Rally Time?

471
1514

Video Update for Friday...

Red

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or just a relief bounce...

After selling off for 4 days straight, the market needed a breather, and that's exactly what we got today.  As for tomorrow, as long as the initial claims and continuing claims numbers meet or beat expectations, the market should go a little higher.

I'm not saying that it will for sure, but it's likely to push up some as the 60 minute chart is in rally mode now.  The 107 spy area is the likely target, where it will find resistance again from the larger falling channel.  If it makes it back up there, then I expect that area to stop the rally and then continue the selling next week (and possibly Friday too?).

The GDP number on Friday could be a non-event, and then the market would just trade sideways to up a little.  But, if it's really bad, then we could see a huge sell off on Friday.  There is no way to tell right now, but the trend is still down.  We just have to wait out this relief rally for a few days.

So, if you are short, just be prepared for a small bear shakeout before another leg down occurs.  There is still nothing bullish in these charts, but the market has come down pretty far and pretty quickly.  So, a bounce is to be expected.  It could last just for tomorrow, or a few more days?  There is no way to tell just yet, but I don't think it will last into next week.

Good luck to all the bulls and bears out there...

Red

471 COMMENTS

  1. Dabama here….OK lets figure out how to save America.

    Chorus of PPT actors—Sure what you got in mind boss?

    Well I am thinking that drawing a line in the sand worked so well in Iraq and Afghanistan, that we draw a line on the SPX and defend it.

    PTT hehe, we know hwo to defend it…we just make the hush hush call to Goldman, Morgan, and those newish guys, and they crank the futures…we just have to give them free money, that they can pump with, and they can also lend that money back to us to Support T-bills also. High five guys!!! We save the country, the market, and our debt all in one shot!!!!!

    Dabama: OK good, so where should we draw that line….

    PPT–deep thought…………hey how about 1040, you know, like the tax form….yeah yeah,,,,,

    Dabama: great and easy to remember, OK code word for da pump boyz is 1040 taxes. Just call them and say hey did you file your 1040 tax form yet….it’s perfect

    High fives, high fives.

    Charts at
    http://oahutrading.blogspot.com/2010/08/dabama-here-defend-our-country-boyz.html

  2. The stock indices have a similarity to the days leading up to the flash crash in regards to its bollinger bands They have hit their lower downtrending BBs and are starting to hug them. The last two days action are mimicking the May 4, 5th days as the BBs are just starting to widen. This is the start of a new move and it appears that a counter -trend rally can begin from this formation. Even if there isn't a crash tomorrow, the indices should continue to hug the decling BBs. Only a complete close inside the BBs would be the first sign of a new rally. And this brings me back to the trader with a great track record the last few months. He waits for a bubble to form with the widening BBs and then waits for the BBs to contract with the indices down at BBs before he takes a counter-trend trade (from what I gather). The BBs are just now starting to widen. I also went back to the 1987 crash, and the market started its crash leg in a similar position. (basically after 2 piercings beneath a downtrending lower BB). Its hard to believe a crash can occur with such a high Mc Summation reading but it happened with the flash crash on May 6. Oil and the currencies are just approaching their lower BBs although the currencies haven't really tagged them yet. Euro is currently doing well in afterhours which would have a positive effect on the markets tomorrow but that could change by the morning.

    • I meant it is unlikely a counter-trend rally can begin with the indices just now starting to tag their downtrending BBs. Maurice Walker has a BB chart on page 3 of his charts………I also went back and checked the Sept 2001 waterfall decline and the SP put up a similar bar on Sept 10. August 26 is also an equidistant 56 days to July 1 low with May 6 flash crash day. (I liked the Aug. 25 numerology better). It also 66 cds from the Summer Solstice high on June 21. July 1 was 66 cds from the April 26 high. And of course it is a major Tdate although T Theory Guru is supposedly disavowing it now. (although as a high) A new 13 day cycle also might come into play tomorrow although it originally was a low cycle (that connects back to May 6) but the last cycle was the August 9 high.

