May 22 Support Check

By Corey Rosenbloom | May 22, 2012 | 10:41 AM |  0 CommentsTweet This

After a steady retracement took the US Stock Market Indexes to lower support level targets, let’s take a look at these targets and what Index levels we will be watching closely in the week ahead.

Let’s start with the S&P 500:

The key chart levels we’ll be comparing across the three indexes are the 38.2% Fibonacci Retracement and the 200 day Simple Moving Average.

In the S&P 500, the key “Round Number” psychological reference level is of course 1,300 and buyers stepped in throughout the trading day to defend this level.

Beneath 1,300 is the critical confluence of the 38.2% Fibonacci Retracement at 1,290 and the rising 200 day SMA at 1,278, making the 1,280/1,290 area the key indicator-based confluence support.

If we stretch back to late 2011, we also see the 1,290 level was a spike high in October, making it a polarity support level.

Quite simply, we’ll be watching the market relative to this level, being cautiously bullish above 1,300 (notice the 20/50 EMA cross and price target near 1,350) and otherwise bearish under 1,270.

The picture is similar in the Dow Jones Index:

While the S&P 500 reversed at a logical prior price support level, the Dow Jones power-rallied off 12,400 which is above the equal confluence of the 38.2% Fibonacci Retracement and 200d SMA at the 12,200 level.

As such, 12,200 will be the indicator-based confluence support which aligns also with the visual resistance from late 2011.

Finally, the NASDAQ also rallied today slightly above its critical confluence:

Unlike the S&P 500 and Dow Jones, the NASDAQ Index actually broke the 38.2% Fibonacci Level on Friday and clawed back above the 2,800 level.

However, similar to both the S&P 500 and Dow Jones, the NASDAQ also formed its initial rally above the weak confluence near the 2,700 and 2,750 level.

Again, we reference the late 2011 swing highs in price with the 50% Fibonacci Retracement and 200d SMA.

Be sure to add these reference levels to the trades and analysis you are conducting in these indexes.

...

S&P 500: Positive Divergences

By Corey Rosenbloom | May 16, 2012 | 10:44 AM |  0 CommentsTweet This

As we start Wednesday morning with a bullish gap, let’s take a quick step inside the market for a “Breadth Check-up” on the S&P 500.

Here’s the intraday chart structure:

What we’re seeing is the S&P 500 Index on the 5-min frame with two Market Internals that show Breadth:

• $ADD:  NYSE Breadth (Advancing Issues minus Declining Issues)
• $VOLD:  Volume Difference of Advancing Issues and Declining Issues

Before we discuss the current structure, let’s review the most recent negative divergence that developed on May 10th into the 1,365 resistance area.

Breadth and VOLD peaked with price on May 10th, yet price pushed the next session back to 1,365 but this time we saw a visual decline – negative divergence – in both Breadth and VOLD.

This mid-morning situation (divergence) was the intraday peak ahead of the current decline to the 1,330 level.

Similarly, Breadth and VOLD pushed to new lows on May 14th (Monday) with price near the 1,340 index level.

Yesterday (May 15th) resulted in a price push UNDER the support level… but both Breadth and VOLD failed to register new internal lows, locking in a Positive Divergence.

Now, Wednesday’s session opens with a bullish gap and initial upward impulse which has resulted in a push-up in Breadth as well.

In sum, Breadth and VOLD – Market Internals – suggests at least initial price strength/bullishness as a result of their positive divergences.

We’ll look to price today and tomorrow for confirmation/follow-through with this potential bullish signal with respect to the key 1,340 index level.

...

Distribution Volume Trends Persist

By Corey Rosenbloom | May 14, 2012 | 7:24 AM |  0 CommentsTweet This

Here’s an update to a prior volume-centric post that highlighted the April trend towards Distribution Volume in the US Equity Markets.

The recent sharp sell-off confirmed the earlier signals and added to the broader Distribution Picture.

