Tuesday, September 07, 2010

Weekly review of Stockchart.com charts; Rally to Continue?

It has been a while since I last wrote one of these. August has kept bears busy, so what are Stockcharts.com commentators saying about the market now?

Ron Walker of TheChartPatternTrader.com has a 60-minute chart which shows the bullish divergence in NYSE advancing/declining issues wih last week's triple bottom, but also illustrates a bearish wedge which could lead to a 30-40 point drop back to rising support.

The Volatility Index is down at the lower Bollinger Band; how will the bounce back to the mid-line behave (will this start to trend down? should be bullish for the market if it does)?

Anthony Caldaro of ObjectiveElliottWave.com looks to have marked a third wave (higher) on the weekly S&P chart - unless I'm misreading this???

Richard Lehman of TrendChannelMagic has a more optimistic outlook for the long term direction for the market.
9/5 -- The short term charts have broken into green upchannels and have even accelerated. The more important issue, however, is that the broad market indexes(SPX, RUT and others) are already back at the upper purple lines on the long term charts, and stochastics suggest they have not yet peaked. Some foreign markets have already broken the long term purple (see FTSE and Toronto) and it appears likely that the US markets will also. If that happens, it will put a much less bearish spin on the long term charts...for now

New programs to boost the economy are coming out this week. There will likely be a lift to the market on such news initially, but when reality sets in later, I expect things will retrace.

9/3 -- Short term channels accelerated on the upside this morning, but the SPX hit the upper purple on the one-year chart and that should represent considerable resistance, if not a reversal point back down. More analysis over the weekend.

9/2 -- The rally continued by creeping up along the upper blue mini lines (which I have now made green as they have broken purples and are new upchannels). Only Naz and XLK have not yet broken the purples on the 5-min charts. Things are extended now and very vulnerable to pulling back in the new green channels but the channels do have further upside potential in either case.

The only long term chart where an upper purple channel line has been broken to the upside is the Toronto Index (TSX). Canadian stocks have been on a nice tear lately.

9/1 -pm- The blue minis have been redrawn now and the broad indexes are at the upper lines. We did get the break of the purple trend lines and then some, but the blue minis are a bit extended and vulneable to a low volume pullback by the end of the week. Nothing really changed in the economy. This looks to me like a snap back rallly that we knew was due.
Anthony D. Allyn of Elliotwavehound is looking at a stay-of-execution for the market
Sept 3rd: Trade the range back to 1129 on the SPX, with any luck it will even break out above the top trend line. See the 60 min SPX chart for wave 'E' target in a pennant formation. Wave 3 crash has been postponed until further notice. Long term hasn't changed. China bubble bursting, and commodities, taking the US markets with them, and just in time for the mid-term elections.
His volatility (VIX) chart is perhaps the most interesting as the wedge plays out.

Yong Pan of Cobrasmarketview is showing more bearish short term signals alongside more bullish intermediate term signals.

His system model has yet to show a long signal (for the SPY)

Although the CPCE 'buy' signal is awaiting confirmation

Yong Pan is looking at the VIX touch of the lower Bollinger Band has a shorting opportunity

Yield tracker pointing to a bottom in the 10-year (bearish for bonds)?

Michael Eckert of EWTtrendsandchart view on the market - if his count is correct - is soon (today?) will see the start of a third wave down (for the S&P) to a target of 791. It would assume the 1,129 reaction high is the second wave peak.

Although in his 60-min chart he points a higher wave 2 peak closer to 1,150.

Finally, Robert New of TheInformedTrader.com has opted to go for consolidation triangles/wedges in the lead indices

But - like myself - is watching head-and-shoulder reversal patterns in the weekly charts.

In summary - there is a general opinion the rally will continue for a little while longer but the outlook beyond the next couple of weeks remains bearish. When the market strings together 2-3 down days in a row will questions be asked? The answer will come with the accompanying volume to those down-days; will it be high and signal a run to the exits, or low and an opportunity to buy a rally retracement?

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