    • Yeah, and the 60, 15, and 5 minute charts don't have a lot of room to go on the upside before rolling back down. I really can't see this lasting into tomorrow either Jim.

  3. GS looks like it's got an inverted H&S on the 10 minute chart. If it plays out, it could help rally the market. However, the vix is falling and is almost at gap fill, which should give it support. Apple has filled it's gap and is stuck there.

    Basically, the market could breakout to the upside… or fail and come back down. However, it's running out of time as the 60 and 15 minute charts are going into overbought territory now.

    It's hard to say what's going to happen at this point? I just don't think it will have enough juice to breakout today. Maybe tomorrow if the GDP numbers come in good? Who knows?

  4. There's no volume at all today. The market will likely go higher into the close today, if it doesn't breakdown soon. It's forming a bull flag (weak one, but with light volume it could play out) on the 60 minute chart now.

    We might be doing an ABC move up to 1070 or so, with this pull back being wave B, and wave C to follow tomorrow (assuming the GDP number isn't horrible?).

  5. IWM, has that clearly in a downtrend, middle bb band… good for shorting. These things usually have 3 possible short entries. a little higher than today, 1. 5% higher or right now

      • Red, that was not a good close, let see what tomorrow brings. On the daily(spx), the bollinger bands are expanding, the RSI could still go lower. You may be right we are going lower. Fingers crossed! If it at closed at 1040 that would be an even better close.

        • Yeah, and just briefly looking at the charts, the 60, 15, and 5 minute charts are pointing back down now. Not good for a rally, that's for sure. But, who knows? Maybe they will spin the GDP to a positive number, and up and up and away we go!

  6. Red is going to have a field day this evening! Looks like his call was Golden. As Red would say “Watch out below”.

    • I won't rule out a move up, as it's certain possible. But, I did notice on that chart that the MACD's had crossed over and were pointing up at the previous black candle you have circle.

      However, right now the MACD's are still pointing down on the black candle we had today. That's a big difference and shouldn't be ignored. If today's daily chart was showing any signs of pointing back up then I'd agree with you that we might rally, but the comparison in that chart isn't equal in my opinion.

      But good luck with it Dread… I do wish you well. Maybe it will show some signs of turning up tomorrow? I don't know? Anything is possible.

        • I try to look at candlestick patterns too, but I like to combine them with the other TA's as well. I just think that the larger time frames are now a lot more negative then they were back then… especially since the market is now below the moving averages instead of above them.

          • Take a look at the daily chart for SPG (the leading REIT). Yes, MACD is bearish, but RSI is over 50. A clear 5 waves up from July, and an ABC down from the high with a shallow retrace. The C wave really does look finished. Price bounced of the confluence of the lower bollinger band and the 50 day moving average. I just don't see anything bearish there. Next stop is likely to be the upper bollinger band.

          • That chart do look like it could roll back up. And, it's trading above the 20 and 50 moving averages, while the spx isn't. Big difference between the two. On top of that, it's hitting the low BB level too… which could give it support.

            That whole move up from 75 to 94, and then down to the current price… looks like a bull flag too me. So yes, I agree with you on that chart. It does look bullish.

          • It looks like its topping to me. BBs are tightening. Dropped to the lower BB and now bouncing to midline/ 20 day average where it most likely repelled. It's probably lagging the overall market by a few days.

  7. 20 day average will be dropping below the 50 soon. Of course, it's a lagging indicator so the market should be well south when that happens.
    Even better news, it appears that T Theory Guru has extended his major T, that was due to expire, into next week joining the multitude of other gurus calling for a rally into the end of August.
    Nice down day with negative breadth to keep the McSummation declining while also allowing the BBs to continue to widen.
    Jaywiz is my newest contrarian indicator. Called for the market to drop 20% on Monday. Now says there will be no crash. Had today as a positive day with it continuing to rally into Monday. Last I saw oil was off its high for the day quite a bit. Todays bar is similar to bars seen before melt-ups in June and July but on those days breadth was positive and the ramp-up was already beginning in after-hours which I haven't seen so far. (but haven't checked in a few hours)

  8. “The government revised its reading of second-quarter gross domestic product to 1.6%. That was down from the previously reported 2.4%, but still topped expectations.