Let’s take a look at the current “Volume Only” color-coded SPY and DIA (S&P 500 and Dow Jones ETF) charts:

 

 

Dow Jones ETF:  DIA

 

 

Start with the April 11th original “April Distribution Volume Trends” for background information and to see what the Distribution Volume picture was in early April.

To recap, according to classical Technical Analysis, volume should confirm price (part of Dow Theory).

What this means is that if Volume and Price move in the SAME direction, expect the price movement to continue.

Instead, if Volume and Price move in opposite directions, expect a future reversal.

Beyond this, we can compare how volume performs on upswings (rallies) or down-swings (declines) in price to get a sense of the bigger picture of money flow.

This can help us see if money is aggressively flowing IN to a rising market (which is bullish) or flowing out of a falling market (which is bearish).

Now, back to the current picture.

I color-coded the recent intraday swings as either “rallies” or “declines” accordingly so that we could clearly see the trend or progression of volume – rising or falling.

It should be clear that during green rallies, volume has been declining or falling (again as price is rising) and that during sell-offs or declines, volume has been progressively rising.

This points to a broader pattern of Distribution – less enthusiasm/activity during rallies and more activity/transactions during declines.

Put in the larger context of an over-extended rally and the seasonal “Sell in May and Go Away” sentiment, this at least paints a picture of caution for the equity markets.

We’ll always let price be the main guiding factor, but for the moment, volume trends/signals paint a cautious to outright bearish picture that we need to monitor closely in the weeks ahead.

...

Top 5 Stocks Most Extended from 200d SMA

By Corey Rosenbloom | May 04, 2012 | 10:02 AM |  0 CommentsTweet This

Which stocks are most over or under-extended from their 200 day simple moving average?

Let’s take a look at the current scan results and the opportunities these stocks may present.

First, here are the most ‘bullishly over-extended’ stocks in the S&P 500:

This scan returns the percentage distance above or below the 200 day Simple Moving Average as a quick measure of trend strength or price over-extension.

When you’re looking at these stocks, eliminate those which have a sudden or large recent gap which will skew the percentage, especially in low-priced stocks.

What you want to identify is a salient, persistent trend on the Daily Chart and from there, you have two specific trading strategies:

“Fade” Traders can look to play SHORT for a quick ’scalp’ trade from an overextended new high to target a quick move back towards the 20 day moving average or else some sort of lower support trendline.

“Pro-Trend Retracement” Traders instead will identify the strong trend in motion and then look to buy (put on swing positions) as price returns to these rising trendlines or moving averages for a low-risk, pro-trend retracement trade.

Let’s see how these have worked recently in our top-extended stock PulteGroup (PHM):

The red arrows indicate counter-trend “Fade” trades (those that seek to enter into the upper Bollinger on an extended price swing and target rising moving averages or trendlines as price ‘works off’ the over-extension).

The green arrows indicate typical pro-trend “Retracement” trades which seek to enter on the pullback to trendlines or moving averages, or else on the break above a falling ‘bull flag’ trendline (for a less-aggressive entry).

Watch to make sure you see steadily rising volume on each up-swing to have greater confidence in a successful retracement outcome (targeting at least the prior swing high or into the upper Bollinger Band).

Not all retracements work perfectly – the April move under $8.50 in PHM is an example of a retracement that went deeper than expected yet the trend still continued higher which brings us to our current ‘overextended’ rally (a chance for short-sellers to play against the recent swing).

Other stocks in the Top 5 SP500 list include Lennar Homes (LEN), Regions Financial (RF – a low-priced stock), Gap Inc (GAP – a popular retail/clothing store), and Masco Corp (MAS).

It’s generally a good sign for the economy that the top extended stocks are two home-builders, a financial company (albeit a small one), and a retail company.

The logic is just the opposite for the Top-5 Under-extended stocks.

Finally, here are the most ‘bearishly under-extended’ stocks in the S&P 500:

I’ve been doing these scans frequently, and one name seems to keep reaching the top of the list:  First Solar (FSLR).

From the chart, it’s easy to see why:

First Solar (FSLR) is becoming a case-study in pro-trend logic (“The trend is your friend” – “Do not fight a trend”).

