Jun 052014

Still negative for the year, the Russell 2000 ($RUT) is approaching downtrend resistance while both the key 50 & 200 day moving averages (exponential) are virtually flat. Should the small caps make a solid break above this downtend line in the coming days, we would also be looking at a bullish crossover of the 20/50 ema pair, which has been on a sell signal since Continue reading »

Apr 152014

Just to clarify or expand on the previous 60 minute QQQ chart & comments, we did get a 60 minute close below the recent lows in the Q’s but by the slightest margin. Much more importantly, the three broad US indices that I focus my analysis on; the $SPX, $NDX, & $RUT are all still sitting essentially on or above key support (my long-standing first downside targets on the daily charts). Of course support is support until broken and although I still favor prices ultimately breaking below these support levels, at this time I continue to favor a bounce off the initial tag of these levels. As I’ve also repeatedly stated over the last several trading sessions, my degree of confidence on the near-term directions of the markets (and hence, any possible bounce) is not very strong and so my preference remains to keep things light by hedging up close to a market neutral portfolio (taking some long exposure to offset a large number of swing short trades that have yet to hit my preferred targets).

The daily charts of the $NDX, $SPX & $RUT below show the $NDX basically still trading at my first target level with both the $SPX & $RUT still slightly above their respective first downside targets, which are likely to be tagged before any meaningful bounce. If that happens, the $NDX would likely go slightly lower & thereby overshooting this support level by a relatively small margin. Only a solid break below these target/support levels on all three indices would convince me to remove my long hedges as that would likely open the door to a move down to the next target levels. As always, the live links to these charts are accessible from both the sidebar on the Homepage as well as the Live Chart Links page.

Jan 282014

Here are a few bearish/short ETF’s for those looking for either a pure-play short on the U.S. equity markets as well as for those who might be looking to hedge a portfolio of longs, particularly in an IRA where shorting of individual stocks is prohibited.  I am not a fan of the 2x & especially the 3x leveraged ETFs (SPXS, SQQQ, TZA, etc..) due the decay suffered when holding these instruments for more than a day or so.  The first three ETFs below (SH, PSQ & RWM) are the 1x inverse (short) tracking ETFs for the S&P 500, Nasdaq 100, & Russell 2000 Indexes.  Unlike those passively managed index tracking ETFs, HDGE is an actively managed bearish ETF which shorts the stocks of companies that they deem bearish from a fundamental perspective (click here for more information on HDGE).

Jan 242014

Since my call for a 5% correction in the markets last Friday, my updates have been focused on the intraday charts, specifically the 120-minute charts.  However, it is always crucial to keep an eye on all time frames of any stock, sector or index that you are trading.  Below are the updated daily charts of the $SPX (S&P 500), $NDX (Nasdaq 100) and $RUT (Russell 2000).   Currently, prices on all of these major US indices sit right on or just below key uptrend line support, which is also the bottom of large bearish rising wedge patterns.  The are the same wedge patterns that have been drawn on these charts for weeks or months now although I did modify the downside price targets on each index today.

The point here is that should the markets reach my 5% correction target based on the intraday charts, that would trigger a much more significant sell signal on the larger (daily) time frames, likely leading to a much larger correction in the US equity markets.  One possibility would be for the SPY to go on to hit one of both of my near-term targets (T1 & T2 at 177.50ish & 175ish on the SPY 120 minute charts), which would clearly bring prices below the daily rising wedge pattern, then a bounce to backtest the wedge from below before moving sharply lower towards my first price target on the daily time frame.  That’s just one of many possibilities but the important thing here is that all major US stock indices are currently testing the bottom of large bearish rising wedge patterns with significant bearish divergences in place.  Live versions of these charts are available from the Live Chart Links page.

Dec 112013

Today’s sell-off in US equities resulted in some solid technical breakdowns in some of the more volatile indices and sectors, such as the $RUT (Small Caps) and XLK (Technology) while the broadly diversified large cap indexes, such as the S&P 500 and Nasdaq 100 are still perched comfortably above their respective primary uptrend lines, albeit looking increasing vulnerable to a significant correction at this time.  The S&P 400 Mid Cap Index, which falls between the more volatile, lower quality small caps and the more (relatively) stable large caps are very close to, but have not yet broken below its primary uptrend line/bearish rising wedge pattern.  This pattern of the recent under performance of lower quality small cap stocks following the pronounced outperformance by small caps in the 2nd & 3rd quarter of this year is typical of the market action often observed in the final stages of an advance.  (Discussed in detail in this post a couple of months ag0).

2013 has been a year plagued with false sell signals and bear traps and with all but the shortest-term trend indicators remaining on buy signal for now, today’s breakdown in the small caps and tech sector may very well prove to be just another false alarm.  However, a preponderance of bearish developments such as extreme sentiment readings, record high margin interest, multi-year low short interest, multi-month bearish divergences and wedge patterns on just about every major index continues to build and will almost certainly manifest in the form of lower stock prices in the coming months.  The chart below is a screenshot of four trend indicators for the S&P 500.  My guess is that by the time the S&P 500 & Nasdaq 100 finally do fall below the primary uptrend lines shown on the charts above (and that can & most likely will happen much faster than most expect, as prices tend to fall much faster than they rise), that the short-term indicators will all be on solid sell signals with the intermediate-term trend very close to moving to a sell signal as well.

Quad Trend Indicators ($SPX)

One final chart worth mentioning is the $NAAD (Nasdaq Advance-Decline Index), which finally triggered a sell signal today on a break below this very long uptrend line and large rising wedge pattern.  As the chart illustrates, a sell signal is given following a break below the $NAAD uptrend line once negative divergence has been put in place (the MACD making a lower high while the $NAAD makes a higher high).  Nothing is 100% and I believe that I’ve posted one false sell signal using the $NAAD earlier this year but that was in the early stages of a trendline break on a questionable trendline draw (very few touches), nor was I using the negative divergence as confirmation to the signal.   Maybe this sell signal pans out, maybe not but this is an extremely well defined and long standing uptrend line with solid divergences in place.  One possibility would be for the $NAAD to make one more thrust higher to backtest the wedge from below before a solid trend reversal in the $COMP takes hold.  However, this is only the 5th confirmed sell signal in at least the last 4 years and the previous four signals were all followed by corrections that were roughly commensurate in scope and duration to the preceding advance in the $NAAD so both bulls and bears alike may want to keep an eye on this indicator.

$NAAD vs. $COMPQ 12-11-13

Dec 112013

The $RUT (Russell 2000 Small Cap Index), XLK (Technology Sector ETF) and XRT (Retail Index ETF) are just a few U.S. indices and sectors currently at key technical support levels.  Any significant downside from current levels would trigger sell signals and likely bring prices down towards the first support or target levels on these charts.  Links to these charts are available from the Live Chart Links page, which can be found under the Market Analysis tab on the menu bar at the top of the page.