We definitely got that “sell the close” institutional selling that I was looking for and then some. This makes 6 out of the last 7 trading sessions that the key index tracking etf’s (SPY & QQQ) were met with high volume selling into the close. This is commonly seen during phases of institutional distribution, especially during the latter stages of a market top/early stages of a new downtrend as the smart money gladly passes the baton to the dumb money (retail buyers), especially on days the market trades higher. A gap down tomorrow, although not necessary, would sure help solidify the bearish primary scenario. Updated 5 minute SPY & QQQ charts highlighting the end of day, high-volume dump into the close.
The SPY turned down right on cue, reversing off it’s previously posted resistance level to the cent which brought the QQQ down with it, just shy of it’s similar previous reaction high from Monday. The expected negative divergences were also made official as the MACD on both index tracking etf’s have now put in lower highs with confirmed bearish crossovers. To affirm the primary scenario, another high-volume dump into the close like yesterday or a gap down tomorrow would help. SPY & QQQ previous & updated 5 minute charts:
Here I am, constantly preaching the virtues of always checking multiple time-frame when formulating your market or individual stock analysis, yet I should have looked at the shorter frames before that last 60 minute scenario update. As these 5 minute charts of the SPY & QQQ show, prices are in a well defined short-term uptrend which will remain intact until prices break below these uptrend lines. With both the SPY & QQQ being slightly below some decent resistance levels on these frames (support and resistance often act like magnets once prices get close enough), a very likely scenario would be to see prices go onto to make another intraday high, which would put in place negative divergences on this time frame, and then turning down near these resistance levels and going on to break below the uptrend lines and continuing lower.
FYI- Such short-term charts typically do not concern longer-term or less active swing traders and as such, are categorized under “Intraday Market Analysis”. For those receiving email post notifications that do not wish to receive such posts, you can deselect this (or any other) category by using the “Change your settings or unsubscribe” link included at the top of every email post notification received.
As stated in the recent 60 minute scenarios on the QQQ & SPY, I was expecting a bounce from the aforementioned support levels, which has clearly happened. I also stated that I was unsure how far those bounces would go (i.e.- the squiggles were not a forecast of the exact scope or duration of the expected bounce). However, at this point, I can say with a pretty decent degree of confidence that prices should turn down from at or near current levels in order to keep those original (and still my current) primary scenarios intact as any additional upside beyond today’s highs (67.69 in the Q’s; 152.48 in the SPY) will quickly begin to chip away at those near-term bearish scenarios and start to sharply increase the odds that at least marginal new highs will be put in with these major indices. Even if that were to happen, the bearish scenario would still be alive and well when viewing the longer-term charts and many other metrics such as the deteriorating fundamentals & recent complacency/bullishness extremes (of which I’ve made the case in the past, typically takes weeks to as long as two months before a top is in place and a new trend reversal begins to manifest.) Once again, my primary scenario remains that the initial snap-back rally that began on Tuesday has now run it’s course and the selling should resume from at or near current levels. Calling the short-term turns in the market can be very difficult at times so as always, DYODD, stay open to all possibilities and do not force a trade unless you are confident in your analysis and have an exit strategy in place; both if right and especially if wrong. Updated SPY & QQQ 60 minute charts below:
The FSLR long bounce trade has hit it’s one and only target for a quick 7.9% gain in less than 24 hours. Although this stock could easily continue higher, I’m sticking to my original trading plan of just taking the quick, oversold bounce off support and have booked profits. This trade will now be moved the Completed Trades category. Wash, Rinse, Repeat: That is the 3rd successful long-side trade on FSLR in the last 6 months, all three totaling 111% of cumulative gains. Yesterday’s & today’s updated 4 hour charts below:
I was asked my opinion on ROST tonight, which has been an active short trade on the site since Aug 16th. In looking over the charts, I figured that not only is it time to update this trade, as the last update was on Nov 15th when it hit the 3rd target for a 22% gain, but there are a few more points that I wanted to share in looking over the charts on this trade tonight. (Notes for the ROST short are on these daily & weekly charts).
To begin with, the ROST trade is a great example of the various ways that one can utilize multiple profit targets often listed on the trade and investment candidates on RSOTC.com.
I’ve received several emails from those concerned that the recent gains in the market have most likely negated the recent longer-term sell signals as the price action has just been overwhelming bullish so I wanted to follow-up on the snap-back rallies chart and discussion from Friday. I’ve made an updated version of that chart (screen-shot taken just before today’s high-volume dump into the close) in which again, the red arrows mark EVERY market peak that preceded a major sell-off over the last two year and on this version, I only included the white arrows marking the peak of the subsequent snap-back rallies. Without exception, the market retraced nearly all of the initial move down off the top. Those initial moves down typically lasted only a few days to no more than a couple of weeks… essentially similar in scope and duration to the move down following the recent Feb 19 & 20th double-top high. Only time will tell if that will turn out to be a significant & lasting top or not but so far, I honestly can’t think of much more technical evidence that could be added to make that case.
With all that being said, history does not always repeat itself. The recent drop could prove to be a blip on the road to SPX 1600+; we could easily go on to make marginal new highs before the next major top is in; or we may have seen the end of the first counter-trend bounce in a new downtrend that started last week. All that I can say at this point is that I still favor the latter (top was put in last week and we are at the tail-end of the range of the first snap-back rally) and if that assumption is correct, then as the chart below illustrates, the recent retracement that we’ve seen over the last few days is well within the historical range of all similar initial counter-trend rallies for at least the last two years. P.S.- For those who like to utilize fibonacci retracements in their trading, all 5 of those post-top initial retracements exceeded the big 61.8% level with most, if not all, reaching or exceeding the 78.6% fibonacci retracement level. Today the SPX reversed just shy of the 78.6% retracement level.
FYI- The AMKR long trade will be moved to the Completed Trades category. The previous update on AMKR stated that it would be considered stopped out on a move below 4.40, which happened last Thursday.
For those in the NM long, be advised that the stock is currently trading at 3.61 vs. the final suggested stop criteria on any move below 3.60.
The MAKO long trade is currently clearing the aforementioned 12.30 resistance level. Although only slightly above that level now (current price 12.40), volume is tracking at 6 times average volume so far today, which is a bullish confirmation of the breakout. Keep in mind that this impulsive buying (the stock is currently up 13%) follows the breakdown and recent backtest of the bullish falling wedge pattern shown on this updated daily chart.