sábado, 31 de outubro de 2009

Longer Term Look at S&P 500

via AlphaTrends by alphatrends on 10/31/09

The trendline from the March lows was broken this week, but trendline breaks do not assure a reversal, they indicate a slowing of the trend. The SPY is still showing a weekly pattern of higher highs and higher lows. A break below the October low of 101.64 would create a lower low, but that would not be the ideal short entry as the market has already expended quite a bit of energy getting to these levels. A lower low followed by a rally which falls short of the 110 area would be of more concern, especially if the volume were to trail off significantly on such a rally.

The majority of earnings reports for the third quarter are now behind us and it appears to be a case of “sell the news”. This past week a lot of participants were reminded of the importance of a strong defense as the market started to acknowledge risks after what has been a great rally.


Things you can do from here:

Be Prepared for S&P's Tricks and Treats


Be Prepared for S&P's Tricks and Treats

JEFFREY COOPER OCT 30, 2009 2:30 PM

Be Prepared for S&P's Tricks and Treats
A sweet break may be just ahead.


Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a 2-week trial FREE trial of his daily commentary and nightly day and swing trading picks, click here.


It’s a dead man’s party
Who could ask for more?
Everybody’s comin’, leave your body at the door
Leave your body and soul at the door
-- "It’s A Dead Man’s Party" (Oingo Boingo)

The above title for tape may not be remembered by some of you, but the tape of the prior patterns of blow-offs from 1929, 1987, and the current tape should be stuck in your memory.

The blow-off from March 2007 to June 2007 mirrors the above pictures. Note that the first high came in June with an overthrow in July 2007, which is reminiscent of the S&P pattern now with a high in September and what looks like a possible overthrow in October.

It's important to remember that the overthrow in July 2007 is a fractal of a larger overthrow of the July peak in October 2007.

The 10-minute chart from the swing high this October appears to be a fractal of the break from last September on the dailies/weeklies. Is the S&P tracing out a hump right shoulder on this snapback, which is backtesting the break from the Bearish Ascending Wedge shown on the SPY yesterday?



I say hump right shoulder because they're often dwarfed and short-lived. Theoretically, if the market survives and holds a test of 1048 to 1050, it could buy some time and extend what I believe will be a right shoulder/backtest.

The market needs a test of 1048ish, but this is a market that's been testless as much as it’s been topless. To be sure, Hoofy has been on the beach in St. Tropez.

The bottom in March wasn’t tested either, which to me speaks to the herd mentality of the market. It's driven by something we can’t quite identify. It's a market that despite the fractals and DNA to past patterns is, in many ways, unrecognizable. One day, everybody wants out at the same time; the next day, everybody wants in at the same time. It’s running on high-octane emotion. And, that makes for a dangerous trading market.

Yesterday, I stated that after an intense sell day (Wednesday), an up opening is usually a sell. Usually -- not always -- that's correct. But there's something unusual about this tape; something that feels synthetic. The clue to yesterday’s trend days was the ability to hold after the first hour and the behavior after the first pullback.

Beat-up names were bought for month-end window dressing as Spyder baskets were run all day to provide a backstop and a tailwind, as the big seller(s) lifted a leg from the severe oversold condition as offered as a possibility yesterday. Was it a one-day wonder? Note the one-day wonder after the breech of support in 1987 just prior to the bottom falling out. The message is clear: Trade below Wednesday’s lows in short order could be an elevator, not an escalator.



The S&P reversed strongly from first trendline support while trendline support from the March/July lows was violated.

Trick or treat? Which is the support line that counts? Is a bigger break just ahead? If history is any guide, I think the answer is yes.

One reason may be that largely unnoticed is the fact that yesterday, Citadel reopened for redemptions by investors who were frozen out last year. Over the next month or so, many funds will reopen their gates as well. After a near-death experience in 2008 and a good year in 2009, will many investors get out? At the same time, for the first time in three months, many funds can "legally" sell stocks. Once fiscal year end on October 31 is past, I suspect they'll be taking your money and be moving to the sidelines as fast as they can. The herd mentality magnified over the last two days with the flood gates opening for many hedge-fund investors, I think the odds favor the downside given the fractals and the dynamics of "year end." But we could just as easily see a new swing high as 950 S&P.

Conclusion: The market should open down and stay down today if there aren't more paint-the-tape buy programs around, which is generally not condoned on month end, but that doesn’t mean they won’t happen anyway. If the S&P makes a new high over Thursday’s high today leaving a Minus One, Plus Two sell signal, will it behave like Baidu (BIDU) did Thursday morning from the same set-up? The market needs a pullback to test the lows, so until that occurs, I think the strategy is to short stocks at resistance until proven otherwise -- especially as I think a bigger break is around the corner.

The dollar is the linchpin under the microscope here. The Dollar Index suffered an outside day down yesterday on the approach to its overhead 50-day moving average. It's pulled back quickly to its 20-day moving average. If 75.25 to 75.50 holds and the dollar turns back up and offsets yesterday’s high, it should explode. I think the dollar should rally for at least three to six weeks and to a minimum of 78.



I wouldn't become too complacent about the smell of paint on the tape going into October 31. If the patterns from 1987,1929, and 2007 mean anything, a break of Wednesday’s low could mean it’s a dead man’s party.





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Jeff Cooper is the author of Jeff Cooper's Daily Market Report and also provides private trading consultation to clients.

30/10/2009 - Chart of the Day


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For some perspective on the current stock market rally and how it compares the 1929-1932 bear market (which also included bank failures, bankruptcies, severe stock market declines, etc.), today's chart illustrates the duration (calendar days) and magnitude (percent gain) of all significant Dow rallies that occurred during the 1929-1932 bear market (solid blue dots). For example, the bear market rally that began in November 1929 lasted 155 calendar days and resulted in a gain of 48%. As today's chart illustrates, the duration and magnitude of the current Dow rally (hollow blue dot labeled you are here) is greater than any that occurred during the 1929-1932 bear market.

Notes:
- Where's the market headed? The answer may surprise you. Find out right now with the exclusive & Barron's recommended charts of Chart of the Day Plus.


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Quote of the Day
"Years of practice enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass." - Jesse Livermore

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