,Pick a side.lol
Anon,
The general rule is that breakouts tend to occur in the direction of the primary trend, which in this market is down.
However, since neither the bulls nor bears were able to gain the advantage last week, it is best to wait for the breakout and then go along for the ride. The next move will be a doozy, so there is no need to rush into a trade.
Long uyg over the weekend wish me luck!!! You are one he’ll of a chartaddict thanks again john!!! Let’s have another great week trading together!!
So basically, what you’re saying is that you don’t have a clue.
CA thank you for your efforts.You have really opened my mind to the value and interpretation of charting. I always used a fundamental approach and after getting my ass kicked the past couple months I felt shell shocked.. Sat watching the screens and couldn t make a trade..This site with its diverse contributors, trading styles, great knowledge and humor has been educational and entertaining at the same time. Teaching is in your blood and you are great at it. Thank you, Berndt
I said wait for a clear direction to form before commitment. Didn’t I?
I have a slightly upside bias, but that can change in a single day.
Whoever is sure of a single direction in the short-term right now is a total fool.
CAT reports Mon pre-market. I think CAT will go up.
fire john paxson…..markets are about probabilities not certanties…if they were then everyone might bank some coin…that’s why its a small percentage of folks who can profit consistently by calcualting probabilities.
think black jack….you don’t know what card comes next but you play the game based on percentages.
if you want a certainty stick to T bills or CD’s
so are you holding anything right now, CA, or waiting it out?
CA,
Looking at a 1-year / 1-day chart on SPY, I can’t stop looking at the cross we just made on the stochastic (full).
A couple of thoughts:
1. Last time we saw a move from below 20 & cross was 11/21.
2. Played over the last year you would have been 15 for 15 to the upside within a day or 2 (depending on when you took profit of course).
I make a pretty okay living trend fading with stochastics on a 1 min chart – doesn’t always work – I know we can reverse the cross fast and go right back to oversold (and stay there) but, with the right stops in place you can end up positive most days.
Might be that we don’t know where it is headed and I know this is only one indicator BUT I would NOT want to be short SPX right now.
Your thoughts??
for the record, there is no actionable info here. but i am sure that CA will claim he is up 100% tomorrow on this. ducati may be a jackass who fucks snoopy, but he is onto the bullshit nature of this whole site.
Do you think a lot of this week and the week that is just around the corner has had/will have a lot to do with the way the earnings have been? I’m not sure there is a definite side until all the earnings for the major companies are in for Q4, and it’s been really really tough to gauge what step to make next. Thank you for all of your insight!
ZM
punyandy – 80% cash, long DRYS, DXO, JPM, short WFC. This may change at any time.
es – we need a nice closing up day to get us toward the 50 mark. We could hang around sub-20 for a while, but a nice “breakout” above 20 would be great on any Sto’s (full, slow, or fast). StochRSI left the 0.2 area. Many indicators are pointing towards a short-term upside move.
Z – We’re not finished with earnings. This is the primary driver for the market (minus unanticipated events). It’s tricky because one day can be full of beat/in-line earnings and the next day could be full of misses.
cool man. like all the picks.
BREAKOUT TO THE UPSIDE.
Thain:
“The final topic is the expenses related to my office. The $1.2 million reported in the press was for the renovation of my office, two conference rooms and a reception area. The expenses were incurred over a year ago in a very different environment. Nonetheless, they were a mistake in the light of the world we live in today. I will therefore reimburse the company for all of the costs incurred.”
Yet, this motherfucker will get $1.5 million in options and restricted stock. $1.5M – $1.2M = +$300K! win.
http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20090123/FREE/901239970/0/SEARCHRESULTS
motherfucker.