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Weekly Wizards

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Weekly Wizards

Wed, Jun 24 2009, 05:49 GMT
by Mike Paulenoff, Jack Steiman, Harry Boxer

AdviceTrade.com

Mike Paulenoff, www.MPTrader.com, on New Downleg in Q's

Monday's action in the PowerShares QQQ Trust (QQQQ) represented a downside breakaway gap, followed by a violation of the prior pullback low and a violation of the March-June up trendline.  In addition, the decline breached the 20-day adaptive moving averages for only the second time since the March low.

The first occurrence was back on May 13, which turned out to be a bear trap prior to another significant upleg.  Monday's occurrence comes amidst much more negative underlying momentum oscillators, which suggests tome that this time the Q's have just started a new downleg rather than faking out the shorts via a bear trap.

If my work proves accurate, then the Q's are heading for 33.00 in the near-term prior to the correct running its course.

Harry Boxer, www.TheTechTrader.com, on the UltraShort Real Estate ProShares (SRS)

The market certainly had a significant move down on Monday, cracking several layers of support, which likely set us off on additional downside momentum.   We've been following the UltraShort Real Estate ProShares (SRS) to capitalize on the market's downside.  

The daily chart of the SRS shows that this was a stock trading over 250 in November.
It got down to 17 and change and reversed this month, showing some upside acceleration, with the downward trendline broken.   The 15-minute chart shows the stock forming a mini base, consolidating for 3 sessions, and then breaking out of that 3-session flagging type pattern on Monday.  It moved up early in the morning and flagged mid-day, with the key being in the last 30-45 minutes the stock had a late surge, with volume and technicals surging in addition to price, and it appears it has broken out and wants to move higher.

The highs at the end of May about 4 weeks ago up around the 23 level may create some resistance. That's also near the top of the short-term channel, so a move up there early Tuesday could result in some further backing and filling or consolidation.  I'm ultimately looking for a move that takes it to the mid-20s, with 25 ¼ the next target, and beyond that it could see something potentially in the low 30s, ideally a move that takes us up towards the 30-32 zone.  

Tuesday morning short-term support would be the bottom of the flag pattern, which comes in around 21.60.  I'd rather not see it go below the moving averages, which right now are coinciding at around 21.80, and preferably not even below the last bar low at 22.  So if it pulls back to 22-21.80, I'd be ok with that, but I would prefer that it move up to the 23-23 ¼ range first before it pulls back and consolidates.

Jack Steiman, www.SwingTradeOnline.com, on S&P 500 Critical Support

The S&P 500 lost its 50-day exponential moving average as has the Dow and most other indexes. Leaders are dying out one by one. The Nasdaq, the real leader, is about to lose its 50 and 200 day exponential moving averages. What does this mean for the market? That old neckline at 875 SPX is critical support. The measurement, if broken, is 81 points head to neckline or 796 SPX. No guarantee we go that low as unexpected news can change the market landscape in a heartbeat. However, you have to respect the possibilities should we lose 875 SPX.

I will never short an oversold market, which we have on the short term time frame charts only. The daily's are not oversold at all. Close but not there. A bounce off the 875 level that back tests the lost 50 day exponential moving average would be the place to short. A failure at those 50's with unwound short term oscillators is the perfect recipe for shorts, not before. We have likely made the turn from bull to bear here folks. However, we aren't far enough away on the SPX nor have we back tested it once lost to confirm it. That could be just a few days away. We must, however, respect the damage we received today that warns us not to be bullish whatsoever for now.

Wherever you turn tonight we see leaders that have lost their leadership. Stock after stock and sector after sector. The big tech leaders such as Aapl, Rimm, Pcln, Amzn, Isrg, Goog and Bidu got crushed. The banks rolled over in a big way today. The Uyg annihilated. The transports and retail sectors knocked out cold. With all that said, nothing got pulverized worse than the commodity stocks.  When leadership is gone, you need to lower your expectations of what's ahead of us short term.

Read Jack's complete analysis, with charts.

Gary Dean, www.MarketsPath.com, on Landing Zones for this Leg Down

The S&P 500 gapped down and blew right through the 915-913 pivot zone on Monday, which gave us an early signal that wave 3 or C started with Friday's mid day pullback.
I am not a big fan of chasing gaps in either direction and decided to wait for the first bounce to get short the indexes. Unfortunately, the bears took the tape down wire to wire.  The advance/decline ratio was the worst I have seen it since the start of the rally and never gave me any signal that it was safe to try any long side scalp. If we see a bounce Tuesday, I am still seeing another leg down before we will see buyers step in to bid up the tape.

We are currently in the process of finishing wave C or wave 3 of this decline. I am expecting the 880-875 as a landing zone for this leg down. If we blow right through that pivot zone, then we will assume we are in a wave 3 down and 848 would be the next landing zone.

I still believe the 880-875/848 will be the end of wave c of a (A) and the rally from those lows will be wave (B) with a wave (C) down to follow, taking the SPX to the 811-780 area when finished.

For now, we have to assume buyers will be waiting at the 875-880 zone.  The bottom line is the SPX is approaching my 880-875 pivot area and I would expect buyers to be waiting there. With the bullish divergences showing in the 15 minute charts, we have to be careful on the short side as we approach the downside targets.

Published on  Wed, Jun 24 2009, 06:03 GMT