Update of the bear rally - 1 Sep 2011

The bear rally that was identified to have started earlier is well underway and about to mature late this week or early next week. Looking at the ES futures (S&P500 E-mini futures) chart, it looks on track to rally into 1240-1255 over the next few days. However, I would be cautious and looking at the 30 min charts for a possible turnaround. This bear rally although relatively strong this week, has a few things to do before resumption of the uptrend takes place.

Firstly, 1255 is the neckline resistance that should be reached by next week Monday. What happens here should be telling of the underlying trend for the next few months. IF it breaks well above 1255, the next resistance level is 1330 (dotted red resistance line). Breaking 1330 would put the ES futures back into a bullish trend. However, it appears to me that this brief rally should tire out at about the neckline or at least pause about 1240 as there is a FadhilFibo level as we call it after our dear friend who noticed this phenomenon. It is at this range that the ES would be meeting the 55/89EMA as well for the first test.

As of today, the Force Index looks like it is weakening and a decent rally by Friday with volume is required to keep the uptrend till next week.

For now, it's rally time... watch the Non-Farm Payrolls and Unemployment data on Friday at 0830hrs ET for a very good indication of directional continuation or change.

The MadScientist

Note: Any material posted here is of my sole opinion, and my opinion may differ or change. This is NOT a solicitation nor advice proceed with anything else as a consequence of reading these materials. The materials presented here are intended for educational purposes only.

Continuation of Sucker Rally - Market Analysis for 29th August 2011 by Singaporeseeds

Daily chart for Dow


Daily chart for S&P


Daily chart for NASDAQ


We are now in the midst of another bounce that should bring us up to around 1,215. With the market having fallen so much within such a short period of time, and with the markets so far away from the 50 and 200 day moving averages, i believe we should range in a volatile, sideways fashion (between 1,115 and 1,215) for 2-3 weeks before it continues it’s movement down to my final target at 1,000.

Daily chart for Dollar


A bullish divergence MACD and RSI pattern had been building in the dollar for weeks. I believe we should see the dollar dip one more time before beginning a long rally up to around 23.50 on UUP. This should be around 76 on /DX.

Daily chart for Gold


Quote from my market analysis 2 weeks ago:
“Gold spiked right past it’s Fibo retracement XOP level at 1,725 in one huge candle last Monday and has kept above this level. Now if gold does not break below this level and bounces off, I have a final target at 2,000.”

Gold had indeed bounced off 1,725. We should see gold at 2,000 soon.

Daily chart for Silver


Silver bounced off a range of moving average supports on last Wednesday and Thursday. With the upward pressure on gold, we should see silver tracking gold over the next few months. Final target at 47.50 on SLV and 49.82 on /SI.

Daily chart for Crude Oil


Crude oil is still following the market for now. We should see if move together for the next few weeks in a range-bound fashion between 31 and 34.80 for the next 2-3 weeks.

Daily chart for Natural Gas


Natural gas formed yet another bullish divergence on MACD and RSI. We should see upward pressure on natural gas for the next few months. However as of now, natural gas is still range-bound between 3.86 and 4.15 on /NG.

Start of a bear rally - 25 August 2011

MadScientist Market Analysis (MMA)

The last two days' market action has confirmed a (bear) rally that should take the ES mini S&P500 futures up to about 1240 to test the Head & Shoulders neckline resistance.

A Buy signal has emerged and this should be a short ride up. Expect some volatility with Ben Bernanke due to announce measures at the Jackson Hole Fed Meeting on Friday 26 August. This was the place where QE2 was birthed and the market are expecting some sort of Fed action. However, note that if disappointed, this rally may be sold on the news.

Technically, the 30mins ES charts look good for a sustained rally as does the daily chart. The tests on the EMAs and 200MA have been indicating a nice test and hold pattern over the past three days but bearing in mind (pun not intended) that a significant top has been put in place, so muted should this rally be. Certainly not for the faint hearted and exposure risk should be kept low.


The MadScientist - 25 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ or change. This is NOT a solicitation nor advice proceed with anything else as a consequence of reading these materials. The materials presented here are intended for educational purposes only.