Again, Pro-Trend Retracement traders had numerous retracement or ‘bear flag’ style opportunities all the way down.

While the trend has been strongly negative, counter-trend “Fade” traders have also had successful swings or quick scalps in the stock – good for quick-aggressive $5.00 to $10.00 ’scalp swings.’

It’s worth noting that counter-trend scalp strategies should only be deployed by aggressive and preferably very experienced traders – new or developing traders should play the safer pro-trend retracement opportunities which carry lower risk and defined entries and stop-losses.

The remaining stocks in the under-extended list include NetFlix (NFLX which garnered a lot of attention during its decline from its $300 per share peak), Alpha Natural (ANR),  Chesapeake Energy (CHK – which also has appeared in prior under-extended scans), and MetroPCS Communications (PSC).

Remember, this is a quick-scan for potential trading opportunities depending on the style of trader you are and the strategies you use.

Don’t just “scan and trade” – do a bit more homework as always before putting on any trading position though these types of scans can reveal names you might not consider otherwise.

...

Post-Fed Cross-Market Update

By Corey Rosenbloom | April 26, 2012 | 8:03 AM |  0 CommentsTweet This

Wednesday’s Federal Reserve announcement and Press Conference shook the cross-market landscape in a somewhat expected pattern.

Let’s take a look at the intraday ’spiky’ movements and then assess the broader Daily Chart levels in the S&P 500, Oil, Gold, and the US Dollar Index.

Here’s the inter-connected intraday picture:

 

(Click for full-size image)

We’re seeing a quad-chart view of three “Risk-On” markets (S&P 500, Gold, and Crude Oil futures contracts) and one “Risk-off” market (the US Dollar Index) from a 5-min intraday standpoint.

The highlighted region represents the initial announcement (no change in policy) and through Chairman Bernanke’s press conference.

Despite an initial plunge in gold and a morning gap-fill/sell-off in Crude Oil, these markets were bullish in the aftermath of the policy announcement.

Stocks, Oil, and Gold all rallied sharply during the press conference/interview session.

Despite initial volatility and indecision, the US Dollar index fell sharply to close at the 79 index level.

With this perspective in mind, let’s now take a quick peek at each market’s Daily Chart:

 

 

A quick glance at the S&P 500 Daily Chart reveals the two key index areas we’re all watching closely:

• 1,400 for a breakout buy signal to the upside (and the ‘open air’ above 1,400 to 1,425’s high)
• 1,360 for a breakdown sell signal to target 1,340 and then perhaps 1,275’s confluence.

In the meantime, price remains ‘trapped’ between the 20 and 50 day EMAs and the broader 1,390 level shy of 1,400.

Gold continues to fight to hold its critical “Make or Break” support:

 

 

I posted this weekend about Gold and Silver’s “Make or Break” critical support pattern with positive divergences into $1,620.

So far, Gold has held this level and – even better – formed repeated lower shadow bullish-potential reversal hammer candles off this reference level.

This time, we can clearly see the Daily Divergences into $1,620.

Does this guarantee gold will support and reverse higher from here?  No, but it’s something we’ll be watching as buy triggers could develop quickly.

Otherwise, a breakdown under $1,620 that carries under $1,600’s ’round number’ reference would suggest a continued drop back to $1,550/$1,525.

Finally, Oil still stagnates between its key daily levels:

 

 

I’ve been highlighting the critical support shelf near $102.50 and the $100 level which has held so far after February’s spike-rally.

It’s not surprising that we are still watching this level for any sign of breakdown (under $100) which would lead to a potential play for $96 or slightly lower.

Otherwise – like stocks – a breakthrough above the $105 upper resistance level clears oil to enter “Open Air” back to the $108 to $110 area.

These are the quick mid-week updates that build from the running commentary I provide for members of the Weekly Intermarket Report series – feel free to view more information about these detailed reports than I’m able to post in a quick blog update.

It’s easy to get information overload from all the charts that we view which is why I like to pause briefly and reflect on key index areas as short-term or even intermediate term reference levels such as these.

...

