Check out these 15 minute charts from my futures station.
The top graph is the ES (S&P mini), the middle is the US Dollar Index, and the bottom is the YM (DOW mini). I can spend hours on the analysis here but time does not permit. I have instead highlight some "at a glance" observations.
1. The ES and YM have experienced very sharp declines on high volume.
2. The US Dollar Idex has experience a sharp rise on high volume.
3. All three consolidated overnight in a tight range.
4. All three are forming triangles (each of a different type)
- The ES is forming a descending triangle. The price action falls to the bottom line, bounces to a decreasing high. This is a bearish pattern and has a high percentage chance of breaking down with a drop equal to the prior move. That would be the sharp decline seen on the left of the graph.
- The dollar index is forming an ascending triangle. The price action rises to the top line and is rejected to a rising bottom trend line. This is a bullish pattern indicating that a break out is likely with a rise equal to the prior move. That would be the sharp rise to the left.
- The YM is forming a symetrical triangle. The price action is centered and alternating between a rising low trend and dropping high trend line. This is a nuetral indicator with a slight tendency towards the price price move - which would be the sharp decline seen on the left.
5. Note that the volume on the down moves is signficantly higher than the volume to the upside. This is also bearish.
So we have a bullish US Dollar Index pattern, a bearish ES pattern, and a nuetral YM. I think we go lower.
Unfortunately, I will not be in a position to trade this action. More importantly, it will be difficult to make important decisions if key levels are reached. I will be working through a game plan that I can monitor and execute under the circumstances.
No time tonight for the setups - however, we did drop out of the channel today and touched the 50% retracement level as I expected. If we continue down from here (and that is what I expect) a full retrace is in the cards - whch is about 1020ish. Watch for a pit stop in the 1048-50 range as this is the 62% retrace level and the intersection with the 50p MA on the daily closing chart. On the upside - there is substantial resistance in the 1075-1080 range now and the top trend line should also serve as a containment force. Do not be surprised if action rises above the 20p MA on the hourly (say 1072 or so) - in fact, if it does and is turned away at that point - you can almost guarentee a signficant correction will follow next week.
Good luck out there!
17 comments:
David,
What part of the west coast?
If you are near Long Beach, I guarantee You won't be able to buy your own beer, if I am around.
Thanks again for your insight.
David , first of all , have a great trip and come home safe .
Here we are again , setting on the 50ma and the April to now trend line,
seems like we have been here b4.
But have we ? The bulls think so , that is a good thing.
We never had a rising $ working with us b4.
Each time prior we shot down like a correction and ran out of gas.
This time we slid down with plenty of rally to keep the Bulls happy.
All that being said , I will feel better with a break in the 50ma A break in lower trend line. and close under 1025.
Would not be surprised to see 15 points of up action tomorrow or Thursday.
I am still thinking trend change rather than correction.
Thanks again.
My best
David , first of all , have a great trip and come home safe .
Here we are again , setting on the 50ma and the April to now trend line,
seems like we have been here b4.
But have we ? The bulls think so , that is a good thing.
We never had a rising $ working with us b4.
Each time prior we shot down like a correction and ran out of gas.
This time we slid down with plenty of rally to keep the Bulls happy.
All that being said , I will feel better with a break in the 50ma A break in lower trend line. and close under 1025.
Would not be surprised to see 15 points of up action tomorrow or Thursday.
I am still thinking trend change rather than correction.
Thanks again.
My best
Hey CBS,
Palo Alto is my destination. Unfortunately, this is one of those "in and out" missions - stacked with marathon meetings from take-off through the touch down of my return red-eye flight on Friday.
I'll keep you in mind next time I'm in Long Beach - I never turn down a beer!
Hey Payline,
You are right, we have been here before and as of yet, I have no reason to believe that we are going to see a meaningful correction. When you examine the daily chart you see that the last rally-pullback cycle lasted 21 days. This included a touch of the 50p MA. We are at day 17 of this cycle and it seems reasonable that we will hit the 50p MA this week. The real test will be if we breakdown below the 1050 zone and head for 1018. That test invites the possibility of the correction down to the 200p MA which sites at around 920 now. It would likely be closer to 940 by the time we reach it - which aslo represents about the 38% retracement of the entire bear market rally. Wouldn't that would be grand!
