Thoughts on the current market and the week ahead. 10/31 - 11/04

What a week for the bulls.  They accomplished pretty much everything that they wanted to.  The Dow is trading comfortably above their 200 day moving average and is in positive territory for the year by 650 points (not to mention they violated their August high), the Nasdaq futures remain the strongest market and are getting within striking distance of their yearly highs ($NQ_F hi-2435.50), the S&P cash took out their daily down trend and closed above their 200 day moving average for two consecutive days (that is great news for the bulls), the VIX is trading well below 30.00 (the bulls have been waiting for that to finally happen), and the only weak link that I can see (technically) are the Transports.  The Transports are struggling to hold above their 200 day moving average and they are the only major Index that remains in negative territory for the year.  

In order for this rally to continue I think that the Transports have to hold above their 200 day moving at 5,022 and eventually work their way into positive territory for the year (5,106).  If they cannot, then I think that we will see the rest of the market soften and start to work its way lower retesting support areas.  I think that the Transports are crucial because they were the leader on the way down and I think that in order for the market to continue its run higher they need the weakest link (Transports) to turn strong.

This week I will be focusing on the Transports and how the rest of the market reacts to what they are doing. If the Transports remain below their 200 day moving average at 5,022 I will be more inclined to sell rallies in the S&P.  If the Transports can hold above their 200 day moving average, then I will be a buyer of breaks and be looking for the S&P cash to test their August high at 1307.38 and the E-mini futures to test their August high at 1309.75.  I expect some resistance at the August highs but if the Transports are in positive territory for the year (5,106), I will be a cautious seller of the S&P.  If the S&P gets above their August high then I think that we could see another pop in equities across the board.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.).  Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year, Black (last summers range), Light Blue (Old highs that could be tested)

$SPX

$ES_F

$SPY

$DJIA

$DJT

$NQ_F

$VIX

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The week ahead 10/24 - 10/28

The bulls are in full control of this trade.  The Transports are back above their 150 day smooth moving average, the S&P has broken out of its two month range and is also trading back above their 150 day smooth moving average, the Dow is comfortably back in positive territory for the year, and the Nasdaq continues to rally sustaining trade above all of their major moving averages.   The only thorn in the side of the bulls is the VIX.  If the VIX continues to hold above 30.00 that may stall this rally.

For the past several months news has been the main driver in this market.  It has been about Dodd Frank, downgrades of U.S. debt, debt ceiling, the Eurozone debt crisis, etc......   Now the market seems to be looking past the news and focusing more on the technicals.  

I have seen the market trade like this before......bad news forces everybody to think that the market will remain weak and traders think that we are range bound.  This keeps everybody away from buying stocks. The next thing you know we are rallying to new highs and nobody is in (riding the wall of worry).  I am not sure that we are going to make new highs but I do think that the trend could remain bullish into the end of the year.

What I will be looking for this week.....

As long as the Transports and the S&P cash remain above their 150 day smooth moving averages I will be a buyer of breaks and looking for the market to trend higher.  The main area of resistance that I will be looking for is unchanged in the S&P (1157.64) and above that I will be looking for a test of the 200 day moving average at 1274.70.  If the Transports or the S&P cash cannot hold their 150 day smooth moving averages I will turn seller (leaning on the 150 day smooth moving averages) looking for the market to sell off down to my support levels. For my day to day thoughts on the market check out my Morning Brief.  Have a great week.

S&P Cash

Dow Industrials

E-mini Nasdaq 

Dow Transports

VIX

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.).  Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year, Black (last summers range), Light Blue (Old highs that could be tested)

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Morning Brief 10-17

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The week ahead 10/17 - 10/21

The bulls are on the verge of taking complete control of this trade.  The Nasdaq has gotten itself comfortably above all of their major moving averages and it looks like they want to make new highs for the year.  The Dow closed back in positive territory for the year and that is giving the market confidence.  The Transports broke their daily down trend and they are now looking to test some of their important moving averages.  The S&P cash is trading right on their 150 day smooth moving average and they are testing the top of this recent range.