Likely failure today - Market Opinion 23 August 2011

At this point of writing, the European markets rallied due to economic data being slightly better than expected. However, the European and German sentiment index muted the rally as it was actually much worse than expected.

The ES futures rallied in unison but are failing the FiboEMAs right now. The rally did not manage to make a higher high, and are failing the FiboEMAs. The MACD is topping out as well and it looks like a mild down day again.

New Home Sales and Richmond Manufacturing Index data are out at 1000hrs ET today.


The MadScientist - 23 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.

Power of the Sucker Rally - Market Analysis for 23rd August 2011 by Singaporeseeds

Daily chart for Dow


Daily chart for S&P


Daily chart for NASDAQ


On longer term charts, it seems that the market is due for an even bounce. But on the shorter term, we should be going down a bit more. As long as the S&P cannot break above the crucial 200 week moving average 1,150, we are going down some more. Supports at 1120, 1060 and 1,000 on S&P.

Daily chart for the Dollar


The dollar is still bouncing above support at 21.90. The weakness in the market will keep the dollar up. We may see the dollar bounce for a bit more.

Daily chart for Gold


There is a resistance for gold at 182.60. We may see gold dip after hitting this level. Final target is still at 2,000.

Daily chart for Silver


Silver usually lacks gold so we should see silver rally over the next few weeks. Target at previous high at 47.50.

Daily chart for Crude Oil


Crude oil is still tracking the market. First support at 31.50 then 26.20.

Daily chart for Natural Gas


Natural gas is now bouncing off its lows. As long as the economic conditions and the market remains weak, we should see natural gas continue to move sideways.

Hit by a train and still dragged - WMA 21 August 2011

Looking at the charts this evening, I realized something... that the move in the markets over the past 3 weeks had been so great, everything else look similar (except precious metals) and many stocks, ETFs, etc. all have this waterfall look.

Therefore, to cut to the chaste, I shall just comment on the E-mini S&P500 Index futures, ES.

The /ES daily chart shows that earlier this week, there was a dead (fat) cat bounce which saw the bounce find itself in the Fibonacci retracement area of 50% to 61.8% (aka COP). As it progressed, the rally got weaker and it rolled over on Wednesday.

The roll over can be observed in the ES 30 min chart where a sudden spike in the futures (together with low volume) failed to sustain and subsequently broke the EMA(s) as well as the 200MA. By the market open on Thursday, the ES was down -30 points due to lousy economic news from Germany. On Friday, early in the market hours, a short rally resulted in an "ice hole failure", which then saw the ES restest the low of the day, with the MACD looking as if it is not the end.

Back to the Daily chart... a new downtrend has resumed and should hold for the next week, less several bounces. Furthermore, after rolling over on Wednesday, the swing point hints of a major reversal. A new SELL signal emerged for Friday as well. What can be seen also is that the Open Interest for the ES has decreased as the dead cat bounce progressed and then increased as the downtrend continued. This is indicative that open positions were being closed as the rally proceeded, and with the downtrend continuing, more positions were opened... very likely, >6% short positions. As the downtrend continues, watch the open interest escalate and this would confirm that the market has more to go. Also notice the alert at 1106.5... this is a significant support level, having break this level on a weekly basis would provide evidence that a bear trend is confrimed in force, at least for the rest of 2011.

Furthermore, in a custom scan, over 35% of the tickers that are tracked put out a SELL signal on Friday. IF this is not enough, then also note that the market registered two "Down Friday, Down Monday" (DFDM) consecutively... and if Monday registers the third consecutive DFDM, the outlook would be very omnious. A DFDM is a statistical observation that two weeks of downward movement follows a DFDM.

Given this very bleak outlook, the Fibonacci downside target is estimated to be about 980 on the ES... and if the Fibonacci Fans are telling, then 5 September is the target timeline date. However, it is not expected to head down immediately nor in a straight line and a support is likely to be about 1010 on the ES.

See also a decent summary from Bloomberg: CLICK HERE and HERE TOO

Have a good weekend, and a better week ahead!

The MadScientist - 21 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.


