Weekly RSI and MFI have made bullish weekly divergences and RSI, MFI and MACD have all made bullish daily divergences. It's the weekly divergences that suggest the lows for the year are in. Although, I still believe next year the US will fall into a recession and face much lower lows. The 30 minute, daily and weekly charts are below.
Thursday, October 6, 2011
October 6th
Closed out my 75% long and went 40% short at the close. Hoping for a one day pull back enough so that it makes the trade worth it and then go long again until we test the 50 day. If we go straight to the 50 day then I will go further short and average up. Then risk off for a short pull back and then long again into December where I will continue to look for 1220-1250 (1230/35 being my target). The 30 minute chart shows MACD is about to cross despite closing on the highs so I thought it was a shot. Also, 1165 is the 23.6% retrace from 1370-1101 which makes for a logical short term pull back. 1187 is the 38.2% retrace if drawing to the 1074 low, so that is a fair target to consider as well if this market pops further from here.
Weekly RSI and MFI have made bullish weekly divergences and RSI, MFI and MACD have all made bullish daily divergences. It's the weekly divergences that suggest the lows for the year are in. Although, I still believe next year the US will fall into a recession and face much lower lows. The 30 minute, daily and weekly charts are below.
Weekly RSI and MFI have made bullish weekly divergences and RSI, MFI and MACD have all made bullish daily divergences. It's the weekly divergences that suggest the lows for the year are in. Although, I still believe next year the US will fall into a recession and face much lower lows. The 30 minute, daily and weekly charts are below.
Wednesday, October 5, 2011
October 5th
Full disclosure...went 50% long Monday at the close. 125% long at yesterdays close. Took 50% off today at the close (a bit too soon I think) but am still 75% long.
The charts below make an unreal case for taking longs off at 1160-1165 and at the 50 day ema/sma and even shorting for a pull back before another possible move up to eventually try and test the 200 day. The first chart is the 60 minute chart. The second is a daily chart. The trend lines and Fib levels all come together in the same 1160-1165 area and with the 50 dam ema and sma at 1190 and 1183 you can see them coming down and possibly meeting in the area as well making it an even better shorting opportunity (or at the very least a chance to take off long positions).
The third chart is the early 2008 lower low. Today's market looks the same. In 2008 you will see the market first tested the 23.6% Fib retrace, had a small pull back and then challenged the 50 day only to pull back again. Today's market looks to be setting up a similar pattern
http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=3&dy=0&id=p06754384142&listNum=1&a=244530375 (60 Minute)
Tuesday, October 4, 2011
Oct. 4th
Today was no shocker. Man, if only I could trade etfs. Oh well, I went from 50% long to 125% long as of today's close. I hear a lot of numbers being thrown out there in terms of next level of resistance. I will say it again and keep saying it until I am blue in the face, while you might get a small pullback at any given point in time, the more likely meaningful pullback will be we sentiment is extreme, and price meets a moving average and/or a Fibonacci level (ideally all at the same time). Today the 50 day ema is 1192 and the 50 day sma is 1187. It seems reasonable to keep an eye on a move toward the 1160-1165 area (23.6%) retrace level. It would be particularly powerful if the market meets a Fibonacci level and the 50 day moving average in that same area. Looking for the 50 day to take part or all of my long position off.
Monday, October 3, 2011
October 3rd
Well, no shocker here. History suggests that big sell offs are ultimately followed by a lower low. We got that today. I know many are looking for 1018 (50% Fib Retrace) but I just don't think we are going to get there. 1080-1090 Pivots seems like reasonable support but 1055-1062 Pivots would make more sense if a capitulation bottom occurs. I can only trade mutual funds so I don't have the luxury of catching a capitulation bottom, so I went 25% double long today (50%) with 75% cash to deploy at lower levels.
Bottom of weekly Bollinger Band is at 1071 which would make sense as a reasonable short term low. Often, the market trades through it on the first move down (as it did in July and August) and then touches it the second time (then rallies). Notice the third link below and you will see that the market in March of 2008 touched the bottom of the BB after first breaking through it. Then it rallied meaningfully higher.
Also, RSI, MFI and MACD are all forming possible bullish divergences, while RSI and MFI are forming possible WEEKLY divergences. That would suggest a bounce that might last for a couple of months rather than a couple of days or weeks.
