CurtisM

$SPX Daily 02/23/2014

INDEX:SPX   S&P 500 Index
496 23 2
Candles similar to the one I'm calling a potential Wyckoff upthrust appear all the time. Most of the time they represent a day of indecision and just become another candle as the markets move on. You will often see these type of candles, spinning tops, gravestone doji's, shooting stars, etc, at turning points but you can find them all over the charts and they are very often ignored. The current upthrust candle has yet to be confirmed or invalidated as the markets have moved sideways the last couple days. It's certain to be confirmed or invalidated soon, or famous last words.

$SPX             off 2pts on the week but what may prove to be more important is that we're back in and stuck in the previous month long consolidation that began in December, 2013. Buyers who bought in late December and early January are sleeping better these days and they'll sleep even better if the markets can move up and out of this rectangular consolidation zone. On the other hand, those same buyers aren't likely to want to sit through another pull back and may be exiting now and their selling may be the reason the rally has stalled. If this is the case, then the markets are absorbing that selling with little damage done but I do believe that at the first sign of overt weakness we will see more and more of those December/January buyers hit the exits and their selling will beget further selling as the market full fills its own form of self prophecy.

To avoid an increase in selling, the market needs to clarify its intentions early in the coming week because right now the market is sending a mixed message. Fer instance:

$NYSI is rising and is now at its highest level going back to May of 2013 and this indicates that the market is moving up with broadening participation.

On Balance Volume remains bullish and is confirming this latest move off the early Feb lows.

$VIX 5EMA is at 14.7, well above the 13-12.5 area where it has turned in the recent past.

But:

$TRIN closed at 1.46 on Tuesday, the 18th, when the $NYSE was up indicating a bit of stealth distribution. During the December/January consolidation, the $TRIN closed above 1.xx on several days when the market closed green so if you're bullish you don't want to see something like this repeat.

P/C ratio closed at .69 on Friday which means that everyone is on the same side of the boat. During the December/January consolidation, the P/C ratio closed numerous times in the .7x area indicating a complete lack of fear by participants. We were not climbing a wall of worry and look what happened. So, again, we don't want to see too much bullishness from the P/C ratio in the early days of next week.

Despite the immediate above, I do believe that $SPX             will make a run for the 1850 area early in the week and I also believe that we could see $SPX             close out the week above that key level. Even though this is what I believe, the market may have other plans so stay on your toes until we clear this resistance zone .

GL in the week ahead.



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SimGlenn
2 years ago
Excellent read as always Curtis. Thanks much.

Glenn
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biff
2 years ago
my key algo moving averages are breached and like at the beginning of the year telling... market will test 1800 then lower after bounce... while a doji type test of 1850 is possible... be prepared for a phase of selling coming SOON. yea man
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biff
2 years ago
PS weekly models are even more telling. We will head down. I am not predicting a 2007-2008 drop, but test of 1700 or lower in the cookie jar and ready to eat
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OldGoat
2 years ago
You may want to take a look at the weekly chart.
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biff OldGoat
2 years ago
i got the weekly chart bro... don't leverage the farm on market going up goat man... good luck
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SimGlenn
2 years ago
Biff - The multi-year trend channel is very well established. The most recent test of lower channels held near 1740 once again and this rally has not run through to completion. A trend break typically needs significant and precipitating event(s) to act as a catalyst. Currently, RSI, VIX 5 EMA, OBV, MACD, etc. all are eith neutral to positive for a market advance to new highs. What catalyst(s) do you see for a downward trend break?
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biff SimGlenn
2 years ago
not going to give away my algo moving averages... just know that those upper channels will not matter soon, but the lower ones will. Everybody and their mother in law thinks we going UP... and that is further unscientific evidence. I have been buying XIV though the market swells... it is going down. XLK, XLP, SPY, and IWM all shorts... market leaders will drop GOOG PCLN AND FB... but selling will come slowly, then accelerate. Govern youself accordingly and be clear on what is happening and NOT what you want to happen. My measures are correct. I noted market drop after first of year and Curtis will note that I bought C at the bottom and predicted market bounce on this last rally UP. I did not know it would be this strong... and have been successfully shorting C last days even with market strength! My measures are correct. wait and see !
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CurtisM
2 years ago
Thanks for all the comments. Nice to have an active and participating group looking over the charts and commentary I put up.

For the stuff I'm following now, it's very important that we print new closing highs for the weekly and monthly charts by next Friday. If $SPX can manage that, then this will set up negative divergences for the RSI and CCI in the weekly and monthly time frames and the last times we had these negative divergences happening at the same time was back in early 2000 and the Fall of 2007. So if we get a higher closing high at the end of the upcoming week and if we have non-confirmation by these two key indicators in the longer time frames, this is going to be, at minimum, a red flag warning. The market may just completely ignore these divergences but it didn't in 2000 and in 2007. For the moment this is nothing but speculation until we get the higher closing high and then see how the market reacts to the accompanying negative divergence.

