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Weekly Wizards

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Weekly Wizards

Tue, Jun 9 2009, 04:44 GMT
by Mike Paulenoff, Jack Steiman

AdviceTrade.com

Gary Dean, www.MarketsPath.com, on Key Pivots to Watch

Did we see an intermediate-term top or "wave A" complete with a blow off top early Friday? There are a ton of indicators that would scream yes, but with Fed has intervened with the market forces and we can't say with 100% certainty they are finished for now.

We are at some pretty important pivot levels and the good thing about the set ups here, is that we will have a pretty good idea what is unfolding by upper and lower pivot points. A move under 936 that sticks should have the SPX heading down to the 928ish support area. That is where the we will get out best early tell. If the SPX breaks below that pivot, a more meaningful drop could be unfolding.

The next and most important pivot is going to come at the 914 level. If the bulls don't defend that breakout level, we should see downside momentum start to pick up and the low 800's would be in play and possibly lower. But that is the longer term outlook and we will cross that bridge when we get there or if we get there. Remaining in trade mode and trading the shorter-term charts is the best way to make money in this market.

Now let's take a look at the bullish case here. If the SPX takes out the 943 pivot, it would be our earliest tell that a test of the highs is taking place. If the bears fail to hold the tape down at the 952 level, 961 would be the next resistance pivot and then 988ish.

I am on the side of an intermediate-term top being formed during this last leg up, where wave A would be stamped complete and we have a the deepest pullback of this bear market rally since March to form wave B, with wave C to follow which would carry the indexes above the highs left behind.

Bottom line: We either finished wave A of the bear market rally at Friday's highs or we are process of doing so with one more push to the 961-988 pivot levels. We should see wave B start and when completed, wave C should take the indexes above the highs left behind from wave A

For Monday: If we see early weakness we need to watch the 936 pivot. If the SPX can stay below 936, the 928 level should be the next stop. If that level doesn't hold, we should see the spx head for the 914 area. If we see early strength, we need to watch 943 as a turning pivot. If the bulls can take the SPX through that pivot, 952 would be next with the door open for a move to 961.

Harry Boxer, www.TheTechTrader.com, on Not Stepping in Front of Runaway Train

The S&P 500 remains in a solid up-channel, although the narrower channel was broken last month in a sideways consolidation without actually breaking down. That resets the trend and widens it. We then had a breakout of the pattern and now a 4-5 day flag pattern that could be bullish, despite the fact that the On-Balance Volume is lower and showing some negative divergences, definitely a sign of caution. There are, however, other technical indicators that are confirming the trend and certainly without any breakdown below the moving averages and trendlines, this can continue higher.
Until we get that confirmed breakdown, there's no reason to step in front of a runaway freight train and try to short here...yet.

The Nasdaq 100, similarly although even more bullishly, double bottomed, broke out, moved up in a tight channel and then moved sideways, consolidated, holding the moving averages. We're reset the channel as well. It's now in the bottom half of the channel, and moving up towards the mid-channel point, making new highs for 2009 and going back to last fall.

Jack Steiman, www.SwingTradeOnline.com, on Why Some Unwinding is Healthy

So is the market done here? We gapped over the 200-day exponential moving average on the S&P 500 at 943. The news was bad, with 9.4% unemployment versus 9.2% expected. The market somehow didn't care and flew higher on the report. Slow erosion began just before the market opened, but we still gapped up nicely. I'd warned about gap and run versus gap and churn. Gap and churn is dangerous for the market and that's what we got. The market just couldn't get going once the gap up occurred and the day was spent slowly moving down from the nice gap up open. Nothing terrible but downward all day. This caused the candles on the daily charts to tell us some near- term caution is warranted. Black and in some cases, even red candles off the gap up and that normally means the very near term market is going to struggle a bit. When a market is moving up and you get a gap off the up trend and you reverse off major resistance -- in this case Sp 943 or that nasty 200 day exponential moving average -- you usually get a reversal for some days. It doesn't mean the reversal will be devastating to any degree. It just tells us that we will likely need to unwind the oscillators which have gotten a bit overbought on the major indexes. That will probably allow the market to gain the fuel necessary to try this very difficult level again in the near future. We have had two attempts now at this 943 S&P 500 number and when a gap at this level fails, expect some losses in the very short term, but again this could be the medicine necessary to get through when most think we won't. With the Nasdaq continuing to hold well today, you add yet another day over its own 200 exponential moving average now at 1742. Super support there. It's quite possible we won't trade below that level for a lot longer than anyone thinks possible. Remember too that this number rises slowly each day. That's bullish. Bottom line is the short term doesn't look great for the bulls, but I don't expect anything terrible. Some unwinding of the oscillators is healthy. Add that the 60 minute charts aren't great from a MACD perspective, and we should, I say should, get some selling. The uptrend is strong so short sellers beware. If we get it, don't get too happy about it.
This market over time may surprise the masses to the upside.

Mike Paulenoff, www.MPTrader.com, on Near-Term Support Being Pressured

The S&P 500 e-mini futures contract is lower this morning (Monday). However, let's notice that price structure has not inflicted any meaningful damage to the chart pattern as of this moment. That said, the S&P 500 e-mini is putting a bit of pressure on an initially important near-term support level - 928.00/50 - across the June pullback lows, which if violated should trigger downside continuation to 922.50 - the June 3 low. A violation of that low will imbue all of the price action during June with the look of a rounded topping formation that will project potential weakness into the 900 area thereafter.
Only the ability of the S&P to hold 928.50 followed by a climb above 938.00 will neutralize the current negative position of the market.

Published on  Tue, Jun 9 2009, 04:57 GMT