Nemo's Stream of (un) Consciousness Findings

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9/10/2012:  ZZZZZzzzzzzz....well, not really.  Many stocks had relatively significant movement yesterday.  The indexes did some meandering, with IWM testing the ranges: first the old resistance from Thursday, that became new support on Friday-which it tested twice, and then by gently piercing the Friday highs just under yesterday's confluence of the Daily R1 and the Quarterly R1with an end of day descent leaving it resting on the Monthly R1 and Daily S1.  SPY's low bottomed at 144 (there's the test of the whole number again) near the 144.02 daily S1 then breaching Friday's high before joining the IWM and financials in the afternoon descent closing at the Daily S3.

Notice how SPY and IWM's movements were not correlated until the final descent starting 1:45.

Financials, tested the Friday's high's concurrently with the SPY and then were weak the rest of the day touching the daily S2 before closing slightly above.

Bonds, as can be expected, rallied into the close as the indexes sputtered.

Now for the descent....I'm on record expecting a relative meandering until the German pronouncements. I of course, could be wrong.  What could be the psychology of the market going into the 12th?

We've just had a long bullish run.  We're coming into a relatively short time period of relative uncertainty.  What do you do?  Simple...you take some profit, or hedge.  Thus the weakness, or at least a reasonable explanation of the weakness.  Which leads me to my, Nemo-you moron...moment.  

Today is 9/11....mmmmmhhhh, which coincidently is the day before the pronouncement.  If the market is us, and the algo's are programmed by us, might that lead to a bit of hesitancy psychologically?   Just sayin'...

Watch the weekly pivots, and watch previous ranges for the action to test them.

9/11/2012:  Let's see what today brings.  The futures are relatively subdued as the clock ticks by 7:42... 

Sure this isn't Groundhog day?  Indexes and financials lifted off those levels to test, in the case of SPY, and surpass albeit slightly in the case of IWM, and then proceeded to sell off, although they closed above yesterday:  IWM just about above the daily pivot, and SPY also just above the daily pivot.

Financials stayed strong all day, so didn't  the "Vampire Squid" GS, although it did sell off to close right on VWAP.

One more interesting tidbit.  The $ sold off significantly, yet the market couldn't maintain the rally.  Is it more a question of strength for the Euro and the expectation of a German "Die Daumen Auf! -thumbs up  (well that's literal...they don't really say that) for the ECB.

Clear as mud...

So, either the strong financials led by GS are signalling all is clear, or the last two days have been distribution.  Tick...tick...tick...tick  

9/12/2012:  The Germans, as expected, didn't go Kamikaze (mixed historic metaphors there)  on the EU/ECB.   Indexes held the range, and GS finished near the top of it's range.  Can See Lloyd (doing God's work) Blankfein lubing up the arm to shove up Bernanke's ass to make his lips move tomorrow.

9/13/2012:  And the bearded clams delivered!!!!   Free money 24 hours a day 8 days a week as far as the eye can see!!!  

He's taking 40billion a month of that bad collateral off the hands of the bank.   Mmmmhhhh...raw materials and oil ripped north with the decision.  I wonder how far the economy can go as oil climbs towards it's 2008 highs with the Middle East looking more like a powder keg every day?

We're not far away from my month end target of 153 spy.  There are headwinds in the 150 area.  IWM finished Thursday off, but got withing .70 USD of its 2011 highs.  Expecting gap up on Friday, with the potential for profit taking going into the afternoon.

I expect this bus to keep going north into the elections.  There is nothing to slow this train down unless earnings season is a disaster.
 

Nemo's Findings for 9/2

Monday that was:

   

I went back to the 15th on this so you could see the fibonacci draws. Looking on the far left at the circle, notice the confluence of the 38.2 up leg draw, and the 50% downleg draw.  Notice how those two levels coincide with the Monthly R1, which was also a failure at the 23rd late afternoon swing-high.  Notice the afternoon bottom after Vad's...er...how did he describe it...oh yeah..."cascading"...drop(had to be there). on IWM you had the 23.6 level.

While SPY showed an area confluence of the 61.8 downleg retrace and the swing high from the 23rd.  Again, at the bottom of the Vad-cascade, the confluence of two fib levels, as well as relative price support at 141.30ish.

Is there a conclusion to be drawn other than the multiple confluences in both indexes were a top for the day, which supports the overall confluence methodology? Dunno.  However, I find it interesting the relative exactitude of the price action/confluence level intersection on IWM relative to SPY 

The riskier instrument seemed to be the tell.  Anyway... 

The week that was:

As we can see for the indexes and the financials  it was a relatively rangebound week with, in the vein of "close enough for government work," IWM and FAS closed on the Weekly pivot. 

                    Nah....the markets ain't rigged.

