In The Land Of The Blind...

The S&P broke out in a major way yesterday, and closed at a new 2009 high of 1068.76 - which was also the high for the day (very bullish - on up volume this implies that demand was satiated and could resume pushing prices up again today).  The overnights were down slightly, which implies a flat to slightly lower open.    However, the market during the past two weeks has shaken off early bear strength at the open to consistently move up - so I'm not discounting that today could end up being an up day when all it said and done.

Here's how the current chart looks - feast on the bull goodness:

S&P 500 - Daily Chart - 3 Months 

I don't have a whole lot to add to the chart by way of interpertation - all my usual moving average and MACD/MACD-H indicators are looking very healthy.   I read in a article this morning the S&P is at it's furthest point above its 200ma since 1983.  This implies extreme healthiness, although it also points to things being overbought and that a pullback/correction of some sort is due at some point - if only to bring the price movement back into line with norms.

One thing I want to point out is volume.  Yesterday was gratifying in that volume rose from the day before on a strong up day.   Any rally worth it's salt needs to have rising volume showing that traders are buying in in the expectation of prices continuing to move higher.   However, volume as a whole hasn't really made much of an increase from its depressed levels over the summer.  I would expect, for this market to really take off, that volume would increase much more than it has - we should see several days where volume is 1.5 times its 45ma - and it just hasn't happened yet (even the strong day yesterday was only 1.18 times the 45ma - and don't forget the 45ma includes most of the summer - i.e., it was 1.18 times a very low number.  That has to improve for this to have legs - otherwise the implication is that the big boys really don't have confidence in a further move up and are remaining on the sidelines.  Supply and demand, baby - and we have to work on demand.

For the past year+ I've been basically confining my trading to the Financial ETFs.  FAS when the overall market is going up - FAZ when it's going down.  Yesterday FAS returned 9+%.   But can we do better?

Here's a listing of the top 10 ETFs by % return since Labor Day (the list actually includes 11 ETFs, but I discount anything that trades lower than 50000/day)

Top ETFs By % Return Since Sept 4, 2009 

As you can see, FAS makes the list, but it isn't the hottest ETF by a long shot.  Something wild is going on in real estate - the 3x Bull Real Estate ETF (DRN) has returned 56+% in less than 10 trading days.  Wow.  DRN debuted in the mid 50s in the middle of July and is now in the 150s - you do the math.

I also did a scan to see which ETF currently has the strongest MACD-H.  Check this out - there's been a lot of discussion of gold in the news lately - how much have you heard about silver?  Here's the chart for AGQ - an ETF that tracks silver:

AGQ - Daily Chart - 3 Months 

Up 14% since Labor Day - not enough to make the Top 10 list, but still not shabby at all.  

The thing that excites me about this chart is check out the volume.   quiet all summer, and then totally took off once September came around.   This is the type of healthy volume that I'd like to see in the S&P charts - but for now, this tells me that AGQ is maybe the place to be.

Later.

The S&P closed yesterday at a new 2009 high of 1052.63 - which is roughly where the futures are now.  Since the futures had declined after the close yesterday, and have since shown a steady uptrend in the overnight, I would expect things to point to higher open this morning.

Surprisingly I have little to say about where we are right now.  The last serious resistance line that I can see for awhile at 1044 has been breached, and theoretically could mean smooth sailing for the next 50-60 points upward or so (kiss of death, of course).

Here's a chart showing the clear uptrend - since the July low it's been higher highs - higher lows:

S&P 500 - Daily Chart - 3 Months

All of my usual indicators are supporting the idea of the uptrend - price is on above the moving averages, and the moving averages are all in the proper uptrend order (shorter MAs above the longer MAs).  MACD has turned upward, after having a downward slope since the beginning of August.  Even the MACD-H is in bullish territory and rising.   There is the bearish divergence that I spoke of last week to consider, but this market has tended to ignore such occurences these past 6 months, so while I'm not going to forget about it, I'm not going to give it a whole lot of weight right now either (kiss of death).

Look at the last MACD-H up impulse at the last couple of weeks of August - see how the maximum barely got above the center 0 line?  The current bull impulse is already much higher, and started from deeper in bear territory - so that tells me that this time around is stronger than last time - and that justifies the higher prices.  Ideally, of course, I want to see the level of the MACD-H get above the high it reached at the end of July - but that also gives something to aim for.

The only thing that surprises me a bit is that volume hasn't markedly picked up after Labor Day - although in the 6 trading days since Labor Day, 4 of the 6 days were above vol 45ma (the 45 day moving average of volume) on up days - so that shouldn't be discounted either.

The 1044 area did serve as a bit of resistance (on the intraday charts, at least - on the daily chart it shows up as the doji three days ago) - so I would look toward that for support on a pullback, but otherwise, I see no reason not to be on the side of the bulls - at least up until above 1100.  

