Wednesday, October 9, 2013

S&P 500 (SPX) SHORT TERM OUTLOOK: BEARISH

As long as the TD Buy Setup on the 4 hour chart stays active, outlook remains bearish.Image

If the SPX is not deterred by news or rumors of a debt ceiling deal, then the current short term TD Buy Setup count will place a 8 and 9 count this coming Friday and will have to reconcile with the daily count if the 4 hour TD Buy Setup stays active. 

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S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: BEARISH

The once fragmented indices are now correlated to the downside. ImageImage

While many indices have room to head lower, the main focus is on the Dow as it is currently respecting support at the 14,800 level. Considering the Dow has lead to the downside, how it behaves at support will help determine if the still active TD Buy Setup stays active so I will be watchful of any bullish price flip and the possible implications for the remaining indices.

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S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: NEUTRAL

Will officially flip to bearish if weekly logs a close below 1687.99 this week. (last updated October 7th)

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S&P 500 (SPX) LONG TERM OUTLOOK: NEUTRAL

Market is extended and within’ the risk level parameters of the 9 and 13 TD Sequential clusters in April and May. (last updated September 30th)

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STOCK SETUP: IBM 

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IBM has been one of the primary drags on the Dow and the longer term outlook is pointing to a bearish bias. The weekly chart has IBM closing in on the weekly TDST Support that has held for almost two years at 179.32. That’s the first long term inflection point and with the daily TD Buy Setup at a DeMark exhaustion point, IBM may waver around this area before it decides what it will do next. What is worrisome is the monthly chart. It has momentum pointing lower and the Bollinger band has been locked inside the Keltner Channel for about a year indicating a potential volatility squeeze. If there is a negative catalyst, IBM could go into a long term bear cycle. 

 Also note the TTM Squeeze indicator above. I recently had a conversation with one of the developers at TOS (Think or Swim) and he showed me this indicator and the purpose of it. It did not take long to figure out that the Bollinger/Keltner relationship with the TTM Squeeze indicator. It is infinitely a better indicator aesthetically too. The relationship is when the Bollinger band enters into the Keltner channel, the horizontal dotted lines turn red from green indicating the market is coiling or in the “calm before the storm”. When it turns back green, there should be a more powerful continuing trend or reversal. The momentum component of the TTM Squeeze is a histogram that looks like a regular momentum indicator with a 20 period look back. I have no clear confirmation just yet on that component. 

I take monthly squeezes seriously. At this point, IBM momentum is pointing lower and if there is a fundamental negative shift in IBM‘s business, the volatility squeeze has enough energy to put IBM‘s stock price into cyclical bear territory. A great recent example of a monthly squeeze is Yahoo (YHOO). Yahoo was stuck in a monthly Keltner/Bollinger squeeze for over 2 years and it took a fundamental shift (Marissa Mayer announced as CEO) in the core business of Yahoo to provide an upside catalyst.  

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As I finish this, the SPX has turned positive. Unless the 4 hour TD Buy Setup breaks the momentum, the trend is still down. 

 

 

 

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