Jack Steiman, On Massive Negative Divergences (SwingTradeOnline)
The charts for the past month, if not more, have been suggesting, in normal times, that this market was about to take a big hit to the down side. After all, there have been existing massive negative divergences on many of the dailies on both the index charts and many individual stock charts, especially the leading stocks such as Apple Inc. (AAPL), Google Inc. (GOOG), and more. It's even more pronounced on recent leaders such as the financial stocks, especially the Financial Select Sector SPDR (XLF). Just awful looking charts abound about everywhere.
So what has all of this meant?
Amazingly, it has meant higher prices. We haven't exactly been blasting up. In reality, we've been mostly just meandering around with a slight lean towards higher prices. A grind would be the best way to express it. However, during the week, we broke above the two year down trend line on the PowerShares QQQ (QQQQ)'s and Nasdaq 100. That is big news as most didn't think we'd ever make that move as the rally lingered on. Surely this would be the place where things died out but that just wasn't the case. The market continues to baffle the experts, many who have been bearish and short for quite some time. On many levels you can't blame them.
So what keeps this market moving higher when the oscillators say it shouldn't?
To start with, we have to go back to the massive trend line breakout over S&P 500 956. Once through, the bulls weren't letting go. The bears began to feel the squeeze above this level and this pressure hasn't stopped. Many who missed the rally now want to be part of it and this too keeps things moving upward. On any weakness, new money comes in with the hope that new highs are in the market's future. In summation, it's the emotional aspect of this game that keeps things moving along and it's showing no inclination to stop any time soon, although there will always be pullback's along the way. Of course, in time, it will end. My guess is we have another month or so thus I wouldn't be buying a long-term portfolio but I would continue to buy weakness, picking up stocks with solid bases along the way. The buy signal remains in place.
Some small unwinding took place Friday, but we could surely use more to unwind things back on those 60-minute time frame charts to where new entries would be most safe. Hard to say how much selling we get although we hit some trendline resistance on both our Nasdaq 100 and S&P 500 Daily charts. A move down to the 1015-1025 would be best for some unwinding. I do think we will move back higher in time but the market should run in to real headaches at S&P 500 1060 where a large longer term gap on high volume is in place. If and when we get there, you can only imagine how overbought we'll be. That, in combination with the gap, should knock the market down for a while. It doesn't mean the ultimate top will be in but 1060 will be very tough folks so if we get there, be prepared to lighten up on your long exposure. You want to look at the internals of a market when it's grinding higher, but especially when you have a major breakout such as we had over that two year down trend line I spoke about earlier in this report. It averaged 3.5 stocks up to every 1 that was down.
In addition, the participation was wide spread. Just about all sectors were involved. The market wasn't just carried higher by a few stocks but rather from everywhere. Leaders and all the secondary on down the line stocks were rocking. Nothing bearish there and with the entire market participating, the bears are going to have a hard time saying the breakouts weren't really all that good.
All that said, there are red flags. Back to those massive negative divergences. One has to wonder when that will all come crashing down. It will folks. It will. The divergences are everywhere, especially on many of the leading stocks such as Apple and Google, and more. This can not just be ignored. You add in overbought weekly charts with RSI's near or above the 70 mark and overbought short-term charts and you don't exactly have the best set up for continued higher prices without at least some selling to alleviate things. Some short-term selling would be best but I think we'll hold 1018 or key gap support on selling for now.
Gary Dean, On Nasty Downside Move Unless "PM"s Step In (MarketsPath.com)
In my last analysis Wednesday night, I left off with a watch the 1039-1045 as areas where the bears will try and defend. The SPX made it up to the 1048 area and that is the high so far. If it takes out that high, the next major resistance is sitting at the 1053 level. But there is an eerie feeling in that air and I am not 100% how it will play out, but something just isn't right, even if the puppet masters want everyone to "think" it is.
The people are speaking out, or should I say shouting out. I am starting to see more and more protesting rallies forming and they are getting larger and larger with every new one hitting the street. The people are getting the "everything is alright" talk crammed down their throats from the puppet masters, but feel everything isn't alright. The PM's were counting on consumer credit to grow as the "everything is alright" plan is in place. But consumer credit is falling at the fastest pace since WWII
September is normally the most bearish month of the year. That was well advertised by the talking heads, so the "if everybody knows it, it won't happen" trade could be put into place. That is exactly what has taken place and now upside targets are the only thing traders are looking at over the weekend.