In the back of my mind I still have an ultimate downward bias, but the charts and price action are telling me that the bulls are still dominant - and have further room to run.  And there's no reason to argue with that if there's money to be made by joining their side.

Good Luck!

Today is 09/09/09.  Happens once ever 100 years - savor it.  Nine is one of my lucky numbers - and it's happening 3 times (which is my other lucky number) - so you'd think that today will be an awesome day.  Hopefully it will be :-)

In the few days bracketing Labor Day weekend, the S&P made it through the Valley of Death and made it past the 1014 resistance line pretty easily.  Now it is in that trading zone between 1014 and the 1039 high in which it occupied most of August.  

S&P 500 - 15 Min Chart - 4 Days 

So it's very obvious from here that those are our 2 numbers to watch - 1014 for support going down - if it breaks down through this, especially a second time, it will be good for the bears - and 1039 as resistance on the upside - if it breaks through there, needless to say it will post a new 2009 high and will be good for the bulls.

The S&P closed yesterday at 1028 and spent the overnight below that number - so the open will probably be to the downside.  I expect that the post-Labor Day trading will begin in earnest today, so whether the bulls can step back in and push prices back up could be a good early indicator of how things will play out from here. 

Here's a daily chart:

 S&P 500 - Daily Chart - 3 Months

First off - notice how yesterday's volume picked up and was over the vol 45 ma - we should expect to see that regularly for awhile as trading picks after the summer doldrums.

The red line at the top is the August and 2009 high that the S&P needs to break through to move out of this trading zone. 

I put some circles on the current trading zone area when we were here back in August so we can do some comparisons.   As you know, I like to use the MACD and MACD-H as momentum indicators and, as can be seen, the current levels of both the MACD and MACD-H are lower than when we were here a few weeks ago.   That isn't good for the bulls and doesn't favor a continuation of the uptrend.

Look at the area in early August where the S&P bounced along the Fib 38.2 at 1014 for a week before turning down, found support at 980 and came right back.   What's happened the past couple of weeks where the S&P then bounced around off of 1039 and then retreated, found support at the 992 level and came right back.  The market does this sort of repetition a lot, so that in itself isn't too unusual - but look at where the MACD and MACD-H are during both waves.  The second wave, prices were higher, both at the top and where support was found after the pullback - but the MACD and MACD-H are both lower in the second wave than the first - and, more importantly for my purposes, the depth of the MACD-H (bear strength) was much deeper the second time, even though prices were higher.   That is a clear divergence, and can be interperted as saying that the uptrend will fail.   However, I've been saying this since April, so who knows?

So, bottom line,  S&P needs to push through 1039 to go forward (and it faces immediate possible resistance at 1044 (theoretically, 1039 is close enough to 1044 that 1039 could be considered part of the 1044 resistance area) - or it needs to drop below 1014 for the bears to take control.   And, as I say repeatedly, not just an intraday poke, but a close.   None of this isn't anything that we haven't heard before.  As the saying goes, it's deja vu all over again.

Good luck.

The S&P nudged against the 992 resistance yesterday, closing at 989.67.  Futures overnight evidently didn't like being up so high, and they've since dipped to the 980 level.  The low on Monday was 978.5 - so basically we've given back overnight all the gains that everyone was so excited about yesterday. Needless to say, expect a lower opening this morning, and a probable resumption of the descent down from away from  the 1000 level.  

S&P 500 - Daily Chart - 3 Months

The daily chart shows how insignificant yesterday's bounce was.   It printed a very small candle, that barely made it up 2/3s the way of the previous day's down candle.  Volume was still very low - no conviction or support by the big boys.   And it wasn't enough to change the negative direction of the MACD-H.  The MACD-H measures momentum, don't forget - so this is indicating increasing negative momentum.

The low price on Monday, and the open yesterday, were very close to the 26ma (red).  Any downward move today should bring prices below the 26.   In a healthy market, prices should find support at the 26 - look at the extreme left hand of the chart back in May for several examples of this.  When important moving averages fail to offer support, and price moves from above the MA to below, should be considered very bearish.  There's little reason to believe that the downtrend will not resume from here.   All of the momentum is working toward the bear side.

Often after a major trend change, the market gives stragglers a second chance to get on board before resuming the new trend in earnest.   Yesterday should be considered such a day.  If you failed to sell your long ETF before Monday and don't want to get caught - or if you were waiting for an optimum price to get into an inverse ETF before the train left the station - yesterday was the day.  No excuses now.

And, most importantly, the market yesterday offered an early test of the downtrend to see if it's for real - the 992 support/resistance line.  Not only did a former strong support line turn into strong resistance (yesterday's high was 991.2) but prices are now fleeing downward from there - exactly what resistance should do. 

So where do prices go from here?  There are no obvious support areas before the mid 940s where prices tried to cross the 200 in June and were stopped (the "head" of the failed head and shoulders).  This also corresponds to where the 200 - and the 50ma - are today.  Will strong resistance in June turn into strong support in August?  Right below that is the first Fib Retracement (the 23.6%) at 935 - which is just above the resistance line that formed the tops of the shoulders in that H&S. 