SPY though not on the Weekly pivot had basically oscillated around it all week finishing Friday on VWAP and creating a doji for the daily and a relatively indeterminate doji-ish weekly candle. So, from the charts going forward, it looks like a "definite maybe."  Volume was actually rising the last two days.

We're moving sideways, which is one way to work off an overbought condition.  Imo, we stay above the 138.60 area, no immediate doom.

Bonds, on the other hand, have been on a steady rise   for the last two weeks

The dollar has been on a relatively steady decline since the end of July.  It's coming into fairly strong support area formed by the price action between the middle of January and the middle of May, so it may thrash around a bit in this area.

Of course, the impending decision on September 12th by the  Bundesverfassungsgericht (say that 3 times fast) hangs over Europe, with the Fed meeting the next day.  One could expect there to be significant dollar volatility.  

If the Germans nix the bailout....dollar should spike and the market should sell off. 

I doubt they'll nix the bailout....How would you like to be fingered as the group that puts a dagger in the Eurotopia experiment?   IMO, they cave outright or, marble-mouth their way around shooting it down.  Of course, that means printing ad-infinitum.  

Question in that situation...if they vote thumbs up, meaning printing, does the Euro strengthen out of euphoria causing the $ to weaken and the markets go up?  Or, does the Euro weaken because of all the printing?  Does Benny hop on the bandwagon to print to keep the $ from getting too strong?

Typical relationship is $ up,  Market Down.  $ down, Market UP


Not expecting big moves next week in the indexes because everybody likely won't come back until the second week, and of course, the aforementioned Deutschentscheidung.

Charts are bullish, but I would, as do others I read, expect a flush to shake out the longs after the German decision ....and then resume onward and upwards into the US presidential election.

                                       SPY 153 anybody?


The week that is (New Monthly levels):

Note the shaded boxes below the price action and the one above.  Those are price levels where heavy volume was done.  Going through either one points to more action in that direction.  However, on the downside the 50SMA is rising and waiting.  The IWM has been lagging the SPY a bit, expect this to lead in relative strength or weakness to indicate direction...my bet is up

Note the relative obedience to the drawn trend-line.  I have three trend lines drawn through the upper, lower, and middle price action from the middle of May and the low in June.  The drawn trend line is the median trend-line.  Notice the Weekly Pivot, is only a few cents different from last weeks.

This was the performance of the major World Indexes on Monday while the US was enjoying a long weekend.   

Nemo's Findings

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  


Oy vay, did it again....forgot to take a picture of the week that was.   So, I looked at last week's.

• The IWM finished the week at the Weekly R2 and for all intents and purposes, at the highs of the week
• The SPY approached the Weekly R3 and topped out at price resistance around 142.25 breaching the year's high by the proverbial "hair"
• The Q's also topped out near the Weekly R3.  We're entering the traditional period where tech gets bought into the holidays 
• This was an incredibly strong week overall.

Yeah, yeah, I know...no volume...welcome to the Summer. If you notice, Thursday's strong move was the highest volume of the week, and the relative value is arguably significant, and Friday's volume was higher than the rest of the week, except for Thursday...that's strong demand...is it op ex week games?  I don't think so, bonds (TLT) have been having a tough time of it, and the dollar has been on a downtrend.  Also, volume is usually higher at bottoms so to see it waning on a climb in the Summer is not unusual.  To compare volume today to the tumult starting with the CDOs cracking in 2007 and March 2009 denouement is probably not a good way to look at it.  Also, stocks were alot cheaper in 2009 (unless you're RIMM) so it costs more to buy them.  One could argue we were having a volume bubble and that a reversion to the mean could be expected...this too shall pass...what comes next?  Crystal ball please...oh cool, it's LED backlit..

I have said that we're probably on an upward trajectory into the German Supreme Court decision.  I still believe that.  Of course, my best friend is a rabbit, so take it for what it's worth.

I have also noticed a surfeit of stories regarding countries preparing for a dissolution of the Euro.  Whereas I don't think the Euro will outright disappear, it is a reasonable assumption that some nations may be forced to leave the Euro, or may decide they don't want to be a part of it.  Nations are finally realizing it means giving up cultural sovereignty to a bunch of un-elected bureaucrats in Brussels(which was an argument I remember having with my European friends during grad school in the late 80's. Having said that, Winston Churchill said the best argument against democracy was a 5-minute conversation with the average voter).  Perhaps the herd of humanity is ready to be a homogeneous flock, I'm not sure.  So, there may already be some desertion expectations baked in to the market.

Should the German court decide against the ECB, we probably get a harsh downward BTFD! action so the Street can shake out some weak hands, and then we resume upward trajectory into the US elections. 