Now this is all taking place as the SPX came within 7 points from a major turn area. The sentiment readings hit levels not seen in over 2 years and 100% of portfolio managers believe the worst is behind us and higher levels will be seen by years end. Can we continue higher? Yes, but if the "plan" is not working, will the PM's continue to support this rally? For every action there is a reaction. They tried to convince the general public to start spending and it hasn't worked. Will they continue to throw money at a losing plan or will they finally let nature take its course?
As I type, futures are getting smoked. Let's see if the "graveyard shift" boyz step in to save the futures before everyone wakes in the morning. That may give us a good clue as too if the "game is still on." Bottom line: If the boyz don't step in to save the futures, we could see a nasty move starting on the downside.
Mike Paulenoff, On Minor Healthy Correction for Gold (MPTrader.com)
With the dollar up 0.004% this morning (4/10 of 1%) and gold prices down about $8, or 0.08%, the action hardly suggests just yet that a significant reversal has occurred. In fact, if spot gold prices pull back to and hold the $982-$972 area, then the weakness will be considered a minor, healthy correction from a technical perspective -- presumable ahead of another potent upleg that projects to $1,100 next. The dollar index must climb and sustain above key near-term resistance at 78.00-78.50 to trigger significant upside reversal signals.
Judging from 1) this morning's gap down, 2) after what looks like a completed up-leg between the 8/17 low at 91.22 and the 9/11 high at 99.33, and 3) the glaring non-confirmed momentum (RSI) high established at the 9/11 high, the SPDR Gold Shares (GLD) does indeed look technically vulnerable to the initiation of a rest/digestion period -- otherwise known as a correction. Notice, I did not refer to today's weakness in gold as the END of its bull run. My medium-term work continues to argue for considerably higher prices, which if accurate means that I will be looking for places to add to our current 1/4 long model portfolio position. The first such place to add another 1/4 long position in the GLD is in the vicinity of 97.00-96.50, and thereafter, should Mr. Market decide to "shake the tree" to expel the weak holders, into the 94.80/40 area. As long as the July support line, now at 92.90 contains any acute weakness, we will remain bullish.
Harry Boxer, On 5 Charts to Watch (TheTechTrader.com)
In our weekend review for our subscribers we discussed a number of stocks with video analysis of their charts, five of which we'll highlight here.
EDAP (EDAP) was in a base that broke out with a huge thrust in August. The stock backed and filled and formed a beautiful wedge. It broke out on Friday on 4.9 million shares, and although did not close strong, it was still up 56 cents on a down day on strong volume. Key will be a breakout of the 5.95 area, and if through that then our target is 8-8 ½. Sinovac (SVA) is also in a coil pattern after a thrust that saw it move from 4 ½ to 12 ½ inside of a week and a half. It had one big down day, and then went sideways for 6-7 sessions, narrowing on lower volume with great technicals. I suspect it could break to the upside towards the 12 ½ area and then move into the mid-teens if that's taken out. Infosonics (IFON) popped at the end of the week before last, and last week it backed and filled in a coiling-type fashion. Underlying technicals are holding up well, and volume is light at the apex of the narrow range. Any thrust could resolve to the upside, towards 2.75, but ultimately, looking at the channel and overhead resistance, the 4 3/4-5 range looks do-able down the road, just a question of when it gets going. China TransInfo (CTFO) also has a nice uptrend under way. Friday's action was excellent, as the stock broke out of a coiling-type consolidation, similar to the others. It was up 78 cents or almost 10% on decent volume for that stock. We're looking for a move that takes it to the 10-10 ½ area. Finally, Planar (PLNR) is also in a consolidation mode after a huge run-up that saw it go from 1.15 to 3.38, nearly trippling. It then pulled into a downward flag, and then a narrow sideways consolidation on very low volume. Obviously in my mind it needs to get over 2.95-3 to really breakout and thrust. Something over 5 is do-able on an intermediate basis.
