Downtrend Part One - Market Analysis for May 21st 2012 by Singaporeseeds

Daily chart for S&P

Daily chart for Dow

Daily chart for NASDAQ

What a week! The US market had its biggest drop since August last year. And according to my charts, it seems that this is only the beginning. We should get at least 2 waves down and we haven’t even completed the first down wave so this is going to be big. I believe support for this first down wave should start to come in around 1,280 on S&P futures. We are just 10 points from that so I believe we should get a bounce sometime next week. It’s going to get a lot more volatile and exciting as the roller coaster gains speed. The second wave should bring us down to around 1,150. On the Dow index, there’s a broadening wedge. This chart pattern indicates increasing volatility and usually does not end well. We may see a bounce to test the bottom of the trendline of the wedge at around 12580 but we are definitely going be end the month much lower than where we currently are now.

Daily chart of the VIX

Volatility had been increasing rapidly over the past few weeks. And as my trading buddy Chris had mentioned, we had begun a new volatility cycle sometime last month. And we should see increased volatility in the markets over the next 3 months.

 Daily chart for Gold

We had gold bounce off support at 1,546 last Thursday. I believe we should see gold test this support again within a week or two before beginning a new rally.

What next week brings... 19 May 2012

Oh what a week!
Global markets tanked in the midst of uncertainty and looks like there may be more to come.. the "Sell in May and Go Away" sure worked this round. Not to be too surprised as the market was way overbought as April ended.

So what does this week's technicals tell us to expect of next week?

/ES
The S&P weekly chart is clearly is not in a bullish trend any more. A sell signal and momentum confirmation is a good indicator of downside for the S&P500 futures over the next few weeks. The daily chart is a little extreme in the bearishness, being oversold and looks to bounce (dead cat) some time later next week, but not before a tad more downside early in the week.

VIX
The volatility cycle has started about 1.5 months ago, and this week confirms a breakout to the upside in the weekly chart. The daily chart is also a little extreme but looks to corroborate with the /ES analysis of spiking early next week, and then retracing later in the week.

/DX
The USD futures are clearly having a good rally. With higher USD, lower Crude, Gold and Equities. Need I say more?

/GC
Gold hit the support and buyers entered the market to give an awesome 2 day rally to recover the Gold price. However, from the weekly chart, I am a little cautious about this rally and rather wait out at this point. Gold buyers are acting on the Euro contagion uncertainty, but in a true panic, these will be washed out nonetheless. The weekly chart is confirming lower Gold prices, but the daily shows a bounce off 1540 support level.

AAPL
Again, featured as I am watching this closely, particularly after a parabolic run which was followed by a topping pattern.  The weekly chart is favourable for further downside over the next two months. The daily chart is similar, even having moved significantly downwards over the past three weeks, it is still signalling an immediate downside into the coming Tuesday before a potential technical bounce is expected. Monday should open down for the morning session.
It's really bearish, and I suspect that Facebook breaking below $38 would pressure the NASDAQ to sell off.

DBA
Ah... my favourite, play for the next 10 years... Soft commodites. Despite a drop across almost all market sectors, DBA (Sugar, corn and wheat ETF amongst other things) actually had a buy signal on the daily chart. This follows a bullish divergence and a bounce off the extremes. The weekly chart has a bullish engulfing that is probable to work. This one is good for going long long term IMHO.

Be safe, have fun!


The MadScientist
19 May 2012


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

Sell in May & Go Away - 17 May 2012

A quick but very important note...


The Sell signals are firmed and it is obvioously clear that the rally has ended. It is time for a correction, one that it fulfilled by the events in Greece (and Europe), at least for now and the months to follow.

ES charts show confrimed sell signals that were given as early as 1.5 months ago. The topping pattern is completed and indicators are compellingly clear.

Find the charts in HERE

The volatility cycle is also starting, with Buy signals confrimed and the VIX has a breakout.

