Saturday, January 12, 2008

Stockcharts.com Weekly review

With such a bad start to January, what had the Stockcharters to say about it:

Joe Reed's summary opening:


THE POSITIVE: ***The Word of the day (and possibly for the year) is 'UNCERTAINTY'. But believe it or not there are TWO POSITIVES to keep in mind... *The Republicans do not want a RECESSION before the Election and they will do everything in their power to prevent it. This MIGHT be enough to keep the market afloat for a while, POSSIBLY. Also, an Inverted Yield Curve PRECEEDS most recessions which has not happened yet.

THE NEGATIVE: 1-7-08 **The 220 and 256 point Dow drop is a HORRIBLE FIRST WEEK OF THE NEW YEAR! And often the first week is reflective of the whole year. So watch out, stay defensive, and short the weak ones for good profits.

Joe has taken Chip's chart (which I have added here!). I suspect weekly low support of 2007 will hold in this decline, but a move to 2006 lows would not be surprising later on in the year (or early 2009).


Joe has his eyes on a crossover bottom in the Dow:


Keep an eye on the Ted lines.

The Qs finished the week at the 300(?)-day MA, but next support sits at 45.12:


If you follow the double bottom breakdown in the point-n-figure chart it has projected a target of $41.


The Dow has a double line of nearby support to look too:


With a projected point-n-figure chart target of 12,442


Although sometimes Ted runs out of Ted Lines!


The SOX has long overshot its point-n-figure chart target of 389.34 - so it is due a change (to the upside):


Maurice Walker noted the importance of March 2007 lows; he sees this as a line in the sand for the cyclical bull market:

1/11 Commentary: Despite this weeks selloff we haven't violated our March 07' low of 1363 on the S&P 500, which serves as a level of support along with the 1370 low made in August. But if we move below that level it would likely end the bull market, the S&P 500 is approximately 2.8 percent above that critical level. I'll bet we see a recovery.

The S&P 500 remains in a bearish phase because the 50 day EMA has had a bearish cross of the 200 day EMA, while prices remain below both EMAs. However this is not true of the Dow and NASDAQ, which have not confirmed the S&P 500. Those indexes are in a distribution phase because even though prices on both averages are below the 50 and 200 day EMAs, the 50 day EMA remains above the 200 day EMA.

Last Wednesday we produced a Hammer Candlestick which has potential to provide us with a intermediate bottom on the S&P 500. The candlestick that formed the day before the Hammer, had a large real body, which is the candlestick we need to move above in order to have a follow through day. On Thursday, we did have a follow through day that closed above its real body ( 1st chart below), but I would like to see prices move above the long upper shadow. The shadow area of resistance is at 1430, which is the neckline of the inverse H & S pattern in the 15 minute time frame. But even with today's selloff, prices did not move below yesterday's confirmation follow through candlestick, which is very encouraging. This Hammer is important because it represents a shift in probability, raising the odds of a reversal in favor of the bulls.

With our most recent bullish crossover on the daily Stochastic, we anticipate a push to over bought levels. This would be the Stochastics second entry into overbought territory since our 1576 high. The odds favor higher prices with the MACD-Histogram producing higher bars on the daily chart, changing the daily slope, as positive divergence in place.

Once the right shoulder in of the inverse H & S pattern on the 15 min chart is completed we will probably break above 1430. From there we should test the declining trendline at the 1490 area. 1490 has been both a level of support and resistance in 2007. A move above 1490 would end the correction by breaking fan line # 3.

Keep your eye on the 60 minute chart, as the MACD is starting to roll over near the zero mark. If it does we will have negative divergence on the MACD, which could allow us to test our recent minor low of 1378. But the 15 minute support of 1401, so far is holding up and could act as a floor of support for the inverse H & S pattern in the 15 minute time frame.

We have not seen a decisive breach in the weekly S&P chart, nor have we gotten a reliable confimation signal of a reversal. Therefore, no definate directional move has taken place, and we will just have to wait for the bulls and bears to fight it out. But I am still betting on a recovery.

Because I suspect that the negative signals in Crude Oil will play out. And that the Fed will ride in to save the day like the cavalry. To ward off those savages (the bears) circling the wagons. In other words, I don't think this will be Custer's last stand and hopefully there will be no massacre.

Here is Walker's first chart referenced in his commentary:


With the Triple Crossover For the S&P:


The Broader picture illustrates March 2007 lows:


Richard has illustrated some potential (nascent) uptrends in the making:


1/12 -- Has it sunk in that we're in a bear market yet? The charts hinted at it since December and confirmed it in early January. For the short term, I believe we are still in an uptrend and the charts support that contention so far -- even with Friday's selloff (which held slightly above the prior lows and gives us a rising line). We have to move higher on Monday to keep that scenario alive, so we'll get confirmation shortly. It will be a seesaw upward move within a larger declining channel, but that's the way it looks on the charts. Gold (and QID) are still the only game in town with a larger channel still rising.

1/10 -- Our short term breaks to the upside are now confirmed. This morning's pullback after the Bernanke rise could be interpreted as a retest of that break. Problems are that this is too steep and narrow to be a full channel and is therefore a leg of something larger. We should still head higher near term, but watch the lines closely for breaks or expansions and remember that the larger trend is down, so like today, rallies will tend to sell off more frequently.

1/9 -- Another line touch to the lower support line and another bounce upward within the channel for most indexes today. I redrew a lot of the downchannels to reflect the larger down move, and the bounce looks better than the prior one, but NO breaks upward have yet been evident. We may get it tomorrow morning, but not yet. In any case, the longer picture is definitely down now for the majors.

1/8 -- Chalk up another couple of percent on the downside -- all in the final hour of trading. There actually was an upchannel, but it lasted hours rather than days. Now we're back down again. This tells me there is a major 'get me out' mentality going on as people and institutions embrace the magnitude of worsening fundamentals and a possible recession. We only have one hour of new downchannel, so we need more data before drawing any kind of lines.

Is Jack Chan calling time on the Energy sector? Note the bearish divergence (not illusrated) in his United States Oil Fund (USO), combined with his Trend Line Break Sell Signal:


Finally, Robert New has a good chart showing the importance of the upcoming test for the Nasdaq:

 
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