Looking More Like a Top Than a Bottom: ETF and Stock Market Outlook
by ilene - October 26th, 2010 2:13 am
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Looking More Like a Top Than a Bottom: ETF and Stock Market Outlook
Daily ETF and Stock Market Outlook from John Nnyaradi’s Wall Street Sector Selector
Instratrader Indicators:
Red Flag: We Expect Lower Prices Ahead
Daily Technical Sentiment Indicators: Neutral
Short Term Trend: Neutral
Today major indexes saw yet another failed rally at major resistance in spite of all the euphoria over the weekend’s G20 meeting communiqué that was widely seen as a license for the United States to continue trashing its currency and so support “risk on” assets.
As everyone knows by now, a declining dollar has meant a rising stock and commodity market, but today the dollar declined and the equities markets were unable to hold onto meaningful gains.
It increasingly appears that the major factor keeping the market afloat is the anticipated Federal Reserve quantitative easing at its meeting next week with a secondary factor being the notion that the Republicans will reclaim at least the House of Representatives in next week’s election.
It also increasingly appears that both of these events very likely have already been discounted by the market and that market participants could be “selling on the news,” as so often happens.
Overall, this looks more like a top than a bottom when you add up declining breadth and participation by individual stocks, overly bullish investor euphoria and a market that appears to be more sustained by government intervention and support than fundamentals and improving sales and earnings.
The next week will be pivotal on both a technical and fundamental basis. Wall Street Sector Selector remains in the ‘red flag’ mode, expecting lower prices ahead.
Disclosure: No positions mentioned. Wall Street Sector Selector holds various inverse ETF positions and positions can change at any time.
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Double Divergence and Resistance in SP500
by Chart School - July 22nd, 2009 10:16 pm
Double Divergence and Resistance in SP500
Courtesy of Corey of Afraid to Trade
Structurally, after the recent rally from the 875 lows, the S&P 500 is challenging possible resistance at the 955 level which comes from both the January and June 2009 highs. We’re also picking up an internal negative momentum divergence along with a TICK (high) divergence at these levels which should call our attention. Let’s look at the structure.
Let me begin by saying there’s absolutely no guarantee price will inflect downwards off these levels, but due to these developments, it would seem that risk is to the upside and opportunity might be to the downside.
As price swung upwards off a clean positive momentum divergence into the July 8th lows, we had a new TICK High of 1,400, which was a first sign of strength. As price swung back to form a higher low – complete with 60min dojis at those lows – we then began the large momentum move up that we see to this day.
However, the momentum may be trailing off as the 3/10 Oscillator is showing divergences (which isn’t as significant as the TICK divergences – oscillators can give false overbought readings on a powerful up-move).
More importantly, the TICK is showing internal divergences with the daily high TICK reading as price has continued higher – both of these serve as non-confirmations of the recent highs.
Now that price has come into prior resistance – which also reflects roughly the 38.2% Fibonacci retracement from the May 2008 highs to the March 2009 lows – odds have shifted to favor a downside move, or at least a low-risk (stop slightly above the highs), high-reward trade opportunity.
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Bulls Can’t Seem to Break 950 on the SP500
by ilene - June 11th, 2009 3:08 pm
Bulls Can’t Seem to Break 950 on the SP500
Courtesy of Corey at Afraid to Trade
I mentioned earlier in my post “So This is What Resistance Looks Like” where I noted that 950 was becoming increasingly difficult for the bulls to clear – they still haven’t cleared that level. Let’s step inside the 30 min chart on the S&P 500 to see the recent price action and current structure.
Though we flirted intraday on the open of June 5th, price hasn’t breached the 950 level – in fact, I’m surprised at how tight a level price has coiled in the 950 to 930 zone.
Until we break one way or the other out of this range, the price structure and trading tactics are clear – play long and short within the range once price hits an extreme in the range.
You might even want to avoid swing trading in this environment until we do get a price break, which would be expected to result in a trend (or momentum) move.
The 3/10 Oscillator is becoming useless in a flat momentum environment – so are the 20 and 50 EMAs on this timeframe.
Remember, during flat market conditions (triangles, ranges) oscillators (like the RSI or Stochastic, etc) become of value in highlighting possible overbought/oversold conditions to initiate trades.
Look closer and follow the price – do you really need an oscillator to show you overbought and oversold conditions in a clean consolidation as we’re having now?
So until we break above 950 or beneath 930, continue to watch the structure closely and lower your expectations.
Corey Rosenbloom, CMT
Afraid to Trade.com
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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 site