135

May 22 Support Check

By Corey Rosenbloom | May 22, 2012 | 10:41 AM |  0 CommentsTweet This

After a steady retracement took the US Stock Market Indexes to lower support level targets, let’s take a look at these targets and what Index levels we will be watching closely in the week ahead.

Let’s start with the S&P 500:

The key chart levels we’ll be comparing across the three indexes are the 38.2% Fibonacci Retracement and the 200 day Simple Moving Average.

In the S&P 500, the key “Round Number” psychological reference level is of course 1,300 and buyers stepped in throughout the trading day to defend this level.

Beneath 1,300 is the critical confluence of the 38.2% Fibonacci Retracement at 1,290 and the rising 200 day SMA at 1,278, making the 1,280/1,290 area the key indicator-based confluence support.

If we stretch back to late 2011, we also see the 1,290 level was a spike high in October, making it a polarity support level.

Quite simply, we’ll be watching the market relative to this level, being cautiously bullish above 1,300 (notice the 20/50 EMA cross and price target near 1,350) and otherwise bearish under 1,270.

The picture is similar in the Dow Jones Index:

While the S&P 500 reversed at a logical prior price support level, the Dow Jones power-rallied off 12,400 which is above the equal confluence of the 38.2% Fibonacci Retracement and 200d SMA at the 12,200 level.

As such, 12,200 will be the indicator-based confluence support which aligns also with the visual resistance from late 2011.

Finally, the NASDAQ also rallied today slightly above its critical confluence:

Unlike the S&P 500 and Dow Jones, the NASDAQ Index actually broke the 38.2% Fibonacci Level on Friday and clawed back above the 2,800 level.

However, similar to both the S&P 500 and Dow Jones, the NASDAQ also formed its initial rally above the weak confluence near the 2,700 and 2,750 level.

Again, we reference the late 2011 swing highs in price with the 50% Fibonacci Retracement and 200d SMA.

Be sure to add these reference levels to the trades and analysis you are conducting in these indexes.

...

S&P 500: Positive Divergences

By Corey Rosenbloom | May 16, 2012 | 10:44 AM |  0 CommentsTweet This

As we start Wednesday morning with a bullish gap, let’s take a quick step inside the market for a “Breadth Check-up” on the S&P 500.

Here’s the intraday chart structure:

What we’re seeing is the S&P 500 Index on the 5-min frame with two Market Internals that show Breadth:

• $ADD:  NYSE Breadth (Advancing Issues minus Declining Issues)
• $VOLD:  Volume Difference of Advancing Issues and Declining Issues

Before we discuss the current structure, let’s review the most recent negative divergence that developed on May 10th into the 1,365 resistance area.

Breadth and VOLD peaked with price on May 10th, yet price pushed the next session back to 1,365 but this time we saw a visual decline – negative divergence – in both Breadth and VOLD.

This mid-morning situation (divergence) was the intraday peak ahead of the current decline to the 1,330 level.

Similarly, Breadth and VOLD pushed to new lows on May 14th (Monday) with price near the 1,340 index level.

Yesterday (May 15th) resulted in a price push UNDER the support level… but both Breadth and VOLD failed to register new internal lows, locking in a Positive Divergence.

Now, Wednesday’s session opens with a bullish gap and initial upward impulse which has resulted in a push-up in Breadth as well.

In sum, Breadth and VOLD – Market Internals – suggests at least initial price strength/bullishness as a result of their positive divergences.

We’ll look to price today and tomorrow for confirmation/follow-through with this potential bullish signal with respect to the key 1,340 index level.

...

Distribution Volume Trends Persist

By Corey Rosenbloom | May 14, 2012 | 7:24 AM |  0 CommentsTweet This

Here’s an update to a prior volume-centric post that highlighted the April trend towards Distribution Volume in the US Equity Markets.

The recent sharp sell-off confirmed the earlier signals and added to the broader Distribution Picture.