Daily
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=7&dy=0&id=p54280484771&a=243753337&listNum=1
Weekly
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=1&mn=0&dy=0&id=p21520836351&a=243023935&listNum=1
2008 Weekly with Bollinger Band
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&st=2007-06-04&en=2008-06-23&id=p06564419474&listNum=1&a=245202441
Bottom of weekly Bollinger Band is at 1071 which would make sense as a reasonable short term low. Often, the market trades through it on the first move down (as it did in July and August) and then touches it the second time (then rallies). Notice the third link below and you will see that the market in March of 2008 touched the bottom of the BB after first breaking through it. Then it rallied meaningfully higher.
Also, RSI, MFI and MACD are all forming possible bullish divergences, while RSI and MFI are forming possible WEEKLY divergences. That would suggest a bounce that might last for a couple of months rather than a couple of days or weeks.
Daily
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=7&dy=0&id=p54280484771&a=243753337&listNum=1
Weekly
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=1&mn=0&dy=0&id=p21520836351&a=243023935&listNum=1
2008 Weekly with Bollinger Band
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&st=2007-06-04&en=2008-06-23&id=p06564419474&listNum=1&a=245202441
Sunday, October 2, 2011
October 2nd
I've been posting on other blogs for sometime now and just figured that since I end up having some very nice conversations back and forth with other investors that I might be able to do it in one spot from time to time. That is the reason for this site. It is not intended to take away from anyone else ideas or hard work, rather share my own point of view and to also benefit from other investors' insights.
As many of you might already know, I am a strong supporter of using RSI, MFI, and MACD but in using them together as they seem to be the most reliable and complimentary that I have found. I also like to use Fib Fans for longer term trends, Fib Retrace levels and moving averages as support and resistance, but again, together and as compliments. Sentiment is also a must as most bottoms and tops (short and long term) are made when sentiment is near extreme levels. And lastly, a chart formation (like a Bear Flag) makes for a more powerful signal.
So let's just recap what has currently taken place in the markets. The first link below is a daily chart with a Fib Fan drawn from last years lows (the three white ascending lines). As you can tell the 61.8% level was officially breached in August and has acted as resistance ever since. Also, there are three Fib Retrace Levels drawn. Why? Because I see, too often, investors try and use levels based on two points when the market might in fact surprise us all and find support or resistance given a difference high and low. So, I like to "cluster" my Fib levels and they have worked out terrifically. The 38.2% level (1195-1204) has been resistance several times now but notice how the 1204 level was resistance the first time, but recently 1195 acted as resistance. The cluster worked great and if you were willing to start putting shorts on at the beginning of the cluster you would not have missed out on this most recent sell off.
Moving Averages....If an investor can find an important Fib Level and moving average to meet at a particular point, they probably have a pretty powerful signal. That is what happened recently. It seems that with most bear markets there is a rally and a test of the 50 day. Again, I don't presume to know what works best so I use both the 50 day ema and sma (kind of a MA cluster). We saw the market make a move to the 50 day at 1220 (close to the 1224 Fib level) only to pull back. At 1195 the 50 day was near 1204. Starting to build shorts would have been a prudent move. What sent such a strong signal the day the market reversed at 1195 was that the market closed below the bear flag up trend line. It was a clear indication that the pattern had held.
The second link below is a weekly chart. The most important in identifying when a meaningful top is forming because it is a weekly chart. MACD, MFI and RSI usually make bearish divergences and bullish divergences at meaningful bottoms on a weekly basis. It is nearly always the case at market tops but only mostly the case at market bottoms. Why? Market bottoms sometimes happen very quickly and violently so the weekly chart doesn't have time to adjust. EG. Last year. No bullish divergence on a weekly basis but on a daily basis all three indicators formed bullish divergences at the 1010 low.
So, what now? Well, the weekly and daily pivot points are all sitting in the same area (1087 daily S2 Pivot) and 1080 (Weekly Fib Pivot) and 1090 (Weekly Standard Pivot). If we also include the VIX at around 42 and bullish divergences forming on all three indicators on a daily basis and two of the three on a weekly basis, I think there is an argument to be made for a bottom (short term) to be made in the 1080-1090ish area. The fact that sentiment is so negative and bullish divergences are popping up all over the place, I think those Pivots might end up being a reasonable area to find support.
From there, if 2008 is any indication, watch for a rally to the 50 day (ema and/or sma) to provide a slight pull back and then a move back into the 1220-1260 are (likely 50% Fib retrace if I had to guess). What will be key is, "where is the 200 day SMA"? I happen to think that like May of 2008, the market will slam into the 200 day sma while also being near a major Fib retrace. If resistance holds at the point, there might be a big big shorting opportunity.
All of this is forecasting because it is good to keep an eye on possibilities, but let me be clear: I invest based on the data that is actually available at that moment in time. Not based on what may or may not happen.