The USD futures (/DX) also clearly show a run into safe haven...

AAPL is a feature... this was a market leader as it accomplished a parabolic run, and now it is clearly correcting, as a leader on the downside as well.

Gold futures point to a make or break on support levels. This snapshot fo the chart was taken at midday yesterday, and today a very strong bounce is lifting gold futures more than $30. This one should be watched closely although I think that a panic would send gold sharply down before a real rally to >$2000.

This is the time to be really aware and perhaps take appropriate action where necessary sooner than later. It will be more volatile from now till September to October as I expect.

Be safe.

The MadScientist

17 May 2012

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

Daily chart for Dow

As you can see from Dow futures, there had been a false upside breakout. Price broke and made a new high on May 1st but promptly dropped and closed below the 50 day moving average. This coupled with a bearish divergence on RSI, Force index & a bearish trendline for RSI is a strong indicator that we are going down for the next few weeks. This bearish divergence is also present for S&P and NASDAQ. If we are going to continue to rally, all 3 indexes will have to move above their 50 day moving average (13,000 on Dow futures & 1380 for S&P) and stay above. See following for the daily charts for S&P and NASDAQ Daily chart for S&P

Daily chart for NASDAQ

Should the market fail to keep above these levels, we should see Dow falling to around 11,140 and S&P going to 1200. Daily chart for Crude Oil

Crude oil gapped and dropped last Wednesday when the market realised that the economy was not as resilient as they thought it was. UK was in a recession for the first 3 months of the year while Europe was still struggling with the European Union mess. Everyone who believed US was finally on its way to recovery realised that recovery still had a long way to go. Crude oil, which was one of the most important drivers of the economy, got a real 3 day beating. Daily chart for Gold

As for Gold, it had been building a bullish divergence for a couple of weeks now. It had been going sideways for 2 months now and I believe it should start a new rally in a few days.

The Bulls have left the farm! 8 May 2012

Written on 6th May 2012 but due to technical fault, images were lost and post not updated.

About a month ago, there were clear sell signals in the S&P500 futures, /ES. This was highlighted in my last blog post, and then followed by a dead cat bounce. As of last Friday, after the non-farm payrolls, the bulls have little left and it is about time to watch the bears march in...

So far, the expectations have been playing out accordingly...


ES
The S&P500 futures weekly chart stalled in April, and last week ended with an indication of the start of a new trend... Down. The daily chart had a sell signal last Thursday, and Friday's close reaffirmed it. All other indicators are showing bearing inclinations, and price action targets the previous low as a break point for support. Once a lower low is registered over this week, a top is confirmed, and perhaps it would be a volatile ride down all the way till almost the end of this year.

VIX 
 The VIX charts are also reaffirming the ES outlook in that the next volatility cycle is upon us. A Buy signal on the weekly is valid and the daily breakout of the last high would confirm.

DX
The USD futures suggest USD upside in the near term. Hinting of lower equities prices.

GC
At this point, I want to specially mention one of two highlights. First being Gold futures. Regardless of what others say, I see that Gold is weakening and not ready for a rally. Strangely, a hint of a quick dip appears to be on the charts. This is observed in the weekly chart from the MACD, and the daily Buy signals that have been anulled.

AAPL
Apple is the other highlight... and this is one obvious tanker.
AAPL had gone parabolic and extreme. The stall was expected, and then we saw Sell signals which saw the daily price work its way to the 55EMA. Immediately after that, AAPL released its results and a huge gap opened. There was no "gap and run" and instead stalled. Then Sell signals appeared which coincided with the weekly trends. Last Friday clearly indicates that AAPL is heading much more down... next stop at 535.

Clearly, I have positions in AAPL.
And also see what one of my teachers wrote about AAPL a couple of days after position was taken:
http://www.marketwatch.com/story/apple-a-bearish-one-day-wonder-2012-05-07


Trade well and take care!

The MadScientist

8 May 2012


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