Let’s take a look at the current “Volume Only” color-coded SPY and DIA (S&P 500 and Dow Jones ETF) charts:

 

 

Dow Jones ETF:  DIA

 

 

Start with the April 11th original “April Distribution Volume Trends” for background information and to see what the Distribution Volume picture was in early April.

To recap, according to classical Technical Analysis, volume should confirm price (part of Dow Theory).

What this means is that if Volume and Price move in the SAME direction, expect the price movement to continue.

Instead, if Volume and Price move in opposite directions, expect a future reversal.

Beyond this, we can compare how volume performs on upswings (rallies) or down-swings (declines) in price to get a sense of the bigger picture of money flow.

This can help us see if money is aggressively flowing IN to a rising market (which is bullish) or flowing out of a falling market (which is bearish).

Now, back to the current picture.

I color-coded the recent intraday swings as either “rallies” or “declines” accordingly so that we could clearly see the trend or progression of volume – rising or falling.

It should be clear that during green rallies, volume has been declining or falling (again as price is rising) and that during sell-offs or declines, volume has been progressively rising.

This points to a broader pattern of Distribution – less enthusiasm/activity during rallies and more activity/transactions during declines.

Put in the larger context of an over-extended rally and the seasonal “Sell in May and Go Away” sentiment, this at least paints a picture of caution for the equity markets.

We’ll always let price be the main guiding factor, but for the moment, volume trends/signals paint a cautious to outright bearish picture that we need to monitor closely in the weeks ahead.

...

Top 5 Stocks Most Extended from 200d SMA

By Corey Rosenbloom | May 04, 2012 | 10:02 AM |  0 CommentsTweet This

Which stocks are most over or under-extended from their 200 day simple moving average?

Let’s take a look at the current scan results and the opportunities these stocks may present.

First, here are the most ‘bullishly over-extended’ stocks in the S&P 500:

This scan returns the percentage distance above or below the 200 day Simple Moving Average as a quick measure of trend strength or price over-extension.

When you’re looking at these stocks, eliminate those which have a sudden or large recent gap which will skew the percentage, especially in low-priced stocks.

What you want to identify is a salient, persistent trend on the Daily Chart and from there, you have two specific trading strategies:

“Fade” Traders can look to play SHORT for a quick ’scalp’ trade from an overextended new high to target a quick move back towards the 20 day moving average or else some sort of lower support trendline.

“Pro-Trend Retracement” Traders instead will identify the strong trend in motion and then look to buy (put on swing positions) as price returns to these rising trendlines or moving averages for a low-risk, pro-trend retracement trade.

Let’s see how these have worked recently in our top-extended stock PulteGroup (PHM):

The red arrows indicate counter-trend “Fade” trades (those that seek to enter into the upper Bollinger on an extended price swing and target rising moving averages or trendlines as price ‘works off’ the over-extension).

The green arrows indicate typical pro-trend “Retracement” trades which seek to enter on the pullback to trendlines or moving averages, or else on the break above a falling ‘bull flag’ trendline (for a less-aggressive entry).

Watch to make sure you see steadily rising volume on each up-swing to have greater confidence in a successful retracement outcome (targeting at least the prior swing high or into the upper Bollinger Band).

Not all retracements work perfectly – the April move under $8.50 in PHM is an example of a retracement that went deeper than expected yet the trend still continued higher which brings us to our current ‘overextended’ rally (a chance for short-sellers to play against the recent swing).

Other stocks in the Top 5 SP500 list include Lennar Homes (LEN), Regions Financial (RF – a low-priced stock), Gap Inc (GAP – a popular retail/clothing store), and Masco Corp (MAS).

It’s generally a good sign for the economy that the top extended stocks are two home-builders, a financial company (albeit a small one), and a retail company.

The logic is just the opposite for the Top-5 Under-extended stocks.

Finally, here are the most ‘bearishly under-extended’ stocks in the S&P 500:

I’ve been doing these scans frequently, and one name seems to keep reaching the top of the list:  First Solar (FSLR).

From the chart, it’s easy to see why:

First Solar (FSLR) is becoming a case-study in pro-trend logic (“The trend is your friend” – “Do not fight a trend”).

