There is compelling evidence that we may have seen a top in the S&P index. In my new short video, I show you the evidence that I have found which may point a correction in this index. While the S&P index needs to put in more work to create a major top, there are early signs that this may be happening. I think when you watch this video you will come to the same conclusion as I did in regards to this market.
Adam Hewison at Market Club has a new video out discussing the "divergences" taking place in the S&P 500 right now.
Adam uses the MACD as an indicator to highlight non-confirmations between price and the MACD (or other oscillator-type indicator). Divergences occur when a market makes a new high (or low) but the MACD indicator fails to confirm it.
In the video, he demonstrates divergences that didn’t work out, showing what to look for, and what to do if your divergence fails.
Last thing I remember I was running for the door I had to find the passage back to the place I was before ‘Relax,’ said the night man, ‘We are programmed to receive You can check out any time you like but you can never leave’.
Hotel California The Eagles
Since we sold some stuff two days ago it’s natural we want to find the place we were before. But, as I read somewhere else today maybe this is the Hotel California Economy and stock market. Let’s just say bulls put the pedal to it today squeezing any shorts and prepping for quad-witching beginning tomorrow and ending Friday. Things can get weird around this period and volume increases. Generally, it’s a good time to stay away but not so far this week for bulls.
Volume increased today and breadth was positive but not spectacularly so.
I have been following the 1937-1942 "analog" with great interest, and if we follow it to the letter, the S&P should probably keep pushing higher to about 1080 or so before we finally have a top in. I, umm, sort of wish I had etched this into my forearm around March of this year, since I "discovered" the analog for myself way back in October, but my time machine isn’t working.
This projected peak would nail the median line of the prominent downward channel I’ve drawn. 1080 is only 3.5% higher from here, and I’m optimistic it could really be worth the wait. In the meantime, bears are going to continue to get spanked, just like most of 2009.
We’re playing catch-up on the global markets this morning.
The Nikkei gapped up 100 points on Monday morning, right over the critical 10,200 mark and the index has gained another 100 points into this morning’s close so up about 1.5% in two days. The Hang Seng has continued it’s strong 5-day recovery, where it’s up 1,500 points in 4 days, back to 21,000 and up 7.5% from the bottom while the Shangai Composite is back to 2,930, neatly completing a 250-point bounce after the 800-point drop, right in that 32% Fibonacci zone so the 3,000 line is going to by hyper-critical to determine further strength in China. Europe is up at well but the FTSE, CAC and DAX are all running out of gas at the 5% rule over 5 days of trading back up.
Although the G20 pledged this weekend to continue to throw money into the global economy, US indexes are nowhere near 5% gains off last week’s lows but they are working on that in the futures as we are up about 1% across the board. We’re not going to make 5% so let’s be real (this is not China yet, that flag gets raised over the White House later this month) – 4% gains off the lows can take us back to: Dow 9,600, S&P 1,030, Nasdaq 2,038, NYSE 6,700 and Russell 577. Since the S&P, NYSE and Nas would all be at about new highs for the year, that in itself would be some trick so let’s watch Russell 577 as the line in the sand because they’ve been well above that mark and should have no trouble getting over that line if this rally is real. Otherwise, it may just be another round of pre-market pumping on light volume trying to foment excitement that doesn’t really exist during actual trading hours.
I am in the process of a major review of the market crash and I’m still not convinced we should be over 9,100. You can read Part 1 and Part 2 of my commentary, which takes us through the events leading up to the March crash so far so perhaps that is why I’m still feeling bearish this morning but I do wonder how do we really know this 20% market run (from July 10th) is all that different from the 20% run we had from November 20th to January 5th. 4M people have lost their jobs since Jan 5th and the job seeking…
I wanted to show two quick charts of the internal S&P 500, highlighting a “Rounded Arc” formation along with a view of a potentially significant negative Breadth divergence at the highs. Let’s take a look.
First, the 30-min chart with 3/10 Oscillator “Momentum” Divergences and Arc Pattern:
(Click for full-size image)
You can almost draw a full arc on the 3/10 Oscillator peaks as well, which forecast an arc prior to it happening.
Now, the oscillator is making new momentum lows, and the peaks in the oscillator are forming lower highs as price formed higher highs – that’s the sign of a classic non-confirmation which can be a bearish signal.
