Market Update

Today the market pulled back a little bit but the market breadth was not optimistic.  The intermediate term signal on the daily chart (see 0.0.3 SPX Intermediate-term Trading Signals) is still buy, but it’s at the edge of being reversed.  The big pattern looks like a rising wedge while the market always backs off after touching the upper trend line, negative divergence on all indicators has not been corrected yet.  Crude oil is sitting on the intermediate term ascending trend line, the futures index has actually fallen below the short term trend line.  The retreat of oil price is not good for the broad market.  EEM (emerging market index ETF) has broken the intermediate term uptrend as well as the rising wedge.  We’d better to keep an eye and watch if this is an early warning of more severe pullback in US market.

Crude oil daily     Crude oil futures daily EEM daily

In the short term, the intraday chart shows a reversal pattern and the support level holds firmly.  Therefore the market may continue to bounce back up tomorrow, at least it may attempt to fill the gap.  XLF is still range bounding with immediate support at ~14.4, the coming breakout is more likely at the upside.

SPX hourly XLF hourly

Summary: intermediate term uptrend may be challenged; short term bounce back may continue tomorrow.

Market Update

Today is a typical post-MAD (Major Accumulation Day) pattern: the market tried to go higher but couldn’t sustain because of profit-taking, while dip buyers were excited to buy any magnitude of selloff.  Due to the balance of bulls and bears, finally the market didn’t go anywhere.  A doji means future direction is undecided, while the previous direction will likely hold.  The intermediate term trend is still pointing up, however significant negative divergence has appeared on the daily chart on many indicators (refer to 0.0.3 SPX Intermediate-term Trading Signals) and the pattern starting from this March seems like a giant bearish rising wedge.  Technically the overbought condition has not been fully corrected at the market close, the market may pullback further tomorrow morning to reach the support zone at 1015-1018 (which is also 38.2% retracement) then the uptrend may resume.  On SPY 15-min chart, a mini falling wedge has formed with positive divergence on STO and ChiOsc.

SPX hourly  XLF hourly

In term of the market breadth, most signals are still very bullish.  The pullback didn’t even push TRIN above 1, CPC and CPCE are also extremely low.  Sometimes over-bullish put/call ratio is an early sign of deeper pullback, so it’s better to protect long positions carefully.

XLF gapped up and broke out the resistance.  However all gains were given back later.  We should watch carefully how it goes in the coming days.  Technically as long as the support at 13.7 still holds, the uptrend will be intact.

The crude oil is trying again to break the overhead resistance.  It seems there is no reason it cannot succeed, but the bounce off of US dollar (as well as falling gold) may not help this trend.

Crude oil daily

In summary, in the very short term the market may (or may not) pull back further.  In longer time frames, the market is in clearly uptrend.  The basic strategy is still buy dip with protected unless the intermediate trend is confirmed to be reversed (not now).

Market Update

Today the market sold off with moderate volume and made the first significant swing low in the short term.  First of all, the long term trend is pointing up according to EMA13 and EMA34 on SPX weekly, however we don’t know if this long term buy signal is a whipsaw.  After breaking out of the consolidation region at the downside, the intermediate term trend is almost reversed down.  On SPX Intermediate-term Trading Signals, the down trend will be confirmed according to NYSI and MACD should the selloff last for a few more days.  In the short term, the market is a little bit oversold, and negative divergences formed on SPY 15-min chart.  Therefore the market may bounce back up tomorrow or even test back the breakout point at 993.

SPX weekly SPX daily

SPX hourly

Market breadth: on 2.8.0 SPX:CPCE, sharp rising CPCE has broken the descending trend line.  If CPCE continues to rise tomorrow, this may confirm the intermediate term top.  VIX went up 14.92% today and is slightly overbought now (see 2.0.0 Volatility Index Daily).  From the previous pattern, it may correct a bit tomorrow which means a green day of SPX.

The crude oil gapped down and almost closed on the ascending trend line.  Let’s watch and see if it bounces back up which will be bullish to the broad market.  Also keep an eye on gold and see if the uptrend is still intact, and get a clue on how US dollar moves in the near future.

Crude oil daily Gold daily

At the market close, XLF also broke out the support after a wild gap down.  According to the past pattern, it may get much more oversold before making a decent bounce.

XLF hourly

In summary, the market may bounce back a little bit tomorrow however the pullback is not likely completed yet.  Wait for the confirmation of intermediate term sell signal and see if the long term buy signal is a whipsaw.

Market Update

Today the market consolidated a little bit with low volume, generally this is healthy.  For the long term trend, MA 50 on the daily chart has crossed above MA200 some days ago, now MA200 is flat; last weekly EMA 13 on the SPX weekly chart also crossed above EMA 34.  Therefore the long term trend has reversed to the upside.  Last week, SPX reached 1018 which is slightly above 38.2% retracement measured from all time high in 2007 to March low at 666.  Technically the trends in most time frames are pointing to the upside.  However from Elliott waves’ perspective, the big rally may have approached  to the last stage and a massive primary wave 3 may start soon which would eventually break the March low.  Given the fact that the market is extremely overbought, one should be cautious for the long position and take profit if possible.  On the following hourly chart, wave 5 from previous swing low may have completed, and more pullback is expected.  This is also supported by the negative divergence on several technical indicators.

SPX daily SPX hourly

The market breadth signals seem quite healthy.  Although SPX was negative today, TRIN was reasonably low while CPC was closed at 0.75 which is very bullish.  QQQQ seems weaker than other sectors, but the ascending trendline is intact, and the ascending triangle has a chance to breakout at the upside (refer to 1.1.5 PowerShares QQQ Trust (QQQQ 30 min)).  Financial sector consolidated a bit with very low volume.  The crude oil has consolidated for several days and didn’t go anywhere.  However we should keep an eye on US dollar, if the bounce back up from the support turns out to be a trend reversal, financials will be affected.

In my opinion, the market is bullish and the trend is up.  Before the big trend is confirmed to be reversed, the basic strategy is to buy dip.  However, in the short term the market is overbought and we may see more pullback in coming days.

Market Update

The market is going up every day, no much to say~~~… First of all, EMA13 on the SPX weekly chart (see below) has crossed over EMA34, which means a bull market may have started technically.  Strong uptrend across all time frames is not weakening at all, today the market almost made a major accumulation day again after last Friday’s consolidation (refer to 7.1.3 Major Accumulation/Distribution Days).  Financial sector gapped up and made a high of the year today.  Notice that CPC is now 0.76 and the firework setup has been triggered again (refer to 7.3.2 Firework Trading Setup).  Keeping in mind the uptrend and basic strategy of buying on (or without) dip, we may also notice that the market is going up on declining volume from last Thursday, and the divergence between VIX and SPX is becoming more severe (refer to 2.0.0 Volatility Index (Daily)).  Additionally, there are too many unfilled gaps on the way up, and the negative divergence on SPY intraday charts hasn’t been fixed.  If a pullback occurs, it might be quick and ugly.  Finally the trading volume between 38.2% retracement 1014 and 61.8% 1229 is very light, eventually the market might quickly penetrate this region and surprise everyone (refer to SPX weekly).

SPX weekly  SPX hourly