What a rally! A sucker rally? - 28 Nov 2011

The US market just opened 30 mins ago, and I just settled down enough to look at the charts... with a stunning 40 points upshot on the ES (S&P500 futures).

This is an awesome headline rally that followed a huge gap up, that might be a good runner for the next week or so, but the intraday bearish divergence is just so obvious. The ES is now up 40 points, 3.5%, and the charts below are snapshots from my iPad.

Notice that the USD futures, DX also has a bullish divergence... and another interesting point is that Crude (CL) futures had a similar bearish divergence and the rally was not sustained even as the ES continued to rally more.

While the news at the opening of the week is really awesome, I am left to wonder if this is a sucker rally of sorts... I'd be watching that ascending wedge as well as for a reversal swing point.


The MadScientist
28 November 2011

Note: ALL material posted here is from my personal opinion, and my opinion may differ or change without notice. These do NOT constitute as solicitation, investment nor financial advice. By reading the materials presented here, Readers acknowledge the awareness that the materials are intended for educational purposes only. For investment(s) advice, related decisions and/or actions pertaining to investments, always consult your own qualified financial advisors, brokers, etc.

Charts are from TD Ameritrade Thinkorswim platform

Beginning of Roller Coaster Ride (2012) - Market Analysis for 28th November 2011 by Singaporeseeds

Daily chart for S&P


Daily chart for Dow


Daily chart for NASDAQ


Last week's market analysis:
“The S&P closed at its 50 day moving average last Friday and all 3 indexes were forming classic daily patterns of market topping throughout the week as we slowly trend downwards. My trading system also highlighted a bearish signal on Thursday. As we move into the December and the famous Christmas rally, I was cautious of being too bearish in a seasonally bullish period of the year.
Then during the weekend, this news came up.
http://www.bloomberg.com/news/2011-11-21/u-s-debt-supercommittee-is-said-to-be-poised-to-announce-failure-of-talks.html

With the situation in Europe going from bad to worse, and reports of repercussions of bad debts moving across the Atlantic into US, this will definitely move the indexes below their 50 day moving averages. (Only the Dow is still above now) On weekly charts it looks even worse. All 3 indexes are showing classic signs of failure and should hit their early October 2011 lows by the end of the year.”

Market Analysis for this week:
All indexes are below their 50 day moving average now. Short term and long term charts are pointing to a downtrend for the next 2 months. We should be back around the early October lows real soon.
Fundamentally, there is nothing bullish right now. Europe, USA and China are showing weakness, with huge debt problems surfacing in every country in the European Union. The US had been reducing its debt liabilities for the past few years by printing its way out of it but with inflation increasing and spiralling out of control, this will not be an option soon. 2012 is turning out to be a very bad year indeed.
We may see a bounce next week to around 1200 on S&P. However it will be downhill after that. I believe the market will break below the October lows and make a new low by the end of the year.
The roller coaster ride for 2012 had just began.

Daily chart for the Dollar


Last week's market analysis:
“The dollar has bounced back up above its 50 and 200 day moving average, indicating bullishness. This should be the case for the rest of the year.

We should move back up to the early October 2011 highs over the next few weeks”

Market analysis for this week:
The dollar is almost back at its October highs. We should break this high easily. Final target at 23.40 on UUP.

Daily chart for Gold


Quote from my last market analysis:
“Gold had been bouncing off its 50 day moving average throughout last week as a rising dollar puts bearish pressure on the price of gold. With such bad news coming out of both Europe and US, I believe we should see gold at an all-time high in the next few months.”

Market analysis for this week:
Gold had been forming a triangle pattern since August 2011. A triangle pattern is formed when volatility and price movement had been decreasing gradually. This pattern usually results in a surge of activity together with a large movement in price. This can be either up or down. With the problems occurring around the world, I would expect a surge up in price soon.

Daily chart for Crude Oil


Last week's market analysis:
“Crude dipped as expected and found support at its 200 day moving average. This is especially so after a steep uptrend and is healthy if we are to have a sustained rally in crude. Supports for this dip should come in at 37.60 and then 35.20.”