One more observation,
The weekly chart shows that we touched the 20p MA only once in this rally. That happened in week 18. We are now 16 weeks into the next cycle and the 20p MA isat around 1000 - probably headed to 1020 by the time the test happens.
My experience with the MAs tells me that when the 20p MA moves up through the 50p MA, there is an overshoot followed by a correction that often re-touches the 50p MA.
As I mentioned the 20p MA on the weekly sits near 1000 today and the 50p MA on the weekly sits around 920 today.
This means that a correction as low as 920 would still be considered "healthy" and the "bull" market believers can still feel in control.
live in atlanta, travel to oakland quite a bit for work. I think we might get upside before more downside? I dunno, I am flat right now. (I have made money on every trade for the last 2 weeks, btw. Why I am being careful.)
David:
Thanks for the great TA.
Payline:
SPX=1025(-) ... I have my fingers crossed :)
something interesting,
COMP has a very nice wedge pattern on the daily chart, and the close broke both the 25d SMA and the wedge lower support.
SML has a ok wedge pattern on the daily chart, and closed below the 25d and 50d SMA, and the wedge lower support.
Hi Bob G , 1025 is the Oct 2nd low ,
My are glued crossed.
David thanks for the incites into MA
My Best to everyone
Payline:
Any thoughts on spx=1074 level?
Thanks
Bob G , Teddy saying 74 to 1120 or down to 900something ,?
I Hope not to screw up the answer as David O is much better than I,
and he is not here to correct me.
and I can in No possible way fill in for him. ( and its his Blog)
all that said 74 is a pretty good number , the down channel we are in , ( see Davids O past post ) is wide but is close to that on Friday and I don't think we really want to break the top trend line .
And we dont want to close above , The 10/21 first leg down close which is not that far from there.
Teddy comes at it very differently than many do but break of 74 would not be good for the bear case ,
and 1120 would be a target.
Again 1025 is my down confirmation I wait for , break that and the 200ma is a real target.
Today I did expect an up 1061 was my target, and I would have luved to close under 1060. we did not .
But its was just a 48% retrace of the leg down from 10/22. I was kinda expecting the retrace yesterday but the long down made is more likely today.
Went long in the pre market ,and sold out at 61. Ewt wave 4 .
Wave 5 will take us down below 1042 , if not I cant count ,and that is very possible.
So we can go up a little from this 66 but I would rather not.
Bear case in tact , Still think its a trend chance rather than correction .
I hope some part of this made some sense.
My Best
Payline:
Your absolutly right, David has a sixth sense for technical analysis. In fact wrote last tuesday:
On the upside - there is substantial resistance in the 1075-1080 range now and the top trend line should also serve as a containment force. Do not be surprised if action rises above the 20p MA on the hourly (say 1072 or so) - in fact, if it does and is turned away at that point - you can almost guarentee a signficant correction will follow next week."
David thanks for your terrific TA.
And Payline, thanks for your capable assistance. I have my fingers crossed for the pull back :)
Bob G
Hi again , well that is a good reson to want a down from here as the 20ma on the hour chart is down at 1056 and we closed above it , a nice snap back under would be great
David O does some things well (for a human being without the ability to predict the future-g-), but Waxie called Thursday... http://trendtradingtowin.blogspot.com/2009/10/like-butter.html
I am all cash right this second after being long for a bit.
teddy's predictions are not always spot on. He hedges, etc. I like him, but he is human as well.
(Personally, I am trying to think about this entire situation rationally. The market could largely follow the trend until reality comes in and puts its throbbing xx right into a gap. The question is what source of reality[which will somehow relate to the destruction of the current carry trade and temporary liquidity that is enabling us to work with rather high debt levels] is going to scare the market? I don't think that it will be CRE. I do think that at some point, maybe already, we will top out at a point we can't break. This was a common theme in some prior, similar markets- 38 and 79/81. Until this point, do we go long on dips and short on rips? Do we short financials and go long energy?
(The lunatic at xpositions is now short again after being long for a cup of coffee. http://xpositions.blogspot.com/)
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