So expect possible clear sailing down from 980 to 950 or so, and then possible congestion for the next 20 points from 950 t0 930.   I am still looking for a move down to 880 to complete the head of the newer bigger head and shoulders that is still forming.   These things being symmetrical, it took about a month for prices to rise up from 880 to form the left side of the head - so it should take about roughly a month to get back down.  A month from the August 7 top?  Just happens to coincide with Labor Day.  And after Labor Day, September trading (traditionally and historically the worst month for the market) begins in earnest.  Funny the way these things work.

So that's it.  Make sure you're in on the downside in an inverse ETF.  Getting in very near the top of a possibly long downtrend provides an excellent opportunity to make $$$.

Good luck!

 It looks like the operative word for today is PLUNGE.  Sorry about that if you are afraid of heights.

I highlighted last week the importance of S&P 992 as support - tested 3 times in 2 weeks - and the futures have blown past it going down.  If this holds at the open, 992 then becomes overhead resistance, and things won't be looking good for an easy trip back above 1000.

I want to show 2 daily charts with slightly different perspectives to show where we are:

S&P 500 - Daily Chart - 3 Months 

This shows the most recent 3 months.  Nothing really new here - I've been talking about this stuff for awhile. 

Starting at the top - prices - the top gray line is the Fibonacci 38.2% Retracement line.  Price aimed at this line several times and, excep for one brief intraday poke above which failed to hold at,  the close, the S&P failed at this line several times and is now turning away from it's foray as the "Valley of Death" (I'm going to miss saying that line) claims a victim.  If today's plunge is the real deal, then we should/could close below the 13ma (orange line) and then aim at the 26, the 50, and the 200.  Theoretically, those moving averages should provide some sort of support.  Whether they do or not could be a good gauge of how bad this will be.   Unfortunately the 200ma line (dotted yellow) could be the last stand - the failed June try at the 955-945 area (because of the curvature of the 200ma, it is back right around that area again) presents the first real area of potential price line support going down.   If this area doesn't hold as support, there really isn't any more good support areas until down around 880.   Note also, the the blue 50ma never did get above the 200.  For those looking for the proper bullish order to the moving averages (price above the 13, 13 above the 26, 26 above the 50 and 50 above the 200) - it never happened.  The 50 never made it above the 200.  You use these little things to help identify and confirm trends - a big bull uptrend, no matter the "green shoots" and the CNBC hype - never materialized.

The middle area of the chart shows the MACD-H.  I've been pointing to this divergence for awhile - you need upward momentum (which MACD-H measures) to maintain an uptrend.   Instead while price was inching above 992 and 1000 - MACD-H was going down.   It should be no surprise to anybody that the uptrend failed.   The MACD-H went steadily downward and is now firmly into negative bearish momentum territory.

And the bottom of the chart - volume.  The horizontal red line is 45ma of volume - sloping downward throughout most of the summer, even while prices rise.  This signalled a lack of commitment by the big money.  And you can't have a rally without increasing volume and participation of the big boys.

Now lets just zoom out a little bit to show the bigger picture:

S&P500 - Daily Chart - 10 Months 

The grey lines show the various Fibonacci Retracements calculated from the Oct 2007 high to the March 2009 lows.  Reading up from the bottom they are the 23.6%, the 38.2% (which gave us so much trouble) and the 50% which we never got near.    The 38.2 served as strong resistance back in Nov 2008 on the first bounce off of the Sept-Oct plunge and that gives context to it proving strong resistance that past 2 weeks.  

I drew a red line at the 950 area which was good resistance back in June when it coincided with the 200ma - and which it coincidently coincides with again now.   Since this was a good resistance going up, it should provide good support going down.   If it doesn't, there looks to be some support/resistance area at 900 - and then a big support/resistance area at 880 (coinciding with the Fib 23.6%) - which has already served as both strong resistance going up and strong support coming down.   In actuality, I would be surprised if we don't get down to at least this level - a drop of 10% from here.  Theoretically, we may retest the March 666 low, but we'll deal with that as we get closer.

At this point there is no reason to stay long once 992 is breached.   A cautious person may watch the anticipated 950 support area before committing to the bear side, but for me, breaking through 992 was the key.

The tools exist - the inverse ETFs to make $$$ when the market goes down.  Don't be irrevocably wed to the bull long side waiting for things to come back - take the opportunity to enjoy and profit from the bear side also looks like that might be the general tone of things for the foreseeable future (and since we're at the top with potentially a long way down to go, the opportunity for some major profits!)

So, fasten your seatbelts - it's going to be a bumpy flight.

Good luck!

