Really not much to report today. Yesterday’s action was clearly bullish with the markets putting in a solid trend day, closing near the highs and giving back very little gains following the intraday 1-minute rising wedge breakdowns. The SPX managed to close right at, or actually just a hair above the upper end of it’s key resistance zone and pivot point around the 1440 area but has been unable to build on those gains so far today (which really isn’t surprising considering that the markets may need to consolidate to work off some of the overbought conditions).
The COMPQ also managed to close just above the key 3030-3040 resistance zone and like the SPX, remains just above that level, but also by a very thin margin. AAPL, although it had a decent day yesterday, continues to lag the broad markets in recent weeks & months and still remains perched just above critical support. All in all, yesterday’s action did take a bite out of the longer-term bearish case and as long as the markets remain above these former resistance, now support zones, the near-term and intermediate term uptrends are intact. However, as the chain of recent 60 minute SPY charts above illustrates, yesterday’s move in the SPY/SPX stopped cold at the back-test of the recently broken bearish rising wedge and R2 resistance level and continues to struggle with that level today. A solid move & close above yesterday’s highs would obviously be bullish and likely lead to additional upside while any decent move lower, in particular a move that takes out yesterday’s lows, would be very bearish and likely open the door to the next wave of selling. Finally, for those heavily positioned in either direction, be aware that we several potentially market moving economic releases due out tomorrow & Friday.
For more active traders, here’s a one-minute chart of the QQQ showing a recently broken rising wedge pattern with a few support levels below to watch for on any pullback. Interesting how the 38.2% fib retracement lines right up with that large volume at price bar which lies at today’s opening gap price. Definitely and important level to watch should the QQQ reverse anytime this week as a move below that level would wipe out today’s gains and be very bearish from a technical perspective. For those receiving e-mail post notifications that do not wish to receive the short-term intraday charts, you can use the “change your settings/unsubcribe” link to exclude the Intraday Market Analysis category.
And here were are…. Will the market just keep going or at least hold onto these gains, closing near the highs and giving the bulls the trend day that they expect or will the institutions hit the “sell” button and start taking profits into the close? In spite of the extremely bullish price action, I still favor the latter and still holding tight on the shorts, licking my wounds today but will respect a significant close above the aforementioned resistance levels and begin reducing my short exposure accordingly. As I type, the SPX sits at 1444, the COMPQ at 3050, just a hair above but basically at the upper limit of my threshold (about 0.3% above to be exact with 2 1/2 hours to go).
First chart below shows the QID scenarios posted two weeks ago today. Prices today are basically where they were back then with QID still bouncing off that support (S1) level. Not by chance, that level coincides with the 3030-3040 resistance level on the $COMPQ and the 1430-1440 level on the $SPX, both of which are also being challenged today. As back then, if these levels are taken out then the alternative scenario then becomes the primary scenario, as prices on QID are likely to fall to the next support level (S2).
Something that jumped out at me when revisiting this chart today was how any move down to the S2 level within this large bullish falling wedge pattern on the QID would also set up a nice, symmetrical inverse head and shoulders bottoming pattern. Symmetry is not absolutely mandatory with H&S & IHS patterns but does add validity to the pattern and increases the odds that it will play out. The fact that the neckline is slanted is perfectly normal with H&S and IHS patterns. In this case, the neckline is the same as the upper trendline in the falling wedge pattern, another reason to pay this level close attention if QID were to approach it going forward. Original QID scenario (from Dec 4th) followed by the updated QID daily charts showing both of the aforementioned patterns.
It’s been a while since I’ve made any updates to the GLD active short trade. In fact, this has been, by far, the longest active trade on the site. The most recent short entry on GLD was back on Jan 30th on the re-test of the yellow sub-uptrend line within the larger (blue) ascending channel. The first target, the bottom of the channel, was hit back on May 24th for an 11.9% gain. GLD, much to the chagrin of gold bugs, has gone basically nowhere over the last year. In fact, this short trade is still at a small profit from entry.
Although I don’t personally have a position in GLD and haven’t for some time, I’ve left this trade on since it has yet to exceed the stop criteria. In fact, GLD has been hugging the bottom of that channel for months now, sort of how a drunk driver hugs the white line on the side of the road…. not exactly bullish behavior. As you can see from this updated weekly chart, GLD is pinching towards the apex of that key horizontal resistance level above (174 area) and the bottom of the channel below. One way or the other, that pattern will have to be resolved by early April (the point of apex). A solid break above the 174 level would obviously be a bullish event, triggering a stop and possible a new long entry while a solid weekly close below the bottom of the channel would most likely usher in the next wave of selling in GLD, opening the door to the 2nd target (140) being hit. Again, the fact that GLD has been limping along the bottom of the channel for months now, especially in light of QEternity, makes me lean towards a downside resolution of this pattern and as such, I will continue to leave GLD as an active short trade for now.