The fact that price is forming a clean ‘arc’ pattern also has bearish implications, given that arcs represent a gentle transfer from demand (buyers) to supply (sellers).
The expectation is that the arc formation has already, or will peak soon, and price will follow the arc now to the downside.
Let’s take a deeper look at market internals to see if we’re getting a similar picture.
Here is a 30-min chart of internal “Breadth”:
The lower pane ‘indicator’ is actually a symbol – $ADD – which stands for “Advance/Decline Difference” (or the difference between NYSE advancing stocks minus NYSE Declining stocks) drawn as a line chart.
We see that breadth made a new high near July 15th with price at 930, though price has peaked at 1,018, breath has formed a series of lower peaks, which also lock in a non-confirmation or divergence just like the momentum oscillator.
The breadth divergence is more ‘important’ or significant than the momentum oscillator, because the momentum oscillator is price-based.
The implication is quite bearish, given that the S&P 500 is hovering beneath critical resistance at the 1,007 level as well as the 38.2% major Fibonacci level at 1,014.
Should price break above 1,020 solidly, it would disconfirm (overrule) these divergences, but until that happens – and it could – we have to assume resistance will hold and that the divergences will play out as they have so many times in the past. This concept of ‘non-confirmation’ dates back to Dow Theory!
Aug. 10 (Bloomberg) — Two years after credit markets seized up and caused the worst financial crisis since the Great Depression, companies are hoarding the most cash in at least a decade……
Even as government reports show that the first global recession since World War II may be easing, corporate treasurers are raising cash as fast as they can, wary of losing access to capital. Corporate defaults reached 10.7 percent worldwide in July, the highest since 1991, according to Moody’s Investors Service. Credit markets that started to freeze in August 2007, have now triggered more than $1.5 trillion in writedowns and losses at the world’s biggest financial institutions.
Do you really think the crooners on CNBC and in other parts of the media are smarter than the CEOs and CFOs that run our largest corporations?
But never mind Bloomberg, they’ll try to plant "green shoots" through misleading reporting:
The recession may have ended in July, said Jeffrey Frankel, a member of the committee at the National Bureau of Economic Research that dates business cycles. The median estimate of 60 economists surveyed by Bloomberg is for growth of 2.10 percent in 2010, after a contraction of 2.50 percent this year.
A member? This is what NBER’s Hall had to say yesterday at 2:30 this afternoon:
National Bureau of Economic Research’s (NBER) Hall: May wait until economy moves past prior high before deeming recession over; could take 18 months – Comments that the upturn could in fact be part of a larger decline.
Aug. 10 (Bloomberg) — Declaring the U.S. recession over may take more than a year because of the risk that recent signs of stabilization will prove short-lived, according to the head of the group charged with making the call.
Ah. And what have I said?
Complicating a recovery call is the possibility that renewed declines in financial markets or home prices will cause the economy to shrink again, Harvard University economist Martin Feldstein,
Welcome Back! I have to admit that seeing the S&P 500 index back in “quadruple digit status” makes me just a bit nostalgic. So do you remember where you were the last time the S&P closed above 1,000? For me, the memories are a bit hazy as our twins were born October 21, and since the last time we saw this level occurred on November 4th, I was a good fortnight into sleep deprivation.
Actually the bigger question might be if you remember where you were the first day this side of 2004 when you saw the S&P close below the 1,000 mark. The date was October seventh and being a bit of a pack rat, I still have the Wall Street Journal for Oct 8th in which the headline reads:
US, Britain Up Ante in Fight to Stop Crisis
Obviously, that fight had a long way to go as the S&P eventually dropped another 33% before hitting rock bottom just off the illustrious 666 level. The trip down memory lane is more than just “for old times sake” – it’s important to realize just how far we have come and what issues caused (and prolonged) this financial crisis. Here are a few additional noteworthy headlines:
Sept 13: Crisis on Wall Street as Lehman Totters, Merrill Seeks Buyer, AIG Hunts for Cash
The article explains that after bailing out Fannie Mae and Freddie Mac just one week prior, the government refused to provide a financial backstop to potential buyers of Lehman
Sept 17: U.S. Plans Rescue of AIG to Halt Crisis; Central Banks Inject Cash as Credit Dries Up
“The Federal Reserve appeared to be motivated in part by worries that Wall Street’s financial crisis could begin to spill over into seemingly safe investments held by small investors such as money-market funds that invest in AIG debt.” I honestly don’t think that the Fed had any idea of the magnitude of what they were dealing with yet.
Sept 20: U.S. Bailout Plan Calms Markets, But Struggle Looms Over Details
The accompanying picture includes SEC Chairman Cox, Treasury Secretary Paulson and Fed Chairman Bernanke walking solemnly behind President Bush. The “in process” treasury plan was revealed and was
As we can see from AlphaTrends chart, that’s going to be a tough breakout and, even if we do make it, can we hold it? In yesterday’s post I said we were ready to switch off our brains and BUYBUYBUY the rally and our breakout levels did all hold yesterday but I decided, in Member Chat, that we needed to raise the bar slightly before we started shutting down our thought processes into the weekend. We simply used the 2.5% lines of Dow 9,297, S&P 1,000 (interesting!), Nas 2,017, NYSE 6,438, Rut 562 and SOX 308 in my 10:16 Alert as our official buying breakouts but those same levels gave us a great indicator to get out of our longs and press our shorts as they ALL failed by 11:09.
It is going to be very much up to the GDP report and we have a pretty low-bar expectation of -1.5% but that’s a heck of an improvement over last quarter’s -5.5% and this earnings season has been nothing if not a celebration of "getting worse more slowly." As we all know, personal consumption makes up 70% of the GDP while government is about 18% and business investment just 12%. Durable goods are only 8% of the GDP while consumables (which includes clothes and, obviously, food and fuel) are 20% and 40% is "services" but 1/4 of that number is Real Estate so that’s a little confusing.
As we know, not much is actually getting better but that’s not the issue with GDP as we are measuring "growth" compared to the prior 4 quarters and our prior year was a disaster! This is like when a raging fire causes a house to collapse and you stand there looking at the wreckage and say "at least most of the fire is out now."
The good news is the comps just keep getting easier and easier the worse things get so, at some point, you are bound to improve! As you can see from Briefing.com’s Real GDP chart on the left, there’s a pretty wide disparity between the Real and Nominal GDP and that’s because the Real GDP meansures the production of goods and services valued at constant prices. So we aren’t producing that much less, we’re just getting less for it…
We’ll get the scoop at 8:30 but our global partners weren’t waiting with…
Big Brother (FINRA) has given Wall Street firms the cover to restrict ProShares, Direxion, Rydex and PowerShares products from use by their clients. This is being done under the guise of protecting them but that’s a smokescreen. You see these firms live and die off residual fee income generated by wrapped high fee products within financial plans. It’s very disruptive to fee income for FAs and clients to mess with the plan. It is no longer permitted to use them denying the investor and FA the choice and opportunities they present. Rather than allow your FA to protect you from 40-60% bear market losses they want you to stick with these plans and keep chucking the money to them. Some firms are even going so far as restricting the use of unleveraged short products which is downright silly but shows you the extent firms will go to protect the flow of fee income.
Here’s a typical wire house message sent to the troops purportedly by Morgan Stanley:
Policy Change on Inverse and Leveraged20ETFs
In June FINRA issued a Regulatory Notice indicating that inverse and leveraged ETFs that are reset daily, typically are unsuitable for retail investors who plan to hold them longer than one trading session, particularly in volatile markets…
Here’s the REAL DEAL NO BS Situation with Europe (Warning What Follows is EXTREMELY BAD).
The media is rife with misrepresentations and analysis of the EU. Here’s the real deal.
The ECB is tapped out. Having provided over €1 trillion in funding via LTRO 1 and LTRO 2, taking on over €700 billion in PIIGS debt putting its own solvency at risk, it simply cannot launch another LTRO scheme for th...
"It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud. The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident...And yet none of this conduct has been punished in any significant way."
~ Charles Ferguson, Inside Job
"I know that my retirement will make no difference in its [my newspaper's] ca...
The S&P 500 got off to weak start and, after retracing a modest morning rally, spent most of the day in the shallow red with an intraday low of 0.63%. But in the last seven minutes of trading, the index recovered enough to a make a small gain of 0.14%. This is the fourth advance, the first was Monday's 1.60 surge, but the last three have ranged from 0.05% to 0.17% with today's close near the high of the miserly three-day series.
The index is now up 5.02% for 2012, which is 6.93% off the interim closing high.