S&P 500 - 15 Minute Chart - 7 Days

After 3 futile attempts, the S&P is backing off of its attempts to push past the Fibonacci 38.2 Retracement line of 1014 and has now retreated below 1000 again.   As the above chart shows, since a gap up at the open to start the month on Aug 3, it's traded in a fairly narrow trading band from 992 to 1014 (there was that one intraday spike to 1018 - but it lasted all of about 60 minutes).

Let's review for a second what makes a trend.  An uptrend is generally defined by higher highs and higher lows - a downtrend is generally defined by lower highs and lower lows.  In an uptrend, you don't necessarily expect each price bar to constantly setting a new high on each print - but the uptrend will stay intact so long as the price bar doesn't create a new low.  And vice versa for a downtrend.   Once that new low is created, the uptrend is finished - once a new high is created, a downtrend is ended.

So that's why 992 is so important right now.  It's been tested 3 times now and held.  A move below 992 creates a new low and ends the uptrend.

As an aside, if you are fairly new to chart reading, I hope you'll notice that the number 3 is a pretty important number.  As you look at charts notice that a lot of things happen in 3's.  Look at the chart above - since we've been above 992, there have been 3 separate upward moves.  The last upward move failed at 1014 3 separate times.  A head-and-shoulders consists of 3 separate thrusts also, etc., etc.  The more you look at charts the more you'll recognize this.  Keep this in mind as you're looking.

There isn't any rule that says that things have to change after 3 failed attempts, but in my experience it happens often enough to be aware of.  3 attempts to break through 992 going down, 3 failed attempts to break through 1014 going up.   I think that means that something is going to give this time - if 992 is tested going down, I don't think it will hold.  If 992 isn't tested and the S&P moves up again, I would expect that a new try at 1014 might be successful.

If 992 support doesn't hold, the uptrend is ended - but with important resistance at the 980 level, it doesn't necessarily mean that a new big downtrend has started (just as moving above 1000 with 1007 and 1014 right overhead offering immediate strong resistance  didn't signal the start of a strong new uptrend).   Once that main support/resistance area is broken, it's generally a good idea to see what happens at the next support/resistance area before commiting yourself to the new trend.  Accordingly I will get out of FAS once 992 is broken, but I won't enter into FAZ unless and until 980 also falls.  Nothing is a sure thing - don't anticipate and trade too early, because you may get burned - there's no rule that says that support at 992 necessarily can't hold again.  Wait for the market and the charts to tell you what to do and when.

I hate to keep playing Cassandra or the boy who cried wolf, but the fact that there was strong resistance which corresponded to an important Fib Retracement point and the S&P is pulling back after a bunch of failed attempts, coupled with the lousy MACD-H and volume readings makes me think that this may very well be the start of the downtrend that we've been waiting on for months, rather than just a temporary pullback. 

Remember all the bull excitement just a few days ago after the Fed announcement?  We were pretty much almost out of the recession, etc., etc.   It didn't quite incite a big lasting market rally, did it?  In just a few days, that might be nothing more than a brief memory.

Back to the salt mines for me.  Good luck!

Futures are pretty much unchanged pointing to an open that is pretty much unchanged.  Since the S&P is in the middle of what I've been calling The Valley of Death ("where uptrends go to die"), the lack of forward movement isn't exactly a positive.  And it's not as if we just had a huge price rise that the S&P needs to consolidate from - it's been 9 days since the S&P crossed the 1000 line - and it's only finished at a new 2009 closing high yesterday of 1012.73.  12 points in 2 weeks!   And the market is acting all exhausted and just.... can't.... push.... things.... higher.....  It's tough isn't it?

Nothing is different from what I've been talking about the past few days.  S&P prices are stalled at the Fibonnaci 38.2 Retracement level (quite a resistance so far, eh?) - 3 tries so far, and all there is to show for it is one intraday poke above.   At some point if things don't happen, the bulls will just give up in disgust and take their ball and go home, leaving the field open for an epic bear move downward. 

 The 50ma still hasn't crossed the 200.  MACD-H is still declining, and is barely a scooch above the center 0 line, barely hanging on.  And volume, to be blunt, sucks.

Basically, for things to continue upward, the bulls really do need to make a show of force - a decisive move that closes above the Fib 38.2 (at S&P 1014) would certainly send a message to right things - will it happen?   3 weeks until Labor Day and the historically very bearish months of September and October begin.   The bulls better get their acts together and in a big way very soon.  None of the indicators that I follow give much support to this notion - but nothing is written in stone - an indicator gives an idea and framework to view the market movements with - but it nothing is ever definite and a sure thing (otherwise we could all retire early).  Maybe the bulls will pull it off - who knows?   I am still using the 980-992 area as my drop dead line on the support side.  Once this is violated on the down side, it's going to be all over.

Busy day at the salt mines today so I gotta run.

Stay tuned - Good Luck!

S&P futures are down about 7 points from Friday's close - having risen some during the overnight and then a steady smallish decline since then.   Which should lead to a more subdued open than on last Friday when everyone was so excited about the jobs report.  Considering that we are now back below our current possible resistance areas, without that upward momentum, it could be difficult for the bulls to get anything meaningful going today.

