Where are we?

Price with respect to its 200 day MA

2007-2009 Bear Market

A newly defined downward sloping 200 day MA acts as a strong level of resistance irregardless of bullish divergence forming on the MACD indicator. Notice the extremely weak contra-trend when the second divergence formed in late Oct.-Nov. of 08. The declining 200 day MA loses its power of resistance when sloping down at an unsustainable angle. This angle of descent is due to an extreme sell-off in the market where severe technical damage has occured.

The spread between prices

The spread between price and it's moving average are at a distance rather stretched from the mean. Major bottoms in the market form when the MACD indicator is at extreme levels and coupled with Massive bullish divergence.

The difference in slope

Notice the declining slope of the 200 day MA from start to end.  See how it picks up speed to the downside.

2011 Bear Market

The Slope of the 200 day Ma is just now beginning to slope downward. So where does that leave us?

What to expect

Possible Bullish Falling Wedge scenario

Possible Bear Flag scenario

3 strikes and your out!

Today's 30 min. chart

Wait and see

I am preparing the yearly report for tomorrow's post so there will be very little for tonight. The charts tell me that the dollar is consolidating so I think there is more upside. The market appears to be days away from a significant top, unless it has already done so. Check yesterday's two scenarios that i give for the market to see what's left.
Have a good night,
Darah

We're getting close

The U.S. Dollar Index Daily Chart

Today's break of the declining trendline is encouragingly bullish. Notice that the hanging man candlesticks have marked the lead in each short-term reversal.

Dollar's Resistance Zone

The next level of resistance comes in at 81.40.

One more look at the dollar

Notice the follow through when prices break the declining trendline. Today marks the first session.

Make or break for the S&P

These are the two scenarios left of the market. A continuation of the dollar's upward movement would not bode well for stocks, but nevertheless, we must respect both possibilities in play for now.

The relationship between these two

The Top of 2007

The SPX daily index chart of the 2007 Top illustrates numerical annotations that serve as a reference to each written explanation. Each numerical annotation corresponds with its numbered explanation.

1) Prices in an uptrend will correct to a rising 200 day MA and can often overshoot these levels before finding support.  The inital sell off takes place well above the rising 200 day MA which better fits for a corrective pattern, not a reversal. Notice how the sharp sell-off quickly turned a rising 50 day MA to one that now has a declining slope. This dramatic sell-off resulted in a bearish cross of the two moving averages. In this case, the 50 Day MA acted as a lagging indicator because it continued to slope downward even when prices found support and chopped sideways. Tops in the market take time to form and generally carve out a defined pattern. It is these defined patterns that are accompanied with a flattening slope of the 50 day moving average. The only case in which tops in the market form quickly are when followed by an uptrend gone parabolic.

2) To further validate my previous point, notice again how prices quickly sell off, but ultimately regain support at or slightly below the rising 200 day moving average. Prices become at oversold levels and chop sideways which is favorable of a corrective pattern.

3)Price is a leading indicator that takes into account the  development of patterns and overall structure in the marketplace. This is key when evaluating the market's condition and will stand to be far superior than any indicator or technical analysis tool. Recognize that a double top pattern is developing. The last swing high was only able to slightly breach the previous minor high before a notable sell-off takes place. This type of topping pattern causes for a sideways sloping formation of the 50 day MA. It is at this time that the 200 Day MA will catch up to the 50 Day MA where a cross is more likely to occur.

The Top of 2011

Notice how the blue line shapes a rounding arc formation. This is typical of a top in the Market.

S&P Daily Chart (2007-2009) 

Again, a sideways 50 Day moving average.

The Top of 2011

This chart reiterates the similarity in price action of the 2007 Top.

1) An instant sell-off that caused for serious technical damage before prices could resume the uptrend. A dramatic or extreme sell-off that concludes within a short period of time is usually justified as a negative reaction to headline risk.

2)Both price and the 50 day MA are in agreement when the sell-off decisively penetrates the 200day MA. Notice the 50 Day MA sloping down previous to the sell-off. This would not imply a correction, but more likely a reversal.

Holiday Report- Part 1

I will put out two parts to the Holiday Report, possibly 3.  Be sure to check the next post(s) later this weekend.

What to make of the triangle

S&P 30 min. Chart 

S&P Wave Count 

S&P Hourly Chart

S&P Resistance Zone

Remainder of Rally

Tomorrow's post

The weekend report tomorrow will be complete with elaborate charts illustrating every possible scenario left of this rally. Understand that any rally will be nothing more than a shorting opportunity. This rally has possibly one more push higher, but will fizzle and give way quickly. I am expecting the next two months to be ugly, I repeat, Ugly for the stock market. I can't speak for other traders/investors nor give out investment advise, but in my opinion, if I were long this market I would be closing those positions out as of today or early next week at the latest.

Have a good night,
Darah

Tonight I have more

Just charts tonight, but many to show you.
Enjoy- Darah

S&P Mini- Hourly Chart

Vix- Daily Chart

Dollar Index Daily Chart

Hourly Chart for the Dollar Index

S&P- Head and Shoulders Topping Pattern

For all you Elliots

For all you cycle guys

Charts and Commentary

The Daily Chart of Dollar Index

Prices appear to be climbing higher and chewing through the previous cluster zone as I expected. The midpoint is marked with a dotted orange line to further illustrate the strengthening price movement. Remember all of those who said double top in the dollar? I see a higher high with price backtesting support of what used to be resistance. The dollar's resilience in the face of sharp upside moves from equities is encouragingly bullish.

S&P Triangle Formation

Triangles are a continuation pattern but can often morph into different and larger developing patterns. For now, we should expect a break of the triangle in the next several sessions. Prices are likely to take the least path of resistance, but needless to say if an advance is proven correