Monday, June 1, 2009

Ok - too many charts ...

First, today was an important enough day to put in some overtime and review a bit more then usual. I will review my longer term targets by the end of this week.

VIX Daily
Lets start with the easy one first. As you can see VIX is breaking trendlines on both sides of the spectrum and is whipsawing violently back and forth here. Makes me feel good that I am not the only one that doesn't have a clue of where we going - everyone else running for protection and hedges on both sides.

SPY Daily

Just an updated chart here. I did not include the bollingers but you know how they look like with 2 breaches now on the upper band. You remember me saying that a bear market rally has ONE breach on the upper ranges - we now have had 2 breaches with a full month in between. Can this still be a bear market rally? Yes of course. Can this be the first leg of a bull cycle that will last a bit longer then 3 months? Yes of course. Ok then tell me what it is !!!! - not so fast here. We need to let the market show us what it will do. Take a look at the volume, for such an important move to see below average volume is not a strong sign. I will address some more concerns later but lets leave this chart as is.

SPY Daily - last 200dma breach

Here is a chart of pretty much today minus one year when we had the last breach on the 200dma. While this rally was a lot shorter you had similar whipsaw around the first top, some sell off and consolidation and then a new high. On the MACD there you have 3 moves - one long extended one, one shorter one, and one last very short one. Compare that to our current moves - while they are much more extended especially during the consolidation phase we are seeing similar behavior. I am not saying it was the same but take a look at the first above average volume bar you saw there. This is something any bull has to be watching very closely.

SPY 120 min

Lets have a look at another interesting perspective here on our major index. I had put up the 120min chart MACD and RSI level. We have seen 3 extremes during the past 6 months with MACD and RSI breaches above normal levels. On each of the extreme breaches the market continued at least one more day even after MACD started to turn lower. Lets see what happens this time around. This is not something I use for my trading but I found it rather interesting that even with such overbought conditions in the past we have managed to not reverse right away. As you can see each time we had seen continuation we had a VERY strong reversal bringing us back below the breakout range in terms of price. For us now that could mean a run towards 956 with a reversal back to 920.

Make your pick next ....
I have 3 core short positions that I trade in and out off. S&P500, Financials, Real Estate. So lets disect the later 2 in a bit more detail to make a call here.

IYR Daily
At first it almost looks like a perfect textbook breakout. Nice little channel it has been trading in with distribution after the first major resistance test. Both the lower channel and the descending channel put pressure on this index and it pooped out pretty much at the end of the pattern completion - it literally made a move on the last day here. The key on this breakout is the volume showing above average volume and a great move in terms of price. However, one thing of concern is the pull back with a close below key resistance - a textbook breakout would have a close above this key line. Additionally we have a 2 very strong resistance levels fairly close coming up as the next target so quite a bit of work here is needed to go higher. Now if you take a look at the 1 min charts for today - you can see the majority of the above intra-day average volume bars were all declining candles especially into the close - low volume run up on prices while the down bars had the big money behind them. End result is still an upday so price wins over volume.

XLF 120 Minutes
This one is quite interesting. Due to this one I went short today with my trigger happy fingers but forced myself to stop out (you know when you move your stop to a point knowing that it will get taken out - only reason you do that is because you know it was an impulse trade - ok enough of that did not loose money but did not make much either).

You can see 3 beautiful little triangles there. Each consolidation leads to a great 2 day jump higher without looking back and taking out the previous high with conviction ... wait, something wrong. What happened here on the last one? Ooops someone decided not to play nice here. XLF has taken out major resistances in the past with ease and now is showing signs of struggle for the first time. Why is that? Well maybe because all banks were able to go through their capital raises and there is no more need to push those bad boys up? =) ok I promised myself not to say manipulation - there are very valid reasons for this last 3rd failed attempt, considering that we have seen dilution of share holders and an important cluster of resistance levels - it was just fun to say it though to make me feel a little better (and yes saying the market is manipulated is just an excuse for having timed the short entries incorrectly - I get it).

Ok so lets take a look at XLF in a bit more detail.

XLF Daily
It seems XLF is coming to a complete stop soon here. Volume continues to decline and for the first time we have not been able to follow through with a new high after a period of consolidation. we have yet to see the 200dma and the 50dma will race closer as we continue here without making a new high. To make matters worse, when everyone was making new highs with wide ranges on the upside today XLF closed at 0%.

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