GL
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biff
2 years ago
As always Curtis, you are professional in your comments and analysis. Even if we get slightly higher which is possible, We will then drop for a while. Testing 1800 and then lower... into 1700 to lower 1650... After that, the weekly models cannot predict. We could bounce very well from there. But I bet we feed up and bounce down off of my algo arc as it comes around and down. We will grind up the bull of 2013. This is not 1990's scenerio as of right now. Home boyz must have pigs and sheep to buy to get their shares sold up high. Good Luck
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CurtisM biff
2 years ago
biff, you may be right and it's straight into the abyss without passing Go! but one thing I know for sure is that everything, especially a major turning point, must be confirmed. That confirmation would come with a series of lower highs and lower lows and right now we don't have any of that. And yes, I clearly recall when you bought C and you were obviously correct so I do take your comments seriously.

GL
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SimGlenn
2 years ago
Curtis - would you expand on CCI somewhat. Information on it is relatively hard to come by.
Thx - Glenn
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CurtisM SimGlenn
2 years ago
Glenn, I use the CCI as part momentum indicator and also to show when markets are overbought/oversold. You can find a good description on Wikipedia but I don't use it the way it was intended to be used. Anyway, on the $SPX chart note how the CCI dropped below -300 in late January but when the recent pull back ended on Feb 3rd, the CCI was at -169 and did not confirm lower prices indicating to me that downside momentum had waned.

By the same token, we are likely to get a new all-time closing high on the $SPX within a day or two but CCI is not likely to confirm this which will indicate to me that upside momentum is waning. Of course, I'm assuming we're going to get this new closing high but it might not happen.

Today we saw 2.8 billion shares traded along with another topping tail and/or upthrust type candle. Per Wyckoff, an upthrust candle should be accompanied by heavier than average volume. We didn't have that on the 19th but we have it now. This, of course, leaves me wondering if the measured move target of 1880/1890 is in jeopardy. Certainly we'll have a better idea in a couple of days.

GL
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Will Wong CurtisM
2 years ago
Well, we didn't get a higher high today but we also didn't hit a lower low. It also looks like the SPX bounced off the lower trend line towards the end. A red spinning top for the day tells me that the bulls and bears are still tugging at each other. Your thoughts Curtiss? Thanks for your help.
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biff CurtisM
2 years ago
Curtis don't give the homeboyz too much hope you and I both know what is setting up. it is not SPX 1900
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SimGlenn
2 years ago
Every trading day adds another SPX point to the upper channel. Sideways movement in a bull market is generally bullish since potential builds.
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biff SimGlenn
2 years ago
all models on my algo curves show topping perhaps not THE top but the road to 1800 and DOWN If you need to feel good about retaining your profits with that rhetoric, I fully understand. But the time for selling is near and it will not be obvious until it is shoved at those who were greedy and could not see a market ready to fall. good luck
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Will Wong biff
2 years ago
biff:

I understand you perfectly. I have been taking profits off in several tranche on the way up. Down to my last two tranche. You got to admit that the overall trend is still bullish though. Just yesterday we hit a higher high. Hard to go against the trend if you know what I mean.
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CurtisM
2 years ago
All I know is that we're back inside the rectangular pattern and are not able to break out topside. We rally in the morning and then get sold off in the afternoon. The definition of resistance is that when trapped buyers have a chance to get out, they do so which stops the market in its tracks and that appears to be what is going on. Still, little damage done and $SPX up 8pts on the week.

However, we have a problem with two key indexes and a third may be joining them. The Dow and transports are out of sync. While tech and $SPX are pushing up at their respective highs, the Dow and transports just don't seem to have what it takes. I have seen times when transports lagged and the markets ignored this and roared ahead, but I can't recall a time when the transports and the Dow lagged so if this isn't corrected soon then I think we could be in trouble. And now $SOX appears to be under pressure. OBV for SMH is showing negative divergence. It's not much of a divergence but any divergence is concerning especially given that the markets can't seem to decide on which direction to take. The RSI for $SOX rose 71.26 last Thursday and so was showing an overbought situation that needs to cool off a bit either through price, time, or both. However, this seems to me to be an inopportune time for a cooling off period or correction in the $SOX index as it means the loss of another engine and how much higher or for much longer can the markets fly if they keep losing engines? It's probably a bit premature to be concerned about the $SOX index, maybe. Regardless, this needs to be watched closely in the next couple of days to make sure the recent action is merely a pause rather than the beginnings of a decline of one degree or another.

Be careful and stay on your toes until we clear this rectangular resistance zone. GL
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Will Wong CurtisM
2 years ago
Another higher high but couldn't seem to hold on to the gain. Scary market! I would say a lot of people lost money today and also a lot of folks made money too. Perfect market for swing traders who got it right.
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Will Wong CurtisM
2 years ago
Curtis:

What do you think of the action the last two days? Yesterday sell off recovered quite a bit by the close. The 4 hour candle was a bullish hammer. Today's action confirmed the 4-hour hammer from yesterday. I did took some profits off the table this morning just in case this Ukraine thing blows up.
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CurtisM Will Wong
2 years ago
Hi Will, I thought the big decline was completely manufactured so I wasn't surprised to see markets reverse today. What does surprise me is the way they reversed. I think this was a huge overreaction to a non-event. However, this appears to be a legitimate break out to new highs so while I'm likely to be very cautious for quite some time, you have to go with the market.

I do believe we are in a bubble but that doesn't seem to matter to the markets now. No idea when it might matter.
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Will Wong CurtisM
2 years ago
Agree. There was hardly any let up today.
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Will Wong
2 years ago
Wouldn't you say that the trend is still bullish?
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