Again, Pro-Trend Retracement traders had numerous retracement or ‘bear flag’ style opportunities all the way down.

While the trend has been strongly negative, counter-trend “Fade” traders have also had successful swings or quick scalps in the stock – good for quick-aggressive $5.00 to $10.00 ’scalp swings.’

It’s worth noting that counter-trend scalp strategies should only be deployed by aggressive and preferably very experienced traders – new or developing traders should play the safer pro-trend retracement opportunities which carry lower risk and defined entries and stop-losses.

The remaining stocks in the under-extended list include NetFlix (NFLX which garnered a lot of attention during its decline from its $300 per share peak), Alpha Natural (ANR),  Chesapeake Energy (CHK – which also has appeared in prior under-extended scans), and MetroPCS Communications (PSC).

Remember, this is a quick-scan for potential trading opportunities depending on the style of trader you are and the strategies you use.

Don’t just “scan and trade” – do a bit more homework as always before putting on any trading position though these types of scans can reveal names you might not consider otherwise.

...

Post-Fed Cross-Market Update

By Corey Rosenbloom | April 26, 2012 | 8:03 AM |  0 CommentsTweet This

Wednesday’s Federal Reserve announcement and Press Conference shook the cross-market landscape in a somewhat expected pattern.

Let’s take a look at the intraday ’spiky’ movements and then assess the broader Daily Chart levels in the S&P 500, Oil, Gold, and the US Dollar Index.

Here’s the inter-connected intraday picture:

 

(Click for full-size image)

We’re seeing a quad-chart view of three “Risk-On” markets (S&P 500, Gold, and Crude Oil futures contracts) and one “Risk-off” market (the US Dollar Index) from a 5-min intraday standpoint.

The highlighted region represents the initial announcement (no change in policy) and through Chairman Bernanke’s press conference.

Despite an initial plunge in gold and a morning gap-fill/sell-off in Crude Oil, these markets were bullish in the aftermath of the policy announcement.

Stocks, Oil, and Gold all rallied sharply during the press conference/interview session.

Despite initial volatility and indecision, the US Dollar index fell sharply to close at the 79 index level.

With this perspective in mind, let’s now take a quick peek at each market’s Daily Chart:

 

 

A quick glance at the S&P 500 Daily Chart reveals the two key index areas we’re all watching closely:

• 1,400 for a breakout buy signal to the upside (and the ‘open air’ above 1,400 to 1,425’s high)
• 1,360 for a breakdown sell signal to target 1,340 and then perhaps 1,275’s confluence.

In the meantime, price remains ‘trapped’ between the 20 and 50 day EMAs and the broader 1,390 level shy of 1,400.

Gold continues to fight to hold its critical “Make or Break” support:

 

 

I posted this weekend about Gold and Silver’s “Make or Break” critical support pattern with positive divergences into $1,620.

So far, Gold has held this level and – even better – formed repeated lower shadow bullish-potential reversal hammer candles off this reference level.

This time, we can clearly see the Daily Divergences into $1,620.

Does this guarantee gold will support and reverse higher from here?  No, but it’s something we’ll be watching as buy triggers could develop quickly.

Otherwise, a breakdown under $1,620 that carries under $1,600’s ’round number’ reference would suggest a continued drop back to $1,550/$1,525.

Finally, Oil still stagnates between its key daily levels:

 

 

I’ve been highlighting the critical support shelf near $102.50 and the $100 level which has held so far after February’s spike-rally.

It’s not surprising that we are still watching this level for any sign of breakdown (under $100) which would lead to a potential play for $96 or slightly lower.

Otherwise – like stocks – a breakthrough above the $105 upper resistance level clears oil to enter “Open Air” back to the $108 to $110 area.

These are the quick mid-week updates that build from the running commentary I provide for members of the Weekly Intermarket Report series – feel free to view more information about these detailed reports than I’m able to post in a quick blog update.

It’s easy to get information overload from all the charts that we view which is why I like to pause briefly and reflect on key index areas as short-term or even intermediate term reference levels such as these.

...

135