*charts are from TD Ameritrade Thinkorswim platform

Rollover Mr Market - Pre-market Technical Analysis 18 Aug 2011

Earlier this week, in a SMS to a friend, I mentioned that I am waiting for the market rally to rollover, for the last buyer to buy in, and then look to short the market later this week or early next week.

That time is possibly here.

Below is the ES 30min chart with my harmonic EMAs (blue and red lines) and the 200MA(magenta line). You can see that price has a way of communicating with these moving averages. A breakthrough is followed by a test and the outcome of the test tells you what is coming. The chart starts late last week after a test of the 200MA and price passed... So a rally followed. I mentioned previously that this rally was weak compared to previous bounces, analogous to a dead fat cat bounce. The bullish signals were followed by MACD crossovers as well as the (E)MAs pointing upwards as indicated by the thick green arrows.

So what happened yesterday was pretty interesting... Early at market open, the ES rallied hard... Harder than usual. However, the indicators looked suspicious... And by noon, it was clear that this breakout was a false breakout. The ES then broke down and tested, only to fail both the EMAs and the 200MA. There was a test of the 200MA and that failed too. Dave Elliot of wallstreetteachers.com, who was one of my market teachers, calls this "an ice hole failure".

This means that we can expect today to be a down day for the ES.
The latest down activity stemmed from Europe (again, of late) where at some point the CAC and DAX were down more than -3%!

As I write this now from my iPad, the US Initial Unemployment claims is slightly worse than expected... Giving way to a gap down open.

Good luck to those who didn't get out over the past few days... Time to bleed again...

The MadScientist - 18 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.

Pre-market Technical Analysis - 17 Aug 2011

A quick look at the ES futures reveal a possible rollover and breakdown.

Earlier today the chart looked like this:

Notice that the Fibonacci fan has placed a resistance on the daily chart and it can be seen on the 30 min charts as a resistance top of the triangle. ES brokeout during Asian trading hours today, I drew the blue and yellow arrows to show that it has two ways to turn out.
About 30 minutes ago, when the European markets open, the ES broke back into the triangle.

The break back in should be followed through with a moving average test and failure. When that happens, the ES should roll over and resume the downtrend. Watch for this to happen in the coming hours today...

The MadScientist - 17 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.

Dead cat too fat - WMA 16 August 2011

It was just last week that the global markets erased 7.5 trillion of value, and it was swiftly followed by a technical rebound… a dead cat bounce as we call it. This dead cat bounce was a little more peculiar than the usual bounce. It kinda resembled a fat cat… the rallies were observed, and the technical levels broken, however, the rallies were not as ferocious as I anticipated. This was very very unusual as compared to the recoveries of the previous two years since volatility reached new highs in the global markets.

I have had friends ask me to tell them when to buy in… and cautious as I am, I have not budged on anything since pulling out profits near the bottom. However, these friends had been overwhelmed by the rallies and some were in for a ride. As of today, the ride possibly ended and I hope that my silence spoke more words than when I a scream about the markets tanking.
Unlike the usual WMA, this one will show some charts, as well as how one can tell that the charts are indicating the future. While it is not at all about predicting nor prophesying, I learnt this skill and belief in the charts from Dave Elliot of WallstreetTeachers.com whom I am very grateful to.

Let us now look at charts...

 
ES

The 30 min chart shows clearly how a bounce looks like. Using moving averages of the correct period, one can plot failures and breakthroughs. Last Thursday, after a consolidating for two days, the ES broke through the moving averages and tested before the market opened on Friday morning. This test of the moving averages also coincided with a major swing point and the uptrend was established. Similarly, the MACD signaled a bullish rally on Thursday during open market hours and also a confirmation at the point of the moving average test.

The uptrend was lackluster and it appeared to be ready to reverse at some point in the future. While Monday was mildly bullish, at the close, it ended with a swing top and a Sell signal was generated. Coinciding with this point was the rising wedge resistance.