S&P 500 - Daily Chart - 3 Days 

 Friday morning opened up with a gap toto the upside - hit resistance at the Nov 1007 line, got through that and hit resistance again at the Fibonacci 38.2% Retracement line of 1014 and managed to get past that just a bit before losing steam and dropping back at the end of the day as folks took profits.   I'm not posting a daily chart, but volume was up and was above the 45ma - which you want to see on an up day.  FAS was still en fuego, up almost 8% for the day - over 30% for the week.  I'll take it.

On the down side, MACD-H was down, again continuing the bearish divergence.  And one measure of a successful move through resistance is that the resistance then turns to support - the yesterday's ceiling becomes today's floor.    That didn't really happen on Friday, did it?

You'll notice on the intraday chart that I've drawn lines at 1007 (November rebound high), and at 1014 - the first Fibonacci Retracement line - where we would expect resistance and a reversal.

I've also drawn a new line at about 1021.  I'm reading a very interesting book, Fibonacci Analysis (Bloomberg Market Essentials), which suggests that rather than using the ultimate high and low of the previous trend to determine the parameters for calculating the Fibonacci Retracements, that instead use the last pivot points before the previous trend high and low.   Using this calculation, the Fib 38.2 comes out almost 1021.  Slightly different than the 1014 achieved using the extreme high and lows.  I don't know enough about the whole Fibonacci thing to evaluate  whether this is valid or not, but I threw the new line up there to see if it works.  At this point I would treat any reversal at a level between 1014 and 1021 as a Fib Retracement.  My understanding though is that the Fib devotees really look for pinpoint precision - if the usual way of generating the Fib ratios comes out at 1014.14, they are looking for the reversal right at 1014.14 - not somewhere in a range sorta maybe if you squint with one eye close by.  So we'll see.

I don't expect a really momentous day today.  It's mid-summer, we've just finished a leg upward, and we have all sorts of resistance in our face.  We'll see.  I'm a big believer in "be careful what you wish for" LOL

It's a new week.  Good Luck!

The S&P closed yesterday at 1002 dipped in the overnight below 1000 and has rebounded.  I consider the steady upward move since midnight as portending a higher open in the markets.

I wrote last night about the potential Fibonacci 38.2% Retracement area at 1014.  There's another big resistance also staring us in the face at 1007 that we've already bounced off of once.

Here's a chart

S&P500 - Daily Chart - 11 Months

 Back last fall, when the markets were plunging, prices hit an initial exhaustion in October, and rebounded before resuming the plunge in November.  The high of that initial rebound?  1007 - the same level as our current high hit this week.  It may be hard to see, but I drew a red line across the chart at that level and, as I said, it's already held as a resistance point.  Combine that with the 1014 Fib resistance area and suddenly the immeidate way upward is looking quite problematic.

Let's look at the MACD-H.   See how high the MACD-H was at the Oct 1007 pivot?  See how low the  MACD-H looks at the August high?  This is a bearish divergence.  The current market  doesn't have nearly the same level of upward momentum to get through this same area that stopped things cold back when it had much stronger upward momentum back in October.  This suggests (weasel word) that prices will go down from here.  We'll see.  Add this to all the other reasons why the charts indicate that the rally can't be sustained.  The market hasn't been paying attention to the charts so far.  LOL

Look also at yesterday's volume.  That's quite a red spike.   We're having a tough time getting high volume on up days in an uptrend, but give the traders a down day and everybody comes out of the woodwork.  Does this suggest strength on the bull or the bear side?

Here's the same chart only showing the last 3 months:

S&P500 - Daily Chart - 3 Months

 On the chart you can more clearly see where current price is in relation to these 2 resistance lines.  You can also see how MACD-H is still declining (bearish) suggesting that the bulls have run out of gas.  And of course there's that big red volume spike that the bears put up yesterday.

I don't think anyone wants to say that things are headed south from here - regardless what the charts have said, anyone who has expected a downtrend since April has been burned.  So I'll just settle for saying that, at this point in time, the signs don't necessarily support a big upward move.

If the S&P manages to get past this resistance area and the MACD-H starts looking healthier again I would consider very bullish and start looking ahead toward 1100 and 1200, but until that happens, caution should be a watchword.

FAS en fuego

I use the S&P as a proxy for entry and exit into the financial ETFs (UYG, FAS, SKF, FAZ), since the financials tend to be the tail that wags the market dog.  However, look at this past weeks price action, particularly the past 2 days where things have stalled.

Now consider FAS the past 5 days:

7/30 +6.7%

7/31  +1.8%

8/3    +7.9%

8/4    +6.1%

8/5     +9.1%

27.1% in 5 days.  And this morning, so far, +4.9%

First off, I hope everyone's in FAS and enjoying this.  But notice that the connection between FAS and the S&P is now off - especially the last 2 days.   The financials should be lifting the broader market - and they're not.   I don't know how long this disconnect will last, (and I certainly expect when things turn around that the inverse financial, FAZ, will lead the broader market down) but I think it's worth noting.