From an intermediate perspective, the S&P 500 is 95.2% above the March 2009 closing low and 15.6% below the nominal all-time high of October 2007.
Below are two charts of the index, with and without the 50 and 200-day moving averages.
TIF - Tiffany & Co., Inc. – A surprise earnings miss and a reduced full-year profit and sales forecast from luxury jewelry retailer, Tiffany & Co., took some of the luster out of its shares today, with the stock trading down 8.5% at $56.55 as of 11:50 a.m. in New York. Options activity on Tiffany this morning suggests mixed sentiment on the st...
RealNetworks, Inc. (NASDAQ: RNWK) today announced that it has reached an agreement with the Washington State Attorney General over discontinued e-commerce practices. In accordance with the settlement agreement, RealNetworks has committed to:
Discontinuing the use of pre-checked boxes for purchases of RealNetworks subscription products; Spelling out more clearly the material terms of RealNetworks product offerings; Offering online cancellation of subscription offerings; Enhancing RealNetworks customer support guidelines regarding cancellation. Statement from Thomas Nielsen, President & CEO of RealNetworks:
"About two years ago, the Washington State Attorney General's Office contacted us regarding concerns they had with some of our e-commerce practices.
To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
First we'll go to the technicals. Back in mid April I had opined a 'bear flag' formation was being created. [Apr 17, 2012: Potential Bear Flag Forming] But the market being the difficult beast it is, head faked everyone and rather than a break down from said flag it first went UP and nearly touched yearly highs. This caused everyone to think the bear flag had failed…. only to lead to a horrid May in the market. Generally a bear flag will resolve relatively quickly but the longer...
Despite the fact that U.S. equities are well-positioned and well-supported to go up, once again it is the headlines out of Europe—especially Greece—that are scaring off investors. Some are saying that it is now likely (and even desirable) that Greece will default on all its sovereign debt, withdraw from the euro, and severely devalue its domestic currency (Drachma?). This will allow them to operate a balanced budget while pumping cash into growth initiatives, rather than suffer the ravages of Germany-mandated austerity.
Some say, so what? Greece makes up only about 2% of the Eurozone’s overall economy. Nevertheless, you might say that t...
Markets died and then rallied to flat again as European leaders “prepared contingencies” for a possible Grexit
Markets died hard and fast earlier today as major indexes registered as much as 1.5% of losses after news that Euro zone officials were unofficially “preparing contingencies” for a Greek exit from the Euro. Unofficial statements were not enough to keep markets down however, as major indexes rallied back to flat levels by the end of the day.
So the world continues to wait on Europe, as the SPDR S&P 500 ETF (NYSEACA:SPY) gained .05%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
NEW: Ilene is available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here is this week's test version of the latest newsletter. We apologize for some formatting issues that need to be worked out. Please tell us what you think.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
In this article, please revisit an article written two years ago titled, "The Calm Before the Storm." This article focused on the patent cliff that was looming in the pharmaceutical industry, that was later picked up by the New York Times and several other bloggers! Subsequent articles were written about big pharma company's revenue streams, and the pros and cons of of their later stage pipelines. Other articles have also attempted to identify smaller biotechs with the potential to reap big reward...
My last weekend update is dated from January 30 so after a long hiatus, here is an update of our virtual portfolio. Since the last update, we have closed the AA Money portfolio due to a lack of enthusiasm (and activity) and I have stopped tracking the FAS strangle as the low VIX makes it hard to get rewarded for the risk! But we have added a small $5KP virtual portfolio which does not use any margin.
FAS Money
We have had to recover from a big move up by FAS and a low VIX which keeps option prices low. But the portfolio has gaine about 10% since the last update.
Last update P&L - $5499.00
IWM Money
Not a lot of activity in this portfolio where the main focus is on the large IWM BCS. But the portfolio has grown over 20% since the last update.
Last update P&L - $1998.00
$5KP Portfolio
This is the virtual portfolio that replaced the AA Money portfolio. It does not use margin and we will keep holdings under $5K.
AAPL $50K P...
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(blogroll, archives,
more).
Contact Ilene to learn about our affiliate and
content sharing
programs.
Facebook
Twitter
LinkedIn 
del.icio.us
Digg
We’re playing catch-up on the global markets this morning.
I am in the process of a major review of the market crash and I’m still not convinced we should be over 9,100. You can read 
Courtesy of 
Courtesy of 
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(