On Tuesday, at the time of writing (6pm SGT/6am ET), Germany had posted unexciting economic results and the major European markets are off 1.5% on average. The ES traded downwards on low volume and is just at the wedge support, having failed one of the moving averages. Breaking the next moving average and the wedge support would see a price breakdown later today.
This price breakdown is highly probable given the obvious technicals such as a price uptrend with flattening MACD and lowering volumes.

The daily chart shows that IF Tuesday closes at the current level or lower, it will form a bearish reversal pattern and the downleg may target as low as 1055. This reversal point comes just at the COP of the Fibonacci retracement and the Fibonacci fan. The target is end August to achieve this 130 point drop in the ES. Sounds unlikely? So did the first two weeks of August to lose 225 points on the ES in two weeks!

Given the current scenario and global outlook, the drop to 1055 at some point in the near future would not be impossible. US Treasuries had possibly just reversed their retracement and the weekly ES chart although in extreme territory signals that there is a good 5 weeks of downtrend to continue. Leading indicators of emerging markets as well as the US indicate a recession as soon as next month and economic data coming out of every country are either short of expectations for growth or just barely making the mark.

The only saving grace is more stimulus money from US, Europe and all other governments particularly China and Japan. However, these countries are at a point where it is beginning to be difficult to splurge without a backlash of inflation and political repercussions.

The flipside is that the ES may just work its way past the immediate resistance of 1200, and test the neckline. In order for that to happen, there needs to be a lot of good news, or at least one big piece of good news to keep the markets propped up for 3-4 days. If the ES does reach the neckline, its technicals as it approaches the neckline would be indicative of what might be probable for the next move.

At this point, while not discounting a huge dead cat bounce, I am inclined to expect that this fat cat can’t bounce, and if it does, it will not take long till we can look for another Sell signal (white/turquoise arrows) near October 2011. A reason for October 2011 is that it is the peak of the 6 year cycle and such peaks bring a heavy selling pressure. Some research has been done and a correlation to natural cycles also coincide with the peaking of 6 year cycles, such as the commodity cycles and also weather patterns such as the flooding of major rivers just before the peaking of the 6 year cycle, ie. Missisippi River in June 2011.

The MadScientist - 16 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.

Food for thought: US stocks are lagging Japanese stocks by 11 years?

Chart showing the US stock market lagging the Japanese market by 11 years.

Dead Cat Bounce - Market Analysis for 15th August 2011 by Singaporeseeds

Daily chart for Dow


Daily chart for S&P


Daily chart for NASDAQ


After a 2 day consolidation, last Wednesday marked the start of the dead cat bounce for the markets. As our title suggests, we do not think this is the start of another rally. Instead I have a down target at 1,015 on the S&P.
However like most if not all major downtrends, there has to be a huge dead cat bounce before the next leg down. First bounce target at 1,215, second target at 1,260 on the S&P. I do not think the S&P will bounce any higher than that.

Daily chart for the Dollar


The dollar is still keeping below the wedge trendline as indicated by the red line. Final target for this wedge movement will be at 72 for /DX.

Daily chart for Gold


Gold spiked right past it’s Fibo retracement XOP level at 1,725 in one huge candle last Monday and has kept above this level. Now if gold does not break below this level and bounces off, I have a final target at 2,000.

Daily chart for Silver


Silver is also showing signs of strength as it had been bouncing off the lower channel for the past week. I believe silver is at the beginning of the next rally leg which should bring it above its previous high at 49.82.

Daily chart for Crude Oil


The bullish divergence pattern on Crude Oil had failed and with it, triggered a bearish signal. However I think crude oil is following the markets for now and should bounce over the next few days. There are a range of resistances at 90-92 so I believe crude oil should start turning down from there.

Daily chart for Natural Gas


Natural gas had gone back to its usual movement for the past 2 years….sideways… Currently there are no upward or downward signals so I think it should be following this path for the foreseeable future.

To Bounce or not to Bounce is the question... Market snapshot analysis 11 August 2011

Here is a quick take on the market scenario as at current status...