That's the deal for today. Good luck!  GO FAS!

S&P 500 - 15 Minute Chart - 4 Days

The S&P started off the month of August with a bang(!) - cruising through the 1000 mark - maybe not like buttah - but pretty easily - almost as if it were not the big a deal.  Certainly not the testing and backing off and testing and backing off, etc. that often happens around a big potential resistance number.  Of course hitting a high of 1003 and a close of 1002 doesn't necessarily mean that the 1000 level is in the rear view mirror for good, but it's not exactly chopped liver either (ok - where are all these food references coming from??)

I've read different things about volume - that it was "up"; that it was "strong, but not as strong as Friday", etc., so I'll have to wait until a get to sit down tonight and go over the charts to get the full picture.  As I said this morning, strong volume in an uptrend is crucial - although considering this is the middle of summer, I guess anything over the 45 ma is a good thing (and last Thursday and Friday both were so hopefully today will be too).  And hopefully today's price action was enough to turn around the dreaded MACD-H divergence that I also mentioned this morning.   All-in-all, not a bad day all around.  The S&P itself gained 1.53% and the Dow gained 1.25%.

I spotlighted some ETFs last Tuesday July 28 - let's see how they did today (I recopied this list from Tuesday - the numbers on the chart represent the % change from the July 8 low through July 27), the numbers next to it are the % change today:

EDC  +11.26%

ERX  +7.78%

TNA   +5.57%

MWJ   N/A

USD    +2.47%

UYM   +7.82%

FAS     +7.90%

DZK    +7.44%

BGU   +4.98%

UPRO +5.03%

UMM  +3.67%

Is there any reason not to be in one of these guys?

I thought I would start screening for stocks again rather than just relying on the Dow/S&P and the ETFS.  Here's a really good chart that got me pretty excited.  Now this is an uptrend:

NTES - Daily Chart - 18 weeks

Netease (NTES) is a large internet company in China.  It was a darling of the market about 2 years ago and appears to be coming back in favor.

Some of the things I screen for:

1) Up day on strong (at least 1.5 x 45ma) volume  CHECK

2) High MACD-H value coinciding with the price high - preferably multi-month price high corresponding with a multi-month MACD-H high  CHECK

3) Moving averages are all in the proper order for an uptrend (notice how the 13 (orange) was above the 26 (red) was above the 50 (blue) even before they all crossed up over the 200 (dotted yellow). CHECK

4) Lots of interaction with the moving averages with the MAs providing lots of support.  Look at the way price moved along with the 13ma throughout April and May - and when it broke through downward, it found support at the 50.  This provides predictability - once you know that a stock interacts with particular MAs in a certain way (i.e., as a source of support), when, in the future it fails to act as expected with that MA is a key sign giving warning that things aren't the way they should be.  CHECK

5) Rising average volume (horizontal red line in the bottom window) as well as plenty of recent above avg volume up days (green spikes in the volume bars, as well as the lack of too many red (down volume) spikes) - the demand is out there and pushing this stock higher.  CHECK

Let's look at the MACD-H story and see what it has to say:

Prices rose with March rally, and MACD-H went up indicating rising upward momentum before trailing off in April.  Then followed a bearish MACD-H impulse for 5-6 weeks throughout the end of May.  BUT NOTICE - even though the MACD-H went negative, indicating bearish momentum - prices stayed more or less horizontal.  The bears exhibited their power, but were unable to move the price down.  When the bulls got back in control at the very end of May, they took off.   Same thing happened in June - when the bulls lost momentum and gave control back to the bears, the bears again displayed all kinds of strength and momentum - and could barely pull the price down.  And by the time prices actually did start moving down by the beginning of July, bearish momentum was exhausted and the MACD-H was already rising again - a bullish divergence.  And sure enough, when the bulls got contol again, things went through the roof (figuratively).

This kind of MACD-H movement is what you want to look for - especially when, during a trend, the other side seizes MACD-H momentum, but can't move prices their way.  Their side becomes exhausted and when then other side comes back to the playing field, they completely dominate.  Anytime you see a flat price response after a strong move upward or downward generally means that the trend is very strong and will really pop when the movement resumes.

And now, MACD-H is making a high at the same time as price is making a high - and is the strongest MACD-H on the chart (even higher and stronger than during the March rally). 

And look at MACD - notice in March at the beginning of the rally, and again at the end of May, at the bottom of the MACD where the fast (blue) line crossed over the slow (olive) line - that the 2 MACD lines never made it below the center 0 line.  Do I have to say that this is very bullish?  Well it is.  And now, even though the MACD dipped below the center 0 on it's last trip down, fast has just recently crossed over slow, and both are just now crossing over the center 0.  Either of these are considered buy signals.  I would prefer to buy when a trend is still fairly new, as opposed to, say, the second week of April when, although price was still rising nicely, the MACD-H was already declining, and the MACD was looking a little long in the tooth.  You can use the MACD and MACD-H to help time your trend entries and exits this way.

