Showing posts from April, 2018

Mixed Setups; Something for Bulls and Bears

Markets started the day strong - challenging resistance - but were unable to press this advantage.  Many indices closed lower, leaving 'black candlesticks' which are typically bearish when formed at 'swing highs' but still favor weakness even in the absence of the swing high setup. The 'black candlestick' for the Nasdaq at resistance suggests a move towards the 200-day MA but for this to happen there needs to be an immediate downside; any recovery has a strong chance of negating the 'black candlestick'.

Bulls Buying The Bounce Offered Little

Yesterday's recovery set the groundwork for a bounce but the gap higher took away most of the opportunity the bullish set-up offered. Weakness at this point would be bearish so wouldn't be buying but if in then hold until the morning breakout gap closes and reassess. The S&P generated a small uptick in relative performance but not enough to trigger a 'buy' signal yet. Other technials are mixed with 'buy' signals in the MACD and On-Balance-Volume are offset by 'sell' triggers in +DI/-DI and Stochastics.

S&P To Test 200-day MA

After yesterday's selling today's late recovery was a chance for bulls to catch some breadth. The S&P came close to tagging the 200-day MA on the intraday low. The index is on a path to the lower channel. There was no technical change and relative performance remains weak.

Shorts Kick On

There was no Sleeper (long) play for the S&P as sellers took control across all indices. Losses of between 1-2% took effect in Large Cap, Small Cap and Technology indices. The S&P cut clean through horizontal support, 20-day and 50-day MAs, but was never able to challenge channel resistance. Look for a move down to channel support. Technicals are a mix of bullish and bearish signals.

Semiconductors Approach 200-day MA; S&P Sleeper Play

There were modest losses today with most indices holding the status quo from Friday. The one exception was the Semiconductor Index as it lost over 1% in a confirmed break of support. However, it does have the 200-day MA for a likely test tomorrow. All technicals are negative and relative performance took another step lower but no change there.

Shorts In Play

Friday's selling confirmed the second shorting opportunity with support breakdowns across lead indices. The S&P closed with higher volume distribution on a breakdown of rising support. Relative performance remains weak although there are still 'buy' triggers for MACD and On-Balance-Volume.

Short Opportunity II

The first chance for a short play got burned but there is a second one on offer for the S&P. The S&P tagged channel resistance and while today's reversal off resistance didn't amount to a big percentage loss it did register as a distribution day. There wasn't any significant technical change so if this short does evolve it will do so with risk measured on a move above 2,717.

Short Opportunity Negated

Well, that didn't last long. The shorting opportunities which offered themselves yesterday didn't last the morning; morning gaps held beyond the first half-hour of trading and bar a small sell-off into the close markets finished higher and above key moving averages and trading channels. The Dow created a breakout which now offers a potential long play. Stops go on a loss of 24,600. Technicals finished with a new long 'buy' trigger in Stochastics.

Shorting Opportunities?

The indices are edging higher but the presence of 50-day MAs and/or channel resistance overhead does offer an opportunity for shorts to take a position. Market action does appear to be favouring bearish wedges with prices moving towards an apex on declining volume. The current apathy will break and how it does will define the direction of the next market phase. Today's action in the S&P left the index pinned to its 50-day MA. The tight intraday range offers a low-risk short play with a stop above the 50-day MA and an entry on the break of the ascending support line

Tentative Breakouts Fail To Hang On

Markets had started Friday above the marked consolidations I had drawn on the charts but subsequently ended the week still inside these trading ranges. As a two-day pattern, Friday's close finished as a bearish engulfing pattern across markets which means I'll be looking for a break of newly drawn ascending support (of the last 8 days) in these indices. The S&P still has a MACD and On-Balance-Volume  trigger 'buy' signals but Friday's high (and the high of the bearish engulfing pattern) was the 50-day MA. Sidelined bulls will want to see a convincing break of the 50-day MA, and probably the downward channel before committing. Bears have the easier play - helped by the strong relative underperformance of the index against its peers. Short the loss of Friday's low with a stop above 2,680.

Range Trading Continues

Tuesday saw some upside from Monday's recovery but the trading ranges I marked on the charts over the weekend remain valid so no change in the status quo. The S&P shows this best with the trading range defined by the former 'bull flag'. Today's close left the index just below resistance. The lower close could suggest another run back to 2,590s.

Have the FAANGs come to the end of their bullish run or is there still life in the tech sector? How are you allocating for that going forward?

Posted on " It has been a rocky start to 2018 with direct and indirect Trump factors; for example, Cambridge Analytica (+ fake news distribution), Trump vs Jeff Bezos and a new tariff war, hitting certain FAANG stocks, with the contagion spreading to those indirectly impacted and the broader Tech sector. But not-to-long ago, the same Trump factors were driving the post-election rally; ‘Business Man’ leader, accelerated deregulation with industry friendly appointments, funding cuts to regulatory agencies and massive tax cuts favoring the investment classes. In reality, the “Trump factor” is a bit of a red herring; it’s the uncertainty and randomness of what may come – be it Trump, terrorists or natural disaster - rather than what has come that’s the problem. With that in mind, we can only consider how markets value FAANG component stocks here-and-now."

Dow Breakout Stalls; Semiconductors Make or Break.

The earlier moving Dow Jones got pegged back a little as it fell inside its prior consolidation. Similar moves appeared for the S&P and Tech Averages but as these were still range bound prior to Friday their selling was not as noticed. Markets are in a 50:50 tug-of-war between bulls and bears as these (now) 3-week consolidations work their way to a conclusion. I have redrawn the consolidation for the Dow. Friday's mini-breakout could be viewed as 'bull trap' but I think it's probably fairer to broaden the resistance level for the consolidation. The 200-day MA again looks important but another test so close to its last maybe one too many.  Volume climbed to count as distribution but overall volume was still quite light. Technicals are mixed.

Dow Breakout

Markets look to have found a new routine with 200-day MAs acting as working support. The 'bear flags' I had marked for the S&P and Dow Jones Industrial average look toast given the latter index has broken resistance from what now looks to be a horizontal consolidation. However, the larger consolidation from all-time highs has yet to be challenged but could see a test Friday or Monday.

Bullish Harami Crosses Offer Swing Low Potential

Today's action didn't break the bounds of Friday's range but did create a scenario where solid swing lows develop; bullish harami crosses are one of the most effective swing low markers. The best opportunity can be found in the Nasdaq 100. A rally from here would suggest the makings of a trading range which I have marked in the chart below. The typical stop is a loss of 6,320 but I would use a decisive break of the 200-day MA as a stop.

Blog Traffic Picks Up as Bears Take Control

Blog traffic has doubled over the last three days as 'panic reading' takes hold of the market. Such spikes in readership have in the past acted as good points for a near-term bottom, although today's action does not suggest as such. The S&P and Dow Jones both offered breakdowns from their respective 'bear flags'. The S&P broke from the 'bear flag' and closed just below its 200-day MA. Volume climbed in distribution although there is enough to suggest this could be a support level.


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