ES mini (S&P500 futures)

The daily ES chart shows a completed Head & Shoulders pattern that not only achieved its target in 3 trading sessions, but extended losses and retraced sharply after FOMC statement about leaving interest rates near zero for an extended term until 2013. The next day, due to European debt concerns, particularly the downgrade of France, the anticipated bounce was cancelled and the ES thrugged further down. It is clear that volatility remains with swings in excess of 30 points seen on the ES and its index.
IF there is going to be a bounce, 1180 and 1212 are levels to watch... and perhaps more importantly, the neckline may be the final resistance, whcih co-incidentally has the 200MA lurking about the neckline. Given the MACD, this recent move appears to be the first of many and is not a flash crash (similar to 6th May 2010).

Today, at time of writing, 0500hrs ET, the ES appears to have rebounded and claimed 15 points. Europe is up 2% and Marketwatch.com headlines reads "A Rebound gets underway". This was due to a reaction from the French Prime Minister who cut short his holiday just to return to make a statement that France will do take certain measures... only to stave off a downgrade at this point. This sounds really odd, as it is a reaction... also, the French and German banks were so affected by GreeK exposure that the last reporting season saw many reporting losses due to Greek exposure. There will be more to come.

Looking at the ES 30 minute chart show an interesteing intersection of resistance and supports.

There is a mid channel resistance and a uptrendline resistance at the current point. The ES had bounced off the larger downtrending channel support after reentry from a breakdown. That bounce off was also significant as it was a cross point for two channels of different angles. A breakout above 1150 would put a bullish bounce in force and should follow through to close above 1170 on Thursday.
At this point, a breakdown would mean that the bounce is not ready.
IMHO, I am at this point expecting a breakdown later tonight...

Another reason why so...

STI

Below is the STI index chart as of this morning. There have been many gaps in the STI which actually appears very much weaker. A possible reason may be that funds are exiting Asia for US Treasuries and Gold. But that is another story for another day. The STI daily chart needs to close above 2800 at least for a chance. Today, the STI gapped down past two support levels (as indicated) and traded lower until the afternoon session. The STI closed at 2793, and looks unable to rally above 2800 resistance with commitment. This leaves it in the area between 2800 resistance and 2700 support. Although the stochastics are oversold, it is not indicating a turn - just yet.

That's all from me for now... more next week!
Have a good end to the week and take care!

The MadScientist - 11 August 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.

Post Crash, Downgraded US - Market Analysis for 8th August 2011 by Singaporeseeds

Daily chart for Dow


Daily chart for S&P


Daily chart for NASDAQ


What a week! The market crashed 800+ points over the week, broke its channel support and the 200 day moving average. S&P downgraded US treasuries down a notch to AA the last weekend. This caused futures to gap down over the weekend. Gold soared and crude oil dived.
On the Demark candle counting system, today is the last day of the trend. So if this holds, we should see some consolidation today. I’m expecting a bounce over the next 1-2 weeks. This should not mark the end of this downtrend. We should be in bear territory for the next few months. However do not be surprised to see the S&P hit 1,000 before this is over.

Daily chart for the Dollar


The dollar usually rallies whenever the market crashes just like gold as it is deemed a safe haven in bad times. This was last seen in the 2008 Subprime crisis. However the movement in the dollar over the past few weeks had been nothing but sideways. I believe this shows that the dollar is slowly losing its importance in the world as a safe asset. However I think the dollar would be moving sideways over the next few weeks.

Daily chart for Gold


Gold spiked up and gapped over the weekend to new highs. It is very close to my fibo retracement XOP target at 1,726. I’m still expecting gold to hit this target. However with gold rallying so much over such a short period of time, we think we should see some retracement after it had hit this target.

Daily chart for Silver


Silver usually lags gold so we should see silver rallying over the next few weeks though not on the same scale as gold. I have a fibo retracement target at 47 by end October 2011.

Daily chart for Crude Oil


With the crash in the stock market, the economy is expected to go down with it, along with crude oil consumption. Hence the fundamental weakness and drop in crude oil prices. Next support at 81.10.

Daily chart for Natural Gas


Together with crude oil, natural gas consumption is also expected to drop with expected weakness in the economy. We should see both crude oil and natural gas finding support over the next few sessions. Next support at 3.75.

