Thursday, June 20, 2013

ImageInitially I wanted to make a case that the 50 day moving average will break but since the S&P 500 (SPX) beat me to it, I will make a case for lower lows and beyond. Aside from the long term DeMark counts signaling prices reached upside exhaustion, the short view is acting bearish which helps navigate what will happen down the road. Looking at the four hour chart above, all the foreshadowing is coming to fruition. Aside from the TDST level at 1626.50 was initially violated on the downside, SPX was rejected below the recent TDST level at 1654.51. These are bearish indications going forward. ImageAnother case is from the McClellan oscillator. When the SPX gets to the -300 level on the oscillator, it signals extreme breadth deterioration and stocks usually bounce off these levels. It’s the bounce after that tells you the strength of the market. A bounce followed by an extreme high is bullish going forward. This is not what is happening now. So far this month, we have two bounces off of extreme levels and the best it can do is get to the zero line. That is an indication of further bearish action.ImageImageIt will be appropriate to address gold again today. From the last post on June 18th, the SPDR Gold ETF (GLD) was setting up for a bounce as a 9 and a 13 were recorded on the daily chart. At the same time, the weekly TD Buy Setup was not ‘perfected’ with a final 9 count so another low could be ruled out. Today, the weekly GLD chart has produced a lower low and now conditions are ripe for a counter-trend rally. While that is still the case, it may not happen right away as the daily chart has the Keltner/Bollinger band (K/B) signaling a new trend to the downside with the Bollinger band exiting the Keltner band. It’s this mixed signal that I have to change my stance and allow GLD blowoff to the downside. Hence, I am reverting back to neutral on GLD and wait for the daily to print a 9 count TD Buy Setup before evaluating the next move. ImageWith regards to Apple (AAPL), a response here is necessary also. Last AAPL post was on June 17th. The risk/reward to get long AAPL were good when AAPL was treading above the TDST level at 434.20 and again when it completed the 9 count TD Buy Setup back on June 17th. That trade was broken yesterday as indicated by the K/B bands. As the Bollinger band exits the Keltner band, it signals a volatility squeeze to the downside. The higher probability move is now for AAPL to test the old lows around the 400 area. For further reference, the weekly charts on AAPL has a 4 count on a TD Buy Setup.

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The SPX hourly chart currently has a 9 count TD Buy Setup which is reflected in the current market stability but the longer time frames are just getting started so I will power through it and stay bearish. Another item of note is the buy-the-dip chatter on CNBC. It is another reason to stay bearish. Look for an eventual lower low. (updated intraday)

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