Let's go back to yesterday's price bar where the price and the MACD-H both made multi-month highs.  I'm a big fan of Dr. Alexander Elder, whose books turned me on to the MACD-H.  It is Dr Elder's thesis that when price and MACD-H both simultaneously make multi-month highs (or lows), that that shows that momentum is such that even if the price backs off a bit, that that high (or low) price level will be retested.

There's not a whole lot of things with stocks that are a given and a certainty and a sure thing, and this thesis by Dr Elder is one that comes as close as I've seen.  You can use this a couple of ways.  Even though, for example, NTES looks over-bought right now, if I enter at this price, I can be reasonably assured (weasel words) that, at a minimum,  if price goes down from here, that it will come back and at a minimum retest this level - so that does wonders for my risk factor, doesn't it?  Or alternatively, if I don't want to buy at an over-bought level, I can put this on a watchlist, wait for it to come down a bit for a dip, and then buy, knowing that it should (weasel word) reach that original level again at a minimum.  Doesn't get too much simpler than that - does it?

Futures are up and looking strong.  Since this is the earnings season and those companies set to report today are expected to bring in good earnings reports (albeit on a very low bar and with much lower revenues than, say, a year ago), it looks like today could be another up day in the markets.

The S&P closed yesterday at 951, a new 2009 closing high, and within easy distance of the 2009 intraday high of 956.

The Dow is lagging the S&P as far as these milestones, so I will focus on the Dow here.

Dow 30 - Daily Chart - 7 Months

First off, the Dow crossed its 200ma yesterday and deserves congratulations (Congrats, Dow!)  The Dow closed yesterday at 8848 - but the 2009 high (set back in January 6) of 9088 is still a bit of a distance away.

Here's a close up chart

 Dow 30 - Daily Chart - 2 Months

2 observations:

- The high prices in this recent upturn is not being matched by high volume.   One would think that if the big boys thought that this was the the start of something meaningful, everybody would try and get in while prices were still relatively cheaper now than they would be expected to be down the road.  Instead, average volume (horizontal red line in the bottom section of the chart) is declining.  Not very bullish, is it?  A general market rule is that strong price movements should be accompanied by strong volume to add validity- the big boys should be acting on what they think the price movement indicates wicll happen.  Lack of volume shows a lack of conviction.   If a stock price rises in a forest and no one buys into it does it reaselly matter?  So there will be those who will discount all of this positive movement of the past few weeks and months because it is unaccompanied by increasing volume.  On the other hand, all the big boys are probably at the beach with their familes...

- Look at the price bars for the past 6 trading days - all up days.  One thing I like about Japanese Candlesticks (once you get used to reading them) is that they very easily show price highs and lows compared to open and close.  The thing that strikes me about these 6 days is how the candlesticks show that the price closed very close to the high on each of those days.  That is an indication of strength - buyers aren't fading out as each day goes on - or rather, sellers aren't coming in.  This is very strong and bullish.  When I'm doing my daily screens of potential stocks to buy, one thing I look at as an indicator of strength is the close relative to the high - the closer the close is to the high, the stronger the upward movement is.  If a stock finishes at its high (on strong volume), to me that says that there were still buyers unsatisfied at the end of the day - and they will still be looking to buy in the morning.  Having this happen for several days in a row is a sign of strength.   However, I will temper this with the lack of volume issue - to me this isn't necessarily saying that the bulls are strong (if they were, this would be accompanied by the volume - those bulls like to stampede!) - but that right now at this point there isn't any bear strength - they all went to the beach with the big boys, I guess.  But light volume says that no one is getting excited and stepping in to buy - and no one is really getting concerned about being overbought and selling and locking profits.  Eventually, the up movement has to be accompanied by higher volume in order to continue. 

So these are 2 conflicting considerations - each day is strong price-wise, but weak volume-wise.   This adds to the general ambivilance that the other indicators that I watch have been signalling.  In the case of a nascent bull market, ambivilence is not necessarily a good thing.

 S&P 500 - 3Day Chart - 10 Months

The 3-Day Chart is highly useful in that it tends to smooth out the day-to-day noise and gives us a better illustration of market trends.   Except for the prices, everything in the chart has been mulitplied by 3.  Each price and volume bar represents 3 days.  The blue 50 day MA is really 150 days (that's why it still hasn't dropped below the red 26 and orange 13 day MAs (in actuality 78 and 39 day MAs respectively) - 150 trading days ago prices were pretty high!)

The 3-day very clearly shows the upper reisistance in the S&P 940 range that held in January and again in June.   And I drew a line showing the lower 880 support level that held throughout May.   After being bound in a price range over a period of time, a breach in the range in either direction will determine trend.   And we're about to breach on the downside.

