Saturday, October 27, 2012

Nemo's Findings week of 10/29

(Course on chart pattern recognition is available now:  

Apology up front, it's now hunting season so I'm resetting my routine a bit.  I was negligent on collecting news.

Week that Was:

Suffice it to say, in general, earnings and guidance have been somewhat disappointing and the market has been selling the news, even if it is good, albeit in a relative range.

I've heard said that tops are not a bang and drop, but a process of distribution that takes time.  As I write this headline GDP came in a tad better than expected and the market is relatively blase about it.  Here are the daily moves for the basic indexes I track:

The market seems to be saying it's not too excited about what comes down the road. As you can see, the major moving averages(50, 200 SMA) have held in the Financials and IWM. Notice too on SPY the reddish bands.  Those are volume at price bands where heavy amounts of volume have been done. It will take concerted bullish energy to break above, and relatively concerted bearish energy to break below-although that scenario is building.  Notice how that level has held.  Here are longer term views:

I've highlighted the areas of significant volume or where they demarcate insignificant volume, also known as vacuums, or as the trading savant @gtotoy likes to call them "Kirbys."  Since this is taken as of Friday, you don't see how much volume has built up  in the range this week, but it is significant.  Should the price action drop below the box, notice the lack of volume down to 138.60ish.  Notice how the bottom of that gap coincides with the gap up on 8/3.  That will likely be the bounce level, if it drops that 136.80 level then 135.75.  Not to be a pessimist, notice the volume kirby that begins above 142.03.  Methinks we test that 143.40 band before we go lower.

The week that is: 


As you can see, we have a volume resistance band that coincides with the WR3 and MPP in the 83.75 area, so it will take a little work to get through that area.  Support is formed at the 200SMA with volume support in the 79.75 area with a volume vacuum starting in the area of WS3, 78.60


 The Qs also face volume resistance overhead starting in the area of the 50SMA, but it is a band approximately a dollar wide.  Of course volume support is visible in the 64.25 area.

The SPY also shows a couple of bands of overhead volume resistance with the 50SMA sandwiched in the middle.  The Weekly R3 denotes the most recent swing high.  Volume support held the SPY this week with denoted potential volume support levels below and the 200SMA-the bull market delineation.

In general, the market is looking bounce ready, of course the elections are only a little over a week away could be meander.  Having said that, one more chart:

This is a chart of the dollar.  As you can see, it's traveling a band in a range.  Now the standard relationship is $ down=Market Up.  If the $ holds the range, next move is to test support.  As we see with many of the charts above we see they are near support.  So, given the inverse relationship (normally that is), If the $ begins to drop we should see a rise in the market, because if the $ is worth less, then it should take more of them to buy everything else.  Also...

Looks like Bonds want to at least test the 50 SMA.  Very tight band between there and the 200 SMA. If they break higher normal relationship is inverse to the markets also.

Having said that, I'm not sure what will happen to oil.  Frankly, I'm not sure about anything else either, but given the cloudy economic environment, the market for oil could be mixed should the market advance and the $ drop simply because future expectations of demand for energy will be tempered.

O.K. that's enough for now...