    Economists surveyed by Briefing.com were expecting economic activity to slow to 1.4%. “

    … And the futures markets are rejoicing at this? =blink=

    • I think the IYT chart I posted last night showed pretty good fractal evidence that we were going to rally today.

      Today was a great day for bulls and bears. If you sold the rally yesterday at 1060ish and covered this morning, you banked coin. If you bought on weakness yesterday or today and sold today, you banked coin. I did!

      • Yes Dread…

        It looked like they both played out. Down to the double bottom and then a rally. At this point however, the market needs to break out of this channel if it wants to rally next week too. We'll see, but I think the upside is limited.

  9. Since today is Friday, and all the bad news is out now, and the fact that the rest of the day is likely to have light volume… I'd say that this would be the perfect day for the market to break out of the falling channel.

    This assumes that they want to rally the market now, and this isn't just a head fake? It's a nice double bottom now around 1040, so it might hold today. The key is if they break out of the falling channel or not by the end of the day.

  10. As Red said, GS is down (currently 1.7% !). Also look at big cap techs: aapl, msft, csco, all very weak. Big sellers are raising cash into this sham ramp up. Note gold also up.

  11. Looks like oil rallied this market up today as xom is up over a dollar, but gs is still negative, and aapl is barely holding it's head in positive territory.

    That doesn't bod well for the overall market rally we are have now. Next week should be another down week, if those leaders can't get it up.

      • I am short via a small DRV position over the weekend, Red.

        DRN did not take out the high that it set yesterday on a day when it really really should have. Therefore, I consider today's low a wave 1 down and the rest of the day as a wave 2 retrace. I'm sticking with it until the market proves me wrong.

  12. Its not manipulation at all….yea right! All 3 major indices closing with same gain on the day. Tell me how often that happens:

    Dow Jones
    10,150.65 +164.84 (1.65%)
    S&P 500
    1,064.59 +17.37 (1.66%)
    Nasdaq
    2,153.63 +34.94 (1.65%)

  13. Thank God for stops. Classic manipulation indeed…….We were overbought somewhat. Should see some selling Monday since all the bulls are giddy now…………..Have a great weekend all…..

    • I wouldn't expect it to just fall off a cliff on Monday morning though Robert. The put/call ratio is heavy on the put side, and that level needs to come down first.

      I could see another run up on Monday morning happening, and then maybe closing flat with a doji. But don't expect them to just tank it that quickly.

      But, I do agree with you that it won't last too long… Good luck to all of us (especially us bears… LOL)

    • You know, in a perverse way this makes sense.

      Given that the USA is (technically) bankrupt, Bernanky (sic) has only two choices:

      1. Become a statesman, admit the situation and allow America (and in the process, most other Western nations) to default; or

      2. Print like crazy to delay the inevitable. In the meantime he and his friends can become even more rich and the eventual problem falls into someone elses lap.

      To paraphrase James Clark, a statesman is a politican that thinks of his grandchildren. Not one person in Washington is thinking beyond the next election…