In the 3-day chart, the important 50ma proved the resistance to the March rally.

A couple of points:

Look at the MACD - blue line (fast) crossed over yellow (slow) back in March and has just now crossed back under.  MACD is still above the center 0 line, but the slope isn't increasing and it should turn south soon.  MACD-H after also being positive since March reached it's apex in May (upward momentum increase stalled) and now below the center 0 line.  The fact that prices in May increased after the MACD-H stopped increasing is considered highly divergent - in terms of trend it indicates a trend reversal, and that is what has happened (higher prices should generate higher MACD-H, not lower, so the price increases cannot be sustained).

Look at volume.   After the end of March the overall level of volume declined while prices increased.  This is another bad sign.  If the big boys thought that the rally was going to continue (GO GREEN SHOOTS!!), overall volume would tend to rise as prices rise - people don't want to be left behind if they think the market is going higher.   But obviously they sort of don't, do they?

And lastly - keep an eye on the futures - is there any strength left in the 880 support area? 

hmmmm.... futures are below 870.   I don't think so.

If this turns into a substantial downtrend from here (and all points seem to be pointing south), this is definitely the time to enter on the bear side.  I still like the inverse financials SKF and UYG, both of which are extremely cheap right now and will only get rise as the market goes down.

 Look out below!

The results of the stress test have been leaking out (official results at 5pm EDT) - but the market likes what it sees - futures have been up nicely and this uptrend that won't die looks ready to continue for at least another day.

We're getting within spitting distance of the high point of the year - S&P 944 - hit way back in very early January.   Consider that point to be the next serious resistance mark.   Part of me says that there's no way that we'll get past there - another part of me says that, with the stress tests out of the way and good grade given to the financial system, there's no reason why we shouldn't blow that point away.   S&P 1000 - Dow 10000 anyone?  

And someday we'll have a huge correction.   But not today...

Here's a daily chart showing where we are:

S&P 500 - Daily Chart - 3 Months

I wanted to point out 2 features on this chart that are bullish - notice that the MACD-H (middle window) has turned positive.  It is still in a divergence (if price is higher than at an earlier point, then the MACD-H should be higher too), but the fact that we passed through a part of the cycle where the bears pulled the MACD-H negative but couldn't hold it down below 0 should be interpreted as bullish - it gets to start a new postive cycle from a very high base - kind of like a football team getting the ball on a turnover already at the 50 yard line.

And look at yesterday's volume - an up day, with higher volume than the day before, at a level higher than the 9 week (45 days) volume MA.  That's also bullish.

So, unless something rediculous comes out this afternoon about the stress tests (and it doesn't appear that the market is anticipating such) - today should be an up day.   Either stay in a long ETF (FAS, UYG, etc.) or wait for the official news to come out before jumping in.

And keep an eye on S&P 944 - there should be a lot of hoopla if we pass that for a new 2009 high.

Later.

Lookie here - a trend line going back to early September - pre-Lehman days - Look at the low in Mid-September and the bar right next to it - the solid black bar right next to the turn-around day which was the low - that was a big day that was September 15 - Lehman Bros day - solidly down, the next day there was a turn-around and a one-last-gasp reaction for a few days while Paulson became "the man"  - but since then, this line has not been crossed.

 S&P 500 - Daily Chart - 7 Months

So it shouldn't be a surprise that even with a trillion dollar headwind, the market got stopped stone cold.   The big question here - will it go straight down, or will it meander in a horizontal fashion for awhile.  Of course, if it goes up through here it would qualify as awesome. 

Of the moving average lines on the price chart - you can see how successully the S&P has interacted with the top lite-blue one - the 50 day ma - since in the days when Lehman was still alive - sort of it's once-a-month  "Gee the weather is nice up here" before retreating back down below the 13 and the 26 for the rest of the month.  

But you can see how much better the indicators are this encounter - the ma's are all pointing in an up direction and compared to the interaction points since this whole downtrend-thing began, the MACD-H looks pretty bullish - the volume has had several weeks of above average volume on up days since this month began -

Things could go either way - and Friday is  witching day - expect turbulence.  If it breaks through the line in a convincing way with good volume (and there will be good volume if it happens) it will be incredibly bullish.  If it proves to be the top point of the uptrend the question is how dispirited the bulls will be - will the drag it out and put up a fight or will they give up and will it plummet back to 666?  Either way, if it proves to be a top of course we want to go inverse for the ride down.

I'm gonna watch 780 as a support area and be willing to abandon and make sure my position is in the inverse if 752 or 742 don't hold either - or wherever the 3 day bar low is actually. 

80o is going to be a rough place to get through - if it does, definitely be on the long side.  But there's a lot of stuff going on upwards there and I think it would take a big rally tomorrow to not get spit up and tossed aside by prevailing trend-lines and moving averages converging to support resistance - and maybe it'll be a famous witching day - who knows.  Maybe Bernanke will throw another trillion in just for fun.

Later