Market analysis for this week:
Crude is still forming a support around its 200 day moving average. I would expect crude to move sideways for the next few trading sessions.

Thanksgiving's Roast - 24 Nov 2011

Happy Thanksgiving to all!

Today, the US markets will be closed and on Friday, it opens for the last day of the week, albeit with expected low volumes. Over the weekend, there would be results of Black Friday known and Monday may react to the this piece of news. Black Friday is traditionally the start of the shopping sales season and it is taken as an indication of consumer spending strength, as most retail stores get back into the black (accounting term) from this Friday onwards, if it so happens. Therefore, it might become a significant event either way... up or down.

Meanwhile, here is some good weekend reading:
A very good piece to read about knowing the background of this European Debt Crisis (EDC).
and
I personally like John Mauldin's piece titled Print or Perish, as it outlines why the EDC is one huge gorilla in the room, and how it really can be sorted out, albeit selfishly for the rest of the world, as well as how it is a lose-lose situation for Europe.
Note that the title was tagged from the academic phrase of "Publish or Perish".
Having read these two articles, you should have a think about the year ahead... the picture would be pretty clear.

Now, I already had been bearish longer term since end July, preferring to be "risk off", and previously tracked the current technicals compared to that of early 2008. At some point in the last two weeks, I noted that the market had deviated from that track a little after the second dip. The bounce was magnificent, to say the least, and the ES hit the daily 200MA in half the time it did in early 2008! For a while it looked as if the similarities were broken, and a couple of days later after testing the 200MA twice, it failed. This was the "last station before the train falls over the cliff" as outlined in a my blogpost two days ago.

And in the past two days market action, it is raising some alarm bells...
The US markets have a tendency to rally pre-holiday season. Last two days had weak bull activity and the bears clobbered the bulls really swiftly. This looks as if there is offloading at every opportunity, particularly a fear of holding anything over the holiday season.
The thing is, when observing the intraday charts in comparison, it is a little un-nerving.

Here's why...

Below is a SPX chart compared with TLT (Treausries ETF) and VXO (The old VIX that comprises of large caps only - my preference as I observed it to react faster than the widely used VIX).
From the 15 min intraday chart, in the past two trading sessions, there have been two occasions where TLT makes a higher high BEFORE the S&P500 (/ES, SPX, SPY) starts tanking. For TLT, making higher highs at this level is significant as it is pushing towards historical highs. And the correlation to its indication of a the equity market tanking shortly after is almost 100% since July 2011.
The VXO, however, has stopped being such a similar indicator as it was in August and September 2011. This is telling of money movements into Treasury bonds (likely by big players), without triggering a mass sell-off as indicated by the fear indexes (VIX/VXO).

On the daily SPX charts, there clearly were ice-hole failures on the 200MA, and a critical level is identified at 1130.
Despite the rather significant October rally, the TLT retraced and continued to uptrend, potentially to be rejected or breakout into historical higher highs. By the time the SPX is at 1130, the TLT should be at historical highs, given the current trend momentum.
Similarly, the VXO is no where near the August-Setpember highs, but looks set to breakout of the smaller October range highs.
By mid-next week, it would be obvious.

Below are the /ES charts, weekly (left) and daily (right).
If this week closes at the current levels, the MACD indicates are bearish crossover in bear territory, which may mean a farewell to the Santa rally next month. Remember 1130 on the daily chart? It is coincidentally the weely 200MA support. That's how critical that level would be in the weeks to come.
On the daily ES chart, as described previously, a technical breakdown that included 200MA failures, channel breakdown, and Sell signals all occured last week. The last two trading sessions saw a MACD bearish crossover into bear territory, but price is still not reflecting an extreme breakdown - yet.
The TTR model, which compares the ratio of the TLT/TIP ratio is warning of another downleg.

Yesterday, European news that caught my eye included Dexia's bailout that itself was in trouble, and particularly significant, the German bond auction technically failed. With stuff like that happening over the Thanksgiving seasonal holidays, it is little wonder that the US Treasuries will be attracting more funds. Furthermore, Fitch and Moody are reviewing European ratings, particularly that of France, and so is S&P of the US.