  14. Distancing oneself from the market action of yesterday, things don't appear really that bad. None of the indices, Dow,SP,Nasdaq filled what I viewed as a breakaway gap from earlier in the week. And all of them including the Russell 2000 did not close above the close 4 periods earlier, an occurrence normally during a bull flip on a newly created rally. Plus we got a box formation similar to the late April early May highs the past four days where the last four bars appear to be contained in a box like range. It is especially evident in the Nasdaq. And despite bullish hysteria yesterday, it came out that Intel lowered its guidance and gross margin forecast despite proclaiming excellent guidance for the rest of the year last month. $SOX index has already broken its July low.
    I went back to the 1987 charts and the last up day before the 4 day meltdown into the crash, the white upcandle like todays was completely inside the BBs (did not touch the lower one) and it approached the close of the bar 4 periods earlier but did not close above it. The previous day's bar had pierced the lower BB. (in 2010 this was 2 days ago—2010 is lagging 1987–things are playing out slower—as Hank Wiernicki mentioned its 2010 weekly vs. 1987 daily). The next day the market collapsed down to the lower BB which should be in 1030s area. I see Sept 3 as an important low date so there is time for things to play out.
    Bulls were very giddy yesterday and don't seem to be worried about holding over the weekend or terrified by the ominous forebodings of the Hindenburg Omen (despite how everyone claims that everyone is bearish). At important bottoms, one doesn't see bulls so actively jumping into the market. It appears they see an inverse H+S.
    The market is holding up also to allow its 20 day average to catch up to it. There are still plenty of early August dates at the high involved in the calculation to keep it from dropping steeply but it is a few days away from crossing a downtrending 50 day average so I expect the market should plummet before that cross occurs. (as it last did at the May 12 post flash crash high)

    • Russell 2000 daily did close above the close 4 periods ago but did not close above that day's high. On the weekly it formed a hanging man. It also did reach its July low compared to the other indices so 1987 might be more applicable since in 1987 the final bounce came off the September low. Russell also has rallied for three days and its 20 day average has crossed below the 50 and is close enough to the $RUT that I don't think it is necessary for any furthur rally unless we just put in an intermediate low (which I put a very low probability of that having occurred).
      SP weekly has the 20 crossing 50 period right now and it is the verge of happening for crude oil. This is a very rare occurrence which is virtually almost certain to be reversed in the near term. (unless the bulls are very lucky as a certain troll might say—-Cano is just crushing Zobrist by the way).
      Back to bull flips, the flip usually occurs on a massive white candle and we had examples in late may and off the June 8 low and at the July low. Yesterday's bar when it was an easy position to do so was a massive failure.

      • Another correction. I should have written: it is a virtual certainty that the 20 week crossing 50 week averge will not be reversed. There have only been 7 crosses since 1994 and only one fakeout in 2004 when a sideways 20 week crossed below a rising 50 week and they briefly hugged each other before the 20 week rose again. This must be the part where following MAs is meaningless. I like this anti-intellectual approach to stock investing.

  15. Making charts from raw data, how old fashioned!

    Here is a special treat for you. I haven’t updated this chart since january, note that the data is already a bit old, June 30. Seems like just lately that alot more money has flowed to bonds.

    Short and sweet: BONDS ARE A TRAP!

    All the HBB financial adviser bullshit about portfolio re balancing, shifting your bond/equity asset allocation, etc, it just that, a bunch of bull. Bonds are a promise to pay, a paper asset.

    Read this chart carefully, it’s a real winner. Especially if you are holding a bunch of bonds and feeling safe.

    http://oahutrading.blogspot.com/2010/08/mutual-fund-money-flows-special-treat.html

    Check out this link to an interesting 40 page review of “Retirement Assets”. I think this is important because it represents 35% of all wealth. And that means it’s a big target, and HBB want’s it. They don’t want just to control it, they want IT. I expect this to be the next big battlefield. Financial ogliarchs will craft up legislation that gives them more access to your retirement savings. Here are some ideas—they force a percent of your retirement account into safe bonds “for your own good” further blowing up the bond bubble….they sell off at the top on their own bonds and leave you hanging on to a pile of shit. Or T-bills “Support America” law…works the same as bonds, they use your money to feed a bubble, they sell off at the top, short it in fact, and leave you with a pile of shit. See how that works?

    http://www.ici.org/pdf/fm-v19n3.pdf

    Charts below are from the ICI report

    http://oahutrading.blogspot.com/2010/08/mutual-fund-money-flows-special-treat.html

  16. UNG, those guys got to be some really bad hedge traders. The way they trade, they are going to bankrupt UNG itself. SEC needs to stop by that place—-oh wait, as long as there is major wrong doing going on, the SEC doesn't stop by your place.

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