SPY (S&P500 ETF)

Weekly

Immediate support lies around 115-117. The Head and Shoulders pattern achieved its target within this support level.
In the next 7 weeks, watch 107.55 on the SPY. Closing below this level would confirm the bear cycle.
The weekly MACD has been patiently forming a bearish divergence (white arrow in MACD panel), and it is only now that this divergence is starting to equilibrate.
When the SPY breaks the immediate support, which is also the weekly 200MA, and a long term extended trendline, it is likely to break the TDST support (red dotted level @ 109. By this time, the MACD would be in bearish territory and a cyclical bear would be firmly established.






SPY
Daily

The daily chart shows a very clear Head & Shoulders pattern (outlined by the white arcs). A break of the neckline at 126 occurred on 2 August 2011, and it was quickly tested the following day. This test failed, and together with the MACD running into bear territory, resulted in a breakdown.
The H&S target was 117, which was subsequently hit on an intraday basis 3 days after the neckline was broken.
Clearly, the SPY is well below the 200DMA (dark blue line), which is a long established support for chart technicians, and plasters a bearish outlook. The last time this happened was in 2008 and it resulted in a hefty breakdown of the equity markets before a recovery was in place. Today, it appears that the depth of the tank is nearing a possible end, and it is likely that a test of the 200DMA would be along shortly. Again, this test is expected to fail.
Notice at the bottom, a customized indicator called the TTR. Note that when the TTR spikes above 0.86, after being less than 0.85, it represents a significant turning point.
The SPY has clearly topped out and the bull turned over. What entails shortly could be a dead cat bounce and more downside risk for the rest of 2011.


VXX (VIX ETF)

The daily chart of the VIX ETF, VXX, has a very clear bullish divergence. In May 2011, this bullish divergence did not equilibrate and instead continued its build-up. The recent breakout of volatility as indicated by the VXX suggests that volatility is likely to be increasing in the weeks to come.
This sudden increase of volatility has met with one of two resistance. The first resistance is the 200DMA of the VXX. It is not clear at this point if the test has failed or there is more of a volatility spike.
The other resistance is the TDST resistance which lies on 34 of the VXX. The current Setup is short of breaking that level.
Given the circumstances, a breakout of the VXX would mean a consequent volatility increase, which is bearish for equity markets. This bullish divergence has yet to run its course and this supports more volatility in the coming weeks.
However, it is possible for a decrease in volatility and the VXX to find its way back to 25 before another spike in the VXX.


TLT (20Yr Treasury Bond Fund)

The daily TLT chart went parabolic with heavy volume this past week. This is happening as money is moving into US Treasuries and out of the equity markets as a very fast pace.
Clearly, the extreme short term movement is past mania and a reversal looks to be due soon. This reversal may be seen as soon as Monday 8 August 2011, as the USA was downgraded by S&P to AA- from AAA. While the weekend saw media and experts argue both camps, the TLT chart suggests a return to mean. A close below 101.54 would signal a possible drop to less than 98.
At this point, the demand in Treasuries may mean that a recession is expected and therefore funds are flowing into “safe haven” US Treasuries. An outflow of money from Treasuries would spur the equity markets into a rally.
Having said that, the US Treasury is likely to remain in demand given the developments in Europe, and possible surprises from China.


From the charts above, which are not the usual charts I use for analysis, there appears to be a short term reversal which is likely to be a relief rally, or a technical rebound, before a larger second leg movement follows. Given the current scenario and status, if there are no major changes (eg. QE3), the equity markets would be in bearish territory and continue to be hot with negative news from Europe, and perhaps even China, in the coming weeks to the end of the year.
Just a brief, yet significant mention that the usual charts all signal weakness in the coming weeks. Something I have not seen for a long time.
Fair warning had been given in the charts, and if anyone out there is still applying a dollar-cost-averaging or buy-and-hold strategy, it might be high time to for a review.
For now, let’s see what happens over the next few weeks…


The MadScientist 7 August 2011



Note: Any material posted here is of my sole opinion, and my opinion may differ from others. It is definitely NOT a solicitation to do anything else as a consequence of reading this material. The material presented here is intended for educational purposes only.