Thee various "signs" are omnious... there will be more to come... watch the train fall off the cliff, and if you didn't get out at the last station, be ready to jump out of the train or go down with it!

The MadScientist
24 November 2011

Note: ALL material posted here is from my personal opinion, and my opinion may differ or change without notice. These do NOT constitute as solicitation, investment nor financial advice. By reading the materials presented here, Readers acknowledge the awareness that the materials are intended for educational purposes only. For investment(s) advice, related decisions and/or actions pertaining to investments, always consult your own qualified financial advisors, brokers, etc.

The train has left the last station - WMA 22 Nov 2011

It's been a while since I analyzed the markets proper... partly due to myself being occupied with many different things as well as the volatility in either direction, and the large range consolidation. However, at the end of last week, a new trend started to emarge...

Let's look at the ES (S&P500 futures) first...

The weekly chart shows that last week was a potential end to the short rally, with indicators stopping short on being bullish (pun not intended). There seems to be a significant downside risk from the weekly chart.
The daily ES chart (right) clearly shows a breakdown out of the uptrendling support. Some see a triangle formation that has broken down as well. Indicators are suggesting that a downtrend started late last week, where a Sell signal was generated. There is now a clear failure of the moving averages. With a short trading week, it appears as if there is more downside over the next 4-5 trading days, likely to come close to 1130 as a short term target. Today, 22 Nov 2011, looks set to have an early morning bounce.

With the global economics and politics moving forward, the downside risks appear to be significantly high for the rest of this week.

At this point of time, when there is a lot of uncertainty and a potential breakdown of the European sovereign debt, a lot of money is moving places, mostly out of equity markets and into safe havens. One such haven is the US Treasuries, and this is concomitant of a rise in the USD dollar index as the markets capitulate. Looking at the ETF for US Treasuries, ticker: TLT, we are able to observe that there are signs which indicate a high probability of equity market sell-offs.

Similarly, the VIX index show indications of market sell-off before it happens. Here, we use the CBOE VIX ETF, ticker: VXX.

Shown below is the intraday chart of the SPY (the S&P500 SPDRS ETF), correlated with TLT and VXX daily closing prices in line charts below. What is obvious in the time marking is that there is a break of a higher high on TLT and on VXX BEFORE the SPY started selling off. This is much clearer in candle comparison charts where the breakout of higher highs are registered, as opposed to the closing prices.

Below is the daily chart of TLT, and it is clear that the MACD is indicating a start of a rally, which is concomitant with a higher high breakout. Compare the current scenario with that of early August 2011. The situations look very similar.

Likewise, the VXX daily chart corroborate a similar indication as well.

All the above are suggesting that a significant market sell off is coming and that the last few days' activity is just the beginning. Notice too from the first chart that the was a failure of the 200MA on the ES. This is a major no-no tyope of ice-hole failure and one should be looking out for signs of major deterioration of the markets from the global economic perspective of politics.

The train has left the last station... next stop may be the bottom of the cliff.

Hang on to your pants!

The MadScientist
22 November 2011

Note: ALL material posted here is from my personal opinion, and my opinion may differ or change without notice. These do NOT constitute as solicitation, investment nor financial advice. By reading the materials presented here, Readers acknowledge the awareness that the materials are intended for educational purposes only. For investment(s) advice, related decisions and/or actions pertaining to investments, always consult your own qualified financial advisors, brokers, etc.

And Down We Go! - Market Analysis for 21st November 2011 by Singaporeseeds

Daily chart for S&P


Daily chart for Dow


Daily chart for NASDAQ


Last week's market analysis:
“Anyway last week ended as a doji on S&P. We should see some market gyrations over the next few days as we hit a range of important resistance levels. On daily and weekly RSI, we are seeing a widening bearish divergence. I believe we are at a market top right now and the market is just churning, stronger hands giving way to weaker hands. Once the pros have moved out of the market, the market should give way real soon. I think we would end the year much further down then the levels we are at today. Most probably we should end the year at the early October 2011 lows.”