The market seems to have taken the debt crisis in Europe and put it on the back burner.  Even though the market is rallying, it feels like there has been little participation in this rally.  I think that traders are scared to buy into this rally and I also think that a lot of traders are thinking that a continuation of this rally would be unlikely.  It feels like a lot of traders missed their chance to buy the market near the lows and nobody wants to chase it higher (we are now riding the wall of worry). I think the lows are in for the year and we will see hedge funds and money managers chase performance into the end of the year.  

What could change my mind......

Worse news coming out of Europe or another major event (news can change anything but I think that the worst is behind us for this year).

I think that the Transports will be the key to this rally.  If they can sustain trade above their 50 day moving average then I think that we will see new highs in the Nasdaq, Dow and possibly the S&P.  If the Transports fail to hold their 50 day moving average then I think that the lows for the year are back in play.

This week I will be keeping a close eye on the Transports.  If they continue to grind higher and test resistance I will remain a buyer of breaks in the S&P.  If the Transports start to slip then I think that will create some doubt for the bulls and we could see the market sell off and retest some major moving averages.      (see charts below)

For my day to day thoughts sign up for a free 7 day trial of the morning brief.  Have a great week.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.).  Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year, Black (last summers range), Light Blue (Old highs that could be tested)

$DJT

$DJIA

$NQ_F

$SPX

$ES_F

$VIX

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The week ahead 10/10 - 10/14

Do we have a bottom?

I wrote in my Morning Brief on Wednesday that I saw some signs that the bottom was in.  The first sign was that the VIX could not make new highs for the year.  This is significant because they basically have a double top over the past two years (48.00 this years high; 48.11 last years high).  Failure to take out that double top was bullish action for the stock market.

The Transports came within striking distance of last years low (3,872) and then quickly turned higher.  The Transports went from leading us lower to leading us higher.  The Nasdaq failed to take out a low from August (2022.25) that the charts were showing could be a breaking point for the Nasdaq.  The Dow Industrials were inside last summer’s range and started to look ugly and then they took off to the upside closing back above that range (10,808). All of this action is bullish but we are not out of the woods yet.

This week I will be focusing in on the Nasdaq.  Even though the Transports are the leader of this market the Nasdaq is currently at a more critical area.  I think that in order for the market to sustain this rally the Nasdaq has to sustain trade above their 150 day smooth moving average (2181.63).  If they cannot then  I think that we could drift back down and possibly test the recent lows. We may chop around the 150 day smooth moving average, but it is important that they do not spend too much time below it.

I will also be watching the S&P cash; I want to see if they can get back above their 50 day moving average (1177.87) and their daily down trend at 1177.01.  If they can get back above this area then I think that we could see a nice pop in equities across the board.  If they cannot get back above this area then I think that we will sell off.

For my day to day thoughts sign up for a free 7 day trial of the morning brief.  Have a great week.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.).  Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year, Black (last summers range)

$NQ_F

$DJT

$SPX

$VIX

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Morning Brief

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Morning Brief

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October Newsletter 2011

October Newsletter 2011

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The week ahead 10/03 - 10/07.

Last week could have been the week the bulls wished never happened.....The strong Nasdaq is now turning weak; they broke their daily uptrend and now closed back below their 150 day smooth moving average.  The S&P, Dow Industrials, and Dow Transports cannot sustain trade above their measly 10 and 20 day moving averages and are getting awfully close to their lows of the year.  That is bearish action and the bears seem to be in full control of this trade.

I am looking at last summers range when me made the lows for the year.  I think that last summer's range is important; if the market cannot sustain trade above that range then it becomes a good possibility that they test the bottom of that range.  

On Friday the S&P cash closed almost dead on the top of last summer's range (1131.23 was the top of the range and they closed at 1131.42).  The Dow Industrials and Nasdaq futures are still trading above theirs, while the Dow Transports (our downside leader) are trading near the bottom of last summer's range (getting close to last years lows).

When the Transports remain weak the rest of the market seems to drift lower (even the Nasdaq).  With a bearish Dow Theory Confirmation and a recent break down in technicals in the Nasdaq the market still seems to be searching for a bottom.

See charts for more thoughts on the week ahead......

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.).  Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year, Black (last summers range)

$SPX

$NQ_F

$DJIA

$DJT

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