Since it's a reasonable expectation that there will be money printing in Europe this Fall to either/and finance a series of bankrupt countries, provide liquidity to moderate the effects of countries leaving the Euro, will Bennie the beard have the opportunity to print to keep the $ from getting too strong?  So, keep an eye on bonds and the US dollar.

Anyway...enough mental self-gratification, here are the charts for next week.  Oh...expecting pretty good gap up on Monday...

With all eyes on the spy we can see some longer term resistance in the 143.25 area, but the feeling I get is a bout of euphoria is coming.

As for the IWM 84.50 is longer term resistance, but euphoria means risk on, so given this index is a bit behind the spy in testing it's year highs, I would think it means to do just that in the not too distant future

The Q's...well August is often a traditional time to buy tech going into the holiday season.  69.60 has multi-time frame resistance, but we'll see.  Of course, arguably the Q's are GOOG, AAPL, and AMZN, so as they go...

So, where is the fly in the bull ointment?

Nemo's Findings week of 8/4/2012

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html 

The week that was:

I left the the pivot points in, which only count for the most recent day,  to show the relatively extreme range for Friday. 

Notice how in IWM the range was coralled by the Quarterly and Monthly Pivot above the daily R3

In SPY the daily R3 served as the roof for the day with the upper channel trend line overhead near 140.

I joked in the trading room in the middle of the day on Thursday how  the IWM was forming a "stilleto heel" chart formation.  What you may notice is it does form a perfect Adam & Eve bottom, which gave an inkling, if you had the intestinal fortitude to go long, as to what portended for Friday. By the close of action on the 15 min chart, it had formed a reasonable Cup and Handle.

The gap up Friday was triggered by: 1) a parsing of Draghi's pronouncement that  supposedly gave specific requirements for target nations to receive the benefit of the printing press, and 2)  the perceived beat of the jobs report.

Did you notice how many stocks that have been announcing earnings and selling off immediately after are subsequently being bought recovering their range?  That's strength folks.

The week that is:

It's a reasonable assumption that, as earnings season winds down, and August progresses, volume will shrink, and prices will be moved by the news, primarily that out of Europe.  Intra-day plays become more dicey as reduced volume makes for erratic action.  Draghi has seemingly made his pronouncement, now the world waits for the edict of the German Supreme Court on (well near)  the Ides of September (12th actually) with the Fed meeting on the 13th....funny coincidence.

If the German Supreme Court says "Nein" then the structure of the EU and the Euro come into question...well as if they aren't now, but, that does make the situation more dire,. Basically, we are on hold until that time, so a rangebound market would seem to be the highest probability.

Should the German court say "Ja Wohl!" then that means the printing presses will be unleashed....If the Euro strengthens massively ($ falls) on the news, under the belief the Euro and thus the EU-is saved (or at least the can is kicked further down the road), the equity market likely explode (oh the hyperbole). But if the Euro weakens significantly should the honeymoon wane, can Bernanke afford to let American exports become uncompetitive because of $ strength? Does he then have to open the printing presses to maintain competitive relative currency strength?  What happens to basic materials and oil?

Just a few of the questions.  Oh, yeah...San Bernadino, CA filed for bankruptcy this week.  This is becoming a regular occurence.  Do state and municipal financing become the next crisis?

Nemo's Findings for 7/28/12

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  

The week that was: 

• Remember at the beginning of the month I thought the confluence of  of SPY pivots in the 135 area would serve as a magnet around which the price action would oscillate? Well, so far so good.

• No surprise, bonds went in the opposite direction of the equities and financials 

• After Draghi's comments on opening up the spigots in Europe, spy climbed $1.20ish in 15 minutes on Friday. European markets were closed at the time so expect them to be up HUUUUUUUGEEEE Monday when you wake up, if you live in the Western hemisphere that is.  Will it carry over here?  I'm looking for us opening up in the 140ish area...or not...as Vad would say.  If European markets are lower or flat, then all bets are off.

• Since climbing market usually means risk on IWM led the way finishing just about on the weekly pivot...close enough for government work 

•  Notice how SPY couldn't hold below the 50 SMA on the 24th...it was at that point I said in the room the lows were probably  (or not-feel better Vad?) in for the week.  Then on the 25th, they made one more attempt. (o.k., I don't know why the font changed...just going with it.)

The week that is:  

O.K.  looking at the SPY, I expect that confluence down in the 135 area to provide strong support now.  Obviously the monthly pivots change on Wednesday, but the weekly levels have been the strongest along with the moving averages.  Frankly,  I don't think we get near that level next week.  Time to drink the Euro-kool aid, at least for the next week..or not.  

• Funny thing happened this week, both the 50 day and 200 day moving average are moving north.
• 141.66-142.21 represent price resistance, and as we can see, between 142.80-143.60, there is a ton of resistance.  Get through that and it's open territory with some minor resistance in the 144.50 area, until almost 147.  A bit extreme perhaps, but a week like we just had puts us in the 145 area. Oh ye of little faith.
• Bad news was bought, and bought, and bought.  Well, except for FB.  Exception that proves the rule?