Market Analysis for this week:
The S&P closed at its 50 day moving average last Friday and all 3 indexes were forming classic daily patterns of market topping throughout the week as we slowly trend downwards. My trading system also highlighted a bearish signal on Thursday. As we move into the December and the famous Christmas rally, I was cautious of being too bearish in a seasonally bullish period of the year.
Then during the weekend, this news came up.
http://www.bloomberg.com/news/2011-11-21/u-s-debt-supercommittee-is-said-to-be-poised-to-announce-failure-of-talks.html

With the situation in Europe going from bad to worse, and reports of repercussions of bad debts moving across the Atlantic into US, this will definitely move the indexes below their 50 day moving averages. (Only the Dow is still above now) On weekly charts it looks even worse. All 3 indexes are showing classic signs of failure and should hit their early October 2011 lows by the end of the year.

Daily chart for the Dollar


Last week's market analysis:
“The dollar has bounced back up above its 50 and 200 day moving average, indicating bullishness. This should be the case for the rest of the year.

We should move back up to the early October 2011 highs over the next few weeks”

Market analysis for this week:
Analysis for the dollar is still the same.

Daily chart for Gold


Quote from my last market analysis:
“Gold has been showing strength over the past few weeks, breaking the 50 day moving average. I am seeing a bullish signal today. If this follows through, we should see gold break its high at 1923.70 soon. With the mess in Europe getting out of hand and rating agencies making mistakes, this should not be too difficult.”

Market analysis for this week:
Gold had been bouncing off its 50 day moving average throughout last week as a rising dollar puts bearish pressure on the price of gold. With such bad news coming out of both Europe and US, I believe we should see gold at an all-time high in the next few months.

Daily chart for Crude Oil


Last week's market analysis:
“Crude oil had one of the best bullish runs over the past 2 months. However we are reaching the end of this rally soon. My target is at 103 on /CL. Crude oil is very close to being overbought and this straight up rally movement is not sustainable. We could have a repeat of the late April to early May 2011 type of drop. I would expect crude oil to do move back down later this week or next week.”

Market analysis for this week:
Crude dipped as expected and found support at its 200 day moving average. This is especially so after a steep uptrend and is healthy if we are to have a sustained rally in crude. Supports for this dip should come in at 37.60 and then 35.20.

Formation of a Market Top - Market Analysis by Singaporeseeds for November 14th 2011

Daily chart for Dow


Daily chart for S&P


Daily chart for NASDAQ


Was very busy with the move from Winchester to London last week and coupled with this being the busiest time of the year, I didn’t have time to do my market analysis last week. Will still not be able to have proper internet access until Friday, when the people from British Telecom will come down to fix up the internet access. Things just move at a very slow pace here.

Anyway last week ended as a doji on S&P. We should see some market gyrations over the next few days as we hit a range of important resistance levels. On daily and weekly RSI, we are seeing a widening bearish divergence. I believe we are at a market top right now and the market is just churning, stronger hands giving way to weaker hands. Once the pros have moved out of the market, the market should give way real soon. I think we would end the year much further down then the levels we are at today. Most probably we should end the year at the early October 2011 lows.

Daily chart for the dollar


The dollar has bounced back up above its 50 and 200 day moving average, indicating bullishness. This should be the case for the rest of the year.

We should move back up to the early October 2011 highs over the next few weeks.

Daily chart for Gold


Gold has been showing strength over the past few weeks, breaking the 50 day moving average. I am seeing a bullish signal today. If this follows through, we should see gold break its high at 1923.70 soon. With the mess in Europe getting out of hand and rating agencies making mistakes, this should not be too difficult.

Daily chart for Silver


After the huge drop in mid September 2011, silver is now sitting right above an important support level of 33.60. We should see silver move up over the next few sessions together with gold.

