Saturday, January 26, 2008

Stockcharts.com Weekly review

Did last week produce a bottom in the markets? What had the Stockcharters to say about it?

Joe summed it up nicely with the rate cut and better than expected earnings from Microsoft.


The PowerShares QQQ Trust is in a deep band of support around $42:


His Dow chart is interesting as it shows a positive test of 1999 highs:


He also shows support busted in the S&P


The bearish sequence in the Russell 2000 is clear from the iShares, IWM:


Fans on the financial ETF, XLF, should keep an eye on Ted's support lines:


The semiconductor index has three price levels to watch: 368 resistance, 352 support, and 333 support.


The point-n-figure Semiconductor index chart is interesting as it relates to what I said about this index and 364. Friday's breakout has a new upside target of 436 - negating the prior breakdown target of 260.


The more dynamic ATR point-n-figure chart for the Dow has an upside target of 14,114. Sounds a little ambitious given what has gone before:


Maurice Walker had another 2 part commentary:

The indices got a backtest of the neckline of the Double Bottom patterns that we spotted this past week on the 15 minute charts (charts directly below). But I think with all the economic data coming out next week, we are going to see a lot of volatility. Next week we are going to get a lot of economic data such as the Fed announcement, Q4 GDP, the unemployment rate and the PCE inflation figures. I expect GDP to come in near 1 percent on January 30th. But I don't think we'll get to negative quarters of GDP, since residential construction only accounts for 6 percent of US GDP.

I'm not sure if the DB necklines will hold up due to bearish Belt Hold and Engulfing bars that the indices got on the daily charts today. But whether or not their neckline holds up, I think we will see a new minor trend develop with next weeks price action. The bearish Engulfing candlestick that has formed could allow prices to drop for the short term in order to for a new minor trend to set up. Therefore, it is possible that we violate the backtest that we got today on the 15 minute charts, which is the neakline of the breakout point of the S&P's Double Bottom pattern. We reversed today at 1368, which is the upper boundary of the falling price channel in the 60 minute time frame. If its 15 minute backtest area holds, we may see prices move sideways to build momentum.

Some Belt Hold candlestick patterns emerged on the QQQQ and the NASDAQ's daily charts today. This pattern occurs when the market is trending higher. Which makes me think that we may give up more of last weeks gains in order to develop a lower high, which will produce a minor trend going forward. Belt Holds occur when the market gaps up higher in the direction of the current price trend, but reverses and closes near its low with a long body. The bearish Belt Hold has no upper shadow.

But both the DJIA and S&P 500 daily charts (daily charts pages 1 & 2) got bearish Engulfing candlesticks today, which is also a reversal pattern. The candlestick has totally engulfed yesterday's candlesticks. This represents a shifting in sentiment, because investors aren't optimistic that Bernanke will lower rates by another half a point during next weeks FOMC meeting. It has left a depressing gloomy feeling over the market as we approach the new week, as scores of earnings reports and economic data will be released. So it could be Mr. Toad's Wild Ride next week.

The S&P 500's 60 minute chart reached an intra day high of 1368, that is the level of our August lows, which is acting as resistnace at 1370. The 60 min charts are finding resistance at the upper boundary of their falling price channels. So continue to watch that declining trendline

When this amount of bearish sentiment occurs it is often the most profitable time get long. Prices may fall next week in order to carve out a new minor trend, so we may get a 61.8 Fibonacci retracement. Sometimes for the greater good sacrifices must be made. We also still could test the recent bottom that was made. But I do expect prices to rise higher than the 1368 intra day high we saw this week on the S&P due to the huge Histogram that developed on the its 60 minute chart, along with the other indices, which shows momentum going forward.

I have reorganized the charts in order on the first couple of pages with the 15 minute and 60 minute charts on page 1, daily and weekly charts pages 2 & 3, and sentiment indicators page 3.

The backtest of the double bottom is illustrated clearly on the 15-minute Nasdaq chart:


and S&P 15-minute chart


Richard Lehman commented as such:

1/26 -- No big surprise on Friday's decline except that I thought it might start on Thursday. The short term uptrends are still intact and Dow,SPX, RUT, and even gold & energy are in the same pattern now. We are approaching a potential bounce point and could bounce upward Monday (if there is no break) and there is still decent room on the upside for long trades. However, the longer term is still basically down so there will be days like Friday after each little upleg and possibly another substantial down leg in the coming weeks.

1/24 -- The 'other' indices caught up with the Dow and SPX today, but the overall problem is that these wild swings don't always make for nice clean channels. We have new short term uptrends, but they are hitting longer term trend lines in a few cases, so a quick decline could take place any time within these uptrends. In any case, the channels are not very steep on the upside, despite the big down move and reversal yesterday.

1/23 -- And now we have the short squeeze to take care of the bears. The action was so mixed among the different indices that I'm going to wait to pronounce this an official new short term uptrend. The financials have bounced mightily, the QQQQ has barely moved and the Dow has rocketed upward in a short covering mini mania. When the dust settles, we'll see what this really means to the charts, because with this much emotion and volatility, its a bit too muddy to get an accurate read.

1/22 -- Ah yes -- a little freefall action to pretty much rid the world of any remaining bulls. I read this chartwise as a throwover -- a one-hour anomaly that returned to the existing downtrend when the smoke cleared. I do this because for the most part all of the remaining readings of the day fit back into the former ST downchannels and because it is the more conservative approach since it requires the indices to move higher before confirming any break to the upside.

His 60-min charts show new upwardly rising channels:


Robert New has the Nasdaq testing multi-year support


With 2006 lows also important:


Robert also sees the importance of the backtest


As a final chart I shall leave you with the work of newcomer, Yong Pan. The S&P chart shows how the new-highs to new-lows ratio marked a bottom in August and looks to be doing the same here:



 
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