Source: AwesomeInfographics.com
Double-click for full size view.
_________________
Comments »
Yearly Archives: 2011
Losing Ground
The bulls have started to lose their grip on the action this afternoon, after hovering around the flatline this morning. I currently have a downside hedge on, but will look to take it off quickly if the buyers step up on this dip. You can see on the zoomed out 30-minute chart of the SPY below that the overall pattern off the double-bottom earlier in August has been one of higher lows and higher highs.
______________________
Lots of Overhead Supply to Clean Up
___________________
The market is essentially flat as I am writing this, with 1218 on the S&P 500 once again proving to be a key price level. The action is subdued, with a whole host of indices, sectors, and stocks running up against resistance. At the same time, we are not seeing any kind of violent rejection of these areas. Instead, we have simply stopped going up and are attempting to work off those trapped buyers who now want out by churning sideways. If that type of price action continues, it tends to favors the bulls, as bears are looking for another powerful leg lower and a firm rejection from resistance.
Recall that the concept of overhead supply dictates that if many buyers buy a stock at $12 and watch it break down and go to $8, they are much more likely to sell, than they are to buy more or hold, when the stock recovers to at least $10.5 or $11. Hence, the key issue is whether fresh buyers show up at these overhead supply areas to provide enough strength to carry stocks higher. At the very least, the bulls are focused for now on avoiding a bear raid at these levels, turning up sharply lower.
Comments »Stock #Market Recap 08/31/11 {Video}
Know Where the Lines are Drawn
_____________________
Returning to the monthly look of the market, recall how reliable the slope of the 20 period monthly moving average has been, backtested over 20 years. That reference point is still inclining, which is a long-term positive for bulls. Now, we did breach the 20 period monthly over the summer with the crash, by about 100 S&P points, and have since quickly recovered back over it.
The last time that we significantly breached an inclining 20 period monthly without it resulting in an bear market over the next few months was back in 1998 during the Long Term Capital Management failure and the Asian Contagion. I made a video a few weeks back making the comparison technically to that time period in the market.
_____________________
Is Fading a Fad?
______________________
The character of the market really started to change last Friday morning after the “Jackson Hole Reversal” in the first forty-five minutes of trading. Since then, it has been all bulls, all the time. You can see the clear pattern of higher highs and higher lows on the above on the chart of the SPY.
Currently, the market is giving back the strong gains from this morning. It is not surprising to see quick profit-taking after the volatility we saw this summer, so this fade should not be met with shock. The real issue is whether the simple pattern since Friday favoring the bulls will persist.
Finally, note Freeport McMoRan (FCX) is exceptionally bullish today, easily clearing that prior key $46 level. Just as with the transportation stocks, the bulls need Freeport and copper strong here.
Comments »