The IWM it looks like the bullflag that started the beginning of july is about to break.  The 50 and 200 SMA are so close it's an R-rated chart.  (Would have been X back in the 60's...to think A Clockwork Orange was rated X back then...sheesh, they'd show that on TV today....almost).  Pay attention to the IWM.  If it's weak, SPY likely won't be running very far without it.  The overall range was so tight, I included the R4 levels on the weekly data.

Now, same with the Qs this week bad news was bought.  We're also coming into the time of year when technology is traditionally bought going into the holiday silly season.  So, no reason to expect the Qs not to join the party.  Big support in the $63 area.  200 SMA and 50 SMA both about to start heading up.

 .  . 

Nemo's Findings week of 7-22-2012

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  

The week that was:

• with the SPY, that heavy confluence of Multi-time Frame Pivots kept the price action above the 135 level topping out within .25 of the Weekly R2 level. Notice the trend line from the October lowcoming into play just below the confluence

• with the IWM, the Quarterly and Monthly Pivot confluence served as the relative floor for the week  with it basically hemmed between the two from noon 'til close on Friday.  Notice the trend line coming into play from the October low.

• Given the renewed pressure from the European imbroglio markets dropped on Friday-or at least, that's what the headline writers write.  Drives me apeshit!  Anybody notice how seemingly bad earnings news was being bought for most of the week until Friday?  So, Friday profit taking would make sense.  Have a good week, lock in some profits going in to the weekend in case the fecal matter does hit the ventilator, and start again on Monday. Lather, rinse, repeat

• Having said that, the dollar had quite a bounce north on Friday.  Pay attention though to the rising stories in the US about municipal bankruptcies...canary in the coal mine anybody?

The week ahead:

•  Will the Confluence of Pivots hold.  Dunno...IWM is considered the "risk on" measure of the market.  With Spain's financing problems seemingly on the increase risk may not be in vogue next week.  If we go down, look for the 50 SMA and the rising 200 SMA to provide friction and support.  This week was a lower high of the most recent swing high from the June low.

• QQQs double topped this week touching the yearly R2

•  The confluence of pivots on SPY could provide some stickiness. Below them, the 50 SMA and the rising 200 SMA at 131.50ish
• This week marked the current swing high from the June low

Oh, and this is my trading partner:

 

Nemo's Findings for week of 7-08-2012

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  

The week that was:

 I've added to the panels to include bonds and financials (financials on steroids actually-FAS  ;-)) so you can better see the interrelationships.  I will switch out FAS for UUP to see what the dollar is doing.  Between those 5 you arguably, on a regular basis, get the best general feel for the market.  So what did we see this week:

•  IWM topped out at the R2 on the weekly pivot
• SPY topped out, although my capture doesn't show it clearly, at the 61.8% extension off the break between the 6/4 low and 6/7 swing high
•  SPY bottomed at the Semesterly Pivot, it did penetrate below, but did not close below it.
• Simultaneously IWM bottomed at the 61.8 retrace of the  3/27 top and 6/7 bottom
• Notice how financials move with the indexes
• Notice how bonds tend to negatively correlate

You may find this interesting:

This is the primary list of tracking stocks I look at during the day.  As you can see the majority are ETFs representing industry sectors.  I also have a short list of currencies I watch but really, all you probably need is a dollar index (UUP-dollar strong, usually market weak).  I'll organize by either where they are net on the day, or where they are in their range for the day.  Depending on who is strong or who is weak, and where they are in their range, gives you a sense of the condition in the market.  

Notice  the IYT (transports) are at the top of their range, with XLU (utilities) and XLP (consumer staples) just below well up in their ranges.  When utilities and staples are strong usually the market will be weak, but transports usually indicate strength as does IYR (real estate).  So more than likely we were at a muddling point in the market, or transition when this snap shot was taken.

Now, there are a few "stocks" on this list.  CAT and IBM are big boys in the dow representing different sectors.  If they are strong, likely market is strong.  Notice how CAT is relatively strong but IWM is in the middle of it's range.  Again, pointing to market neutral or transition.  

I also track GS (Goldman Sachs).  The vampire squid is everywhere.  They know more than everybody.  If they are trading weak, be careful.  JPM is considered the best in breed in banking so they are here, and of course  AAPL.

 


 Here are the images for next week:

Looking at dailies, trend is strongly intact.  We're climbing the wall of worry.  One could say, "expect it to continue," but then, that inserts bias into the analysis.

Nemo's week of 6/24

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  

 IWM SPY-the week that was:

The week that is:

A video review of what I saw and what I see:

http://youtu.be/iYOb-yMWOpA