Daily chart for Crude Oil


Crude oil had one of the best bullish runs over the past 2 months. However we are reaching the end of this rally soon. My target is at 103 on /CL. Crude oil is very close to being overbought and this straight up rally movement is not sustainable. We could have a repeat of the late April to early May 2011 type of drop. I would expect crude oil to do move back down later this week or next week.

Poker Face... this week's summary - 4 Nov 2011

Just posting to share this article I found as a very apt, short and sweet round-up to the events of this week.

Note the last line.

The MadScientist
4 November 2011

Note: Any material posted here is of my personal opinion, and my opinion may differ or change without notice. These do NOT constitute a solicitation nor financial advice, and readers agree that these materials presented herePublish Post are intended for educational purposes only. For any investment(s) and related decisions or actions pertaining to investments, always consult your own financial advisors, brokers, etc.

Which ball to keep your eyes on? - 3 Nov 2011

A quick and short note...

In the last analysis done on 1 November, I wrote:

" The week just started and if it ends at the current level or lower, the weekly ES chart would be posting a very bearish candlestick pattern. As of yesteray's close, the trend is still up and the retracement looks to be deep. The daily ES chart has a clear failure to breakout and stay above the 200MA, and it looks set to follow through with more downside for today, particularly with an early but strong Sell signal today. There is support at 1228, and at time of writing, the ES was already trading at 1228. The 30 mins chart is showing that the support should hold, failing which a lot more downside would follow through later in the week.
Looking at the TTR model, it appears as this downside risk is likely to continue... "

And from then on, events were happening leading to a build up at the G20 summit, particularly with the Greek referendum and Italian emergency meetings. Attendees to a private gathering two weeks ago heard about Italy being the next likely to face default, and it looks to be surfacing, at least in the media streams. All these are having a bearish effect on the markets and the downtrend is strong (and a deep retracement, if at the least).

Interesting developments are happening as one is left wondering who to keep an eye out on... Greece or Italy...
If the charts are telling me anything, it looks as if the train has left the last station and is heading over the cliff... (more on that over the weekend analysis).

Hang on!

The MadScientist
3 November 2011

Note: Any material posted here is of my personal opinion, and my opinion may differ or change without notice. These do NOT constitute a solicitation nor financial advice, and readers agree that these materials presented herePublish Post are intended for educational purposes only. For any investment(s) and related decisions or actions pertaining to investments, always consult your own financial advisors, brokers, etc.

The morning after Halloween - 1 November 2011

As if the Trick or Treating didn't end well, the morning after Halloween looks set to have the markets follow through a deep retracement.

The week just started and if it ends at the current level or lower, the weekly ES chart would be posting a very bearish candlestick pattern. As of yesteray's close, the trend is still up and the retracement looks to be deep. The daily ES chart has a clear failure to breakout and stay above the 200MA, and it looks set to follow through with more downside for today, particularly with an early but strong Sell signal today. There is support at 1228, and at time of writing, the ES was already trading at 1228. The 30 mins chart is showing that the support should hold, failing which a lot more downside would follow through later in the week.

Looking at the TTR model, it appears as this downside risk is likely to continue...

As mentioned yesterday, watching the USD (and also the TLT on an intraday basis) helps in telling where the money is moving.

The weekly DX (USD futures) chart has a bullish crossover and this indicates a higher USD in weeks to come. The daily chart shows a strong support enabling the USD to bounce at 75, by and large due to the timely intervention of the Yen by BOJ, as well as the re-emergence of the Euro worries. The Euro worries were underpinned by the increasing yield demands of the Italian bonds, despite the equity market rally of last week. So, keeping an eye on bonds is telling of the underlying story.

Looks like we are in for another down day, although I would not be surprised if there were to be an intraday retracement rally in the morning session.

The MadScientist
1 November 2011

Note: Any material posted here is of my personal opinion, and my opinion may differ or change without notice. These do NOT constitute a solicitation nor financial advice, and readers agree that these materials presented herePublish Post are intended for educational purposes only. For any investment(s) and related decisions or actions pertaining to investments, always consult your own financial advisors, brokers, etc.