To close, I included a chart of early 2008 so you can see the amazing similarity between then and today. Most people are focusing on late 08 when early/mid 08 is the clear chart to keep an eye on.
I look forward to thoughts, comments and insights that I can benefit from and hopefully may other readers that join the conversation over time.
DAILY
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=7&dy=0&id=p32771745761&a=243753337&listNum=1
WEEKLY
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=0&mn=9&dy=0&id=p83217381620&listNum=1&a=237866927
2008
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2007-06-04&en=2008-06-23&id=p88951979887&a=244348898&listNum=1
As many of you might already know, I am a strong supporter of using RSI, MFI, and MACD but in using them together as they seem to be the most reliable and complimentary that I have found. I also like to use Fib Fans for longer term trends, Fib Retrace levels and moving averages as support and resistance, but again, together and as compliments. Sentiment is also a must as most bottoms and tops (short and long term) are made when sentiment is near extreme levels. And lastly, a chart formation (like a Bear Flag) makes for a more powerful signal.
So let's just recap what has currently taken place in the markets. The first link below is a daily chart with a Fib Fan drawn from last years lows (the three white ascending lines). As you can tell the 61.8% level was officially breached in August and has acted as resistance ever since. Also, there are three Fib Retrace Levels drawn. Why? Because I see, too often, investors try and use levels based on two points when the market might in fact surprise us all and find support or resistance given a difference high and low. So, I like to "cluster" my Fib levels and they have worked out terrifically. The 38.2% level (1195-1204) has been resistance several times now but notice how the 1204 level was resistance the first time, but recently 1195 acted as resistance. The cluster worked great and if you were willing to start putting shorts on at the beginning of the cluster you would not have missed out on this most recent sell off.
Moving Averages....If an investor can find an important Fib Level and moving average to meet at a particular point, they probably have a pretty powerful signal. That is what happened recently. It seems that with most bear markets there is a rally and a test of the 50 day. Again, I don't presume to know what works best so I use both the 50 day ema and sma (kind of a MA cluster). We saw the market make a move to the 50 day at 1220 (close to the 1224 Fib level) only to pull back. At 1195 the 50 day was near 1204. Starting to build shorts would have been a prudent move. What sent such a strong signal the day the market reversed at 1195 was that the market closed below the bear flag up trend line. It was a clear indication that the pattern had held.
The second link below is a weekly chart. The most important in identifying when a meaningful top is forming because it is a weekly chart. MACD, MFI and RSI usually make bearish divergences and bullish divergences at meaningful bottoms on a weekly basis. It is nearly always the case at market tops but only mostly the case at market bottoms. Why? Market bottoms sometimes happen very quickly and violently so the weekly chart doesn't have time to adjust. EG. Last year. No bullish divergence on a weekly basis but on a daily basis all three indicators formed bullish divergences at the 1010 low.
So, what now? Well, the weekly and daily pivot points are all sitting in the same area (1087 daily S2 Pivot) and 1080 (Weekly Fib Pivot) and 1090 (Weekly Standard Pivot). If we also include the VIX at around 42 and bullish divergences forming on all three indicators on a daily basis and two of the three on a weekly basis, I think there is an argument to be made for a bottom (short term) to be made in the 1080-1090ish area. The fact that sentiment is so negative and bullish divergences are popping up all over the place, I think those Pivots might end up being a reasonable area to find support.
From there, if 2008 is any indication, watch for a rally to the 50 day (ema and/or sma) to provide a slight pull back and then a move back into the 1220-1260 are (likely 50% Fib retrace if I had to guess). What will be key is, "where is the 200 day SMA"? I happen to think that like May of 2008, the market will slam into the 200 day sma while also being near a major Fib retrace. If resistance holds at the point, there might be a big big shorting opportunity.
All of this is forecasting because it is good to keep an eye on possibilities, but let me be clear: I invest based on the data that is actually available at that moment in time. Not based on what may or may not happen.
To close, I included a chart of early 2008 so you can see the amazing similarity between then and today. Most people are focusing on late 08 when early/mid 08 is the clear chart to keep an eye on.
I look forward to thoughts, comments and insights that I can benefit from and hopefully may other readers that join the conversation over time.
DAILY
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=7&dy=0&id=p32771745761&a=243753337&listNum=1
WEEKLY
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=0&mn=9&dy=0&id=p83217381620&listNum=1&a=237866927
2008
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2007-06-04&en=2008-06-23&id=p88951979887&a=244348898&listNum=1
Subscribe to:
Posts (Atom)