So the Market did manage a little bit of rally after I posted this afternoon (yes, I take total credit for it LOL). The S&P got up to 722 before it was stopped and fell back to the 710-712 area support/resistance level. I guess the big thing for the day as far as the bulls are concerned is that 710 was finally conquered and then held twice as support.
And they managed to actually have an up session without Bernanke opening his yap and helping them out. I guess that's a big thing too.
I've drawn 2 price support/resistance lines on our intraday chart: one shows the late great 710-712 area support/resistance that has been a major factor of our show for the last 3 days; the other shows the 696 line that figured in yesterday's move down below 700. I wouldn't be surprised if we have to deal with both of these lines again in the near future.
S&P 15 Minute Chart 3 Days
Looking at the MACD-H - it shows that momentum was on the side of the bulls the entire day today, continuing the climb since the 692 low yesterday. And the bulls finally used their momentum to get some price gains too. However, the fact that the price trend during the day was up while the trend of the MACD-H was down is a divergence - according to this partiuclar indicator, price should be falling again in the short-term - so we'll see if 710 actually acts as real support or not.
An interesting facet of today was that the inverse financial ETFs were also up while the market was up - generally they tend to trend opposite each other, which is why I watch the general indices for my financial ETF cues. This is something to keep an eye on in case we need to adjust the current methodology.
One thing I haven't done much of is post just plain old everyday daily charts - I guess I assume that these are the ones that everybody has access to and refers to. Here's a current S&P daily chart.
S&P 500 Daily 2 1/2 Months
First off, look at how nicely robust the MACD-H is on the downside. The previous MACD-Hs were all hamstrung by the limited price movement during the big triangle. This is the first MACD-H cycle since the triangle and it is feeling it's oats nicely.
Look at yesterday's price bar and MACD-H. A general rule is if price and MACD-H both make a multi-month high or low on the same day (in this case it was multi-month lows) - that in the event of a retracement, that price will be revisited. So basically, according to the MACD-H rule, we should expect to see the below 700 area again (i.e., if a big rally starts tomorrow, it won't be *the* rally) - so file that away in the old file cabinet.
I haven't discussed Bollinger Bands yet - those are the price channel lines around the price on the chart. The middle line is a 20 day moving average ("20 ma") - the outer bounds are 2 standard deviations away from the 20 ma.
The way you read the Bollinger Bands are that prices rarely stray more than 2 standard deviations away from the mean, so anytime a price crosses an outer line, one should expect it to recross coming back in very soon (the Bollinger Bands version of overbought and oversold). Price tends to either travel along a band (or the bands open and close according to the price action) - and when the price bar leaves one band, it probably won't stop until it at least reaches the next band. So when the price moves, you can kind of expect to have an idea of where it might end up - although there will be times where the price just moves horizontally and the band itself shifts up or down to meet the price movement. A last thing to know about the bands, is that when they get narrow (remember they are based upon a moving average of price, so if they narrow, that means that the price movement has narrowed also during the past 20 periods), at some point price will explode out of the bands. Always fun to see the bands get really narrow....
So looking at today's chart, we see that on a daily basis, that today's little rally basically just moved the price off of the lower band - so we shoud be able to expect that the price will move to the center band - although it might be a situation where the band moves down to meet the price rather than the price moving up to meet the band.
But looking at a daily chart, the take-away is that both on MACD-H and Bollinger Bands, it is obvious that the bears remain very much in the drivers seat and it looks like the bulls will have to exhibit enormous strength to break the pattern. One good day does not change around the charts LOL
As far the ETFs go, there is major resistance going up beginning at 729 - the gap down from breaking the Nov low last Monday - and then again at 751 and 780 - so it is not definite that the bulls will be able to make this a real rally and I would hold off on switching to a long ETF until the market tells us by price breaking through some more resistance and holding it. Interestingly, the high of the last 3-day price bar is right at major resistance at 780. If the price drops back below 710 and then 700 again, definitely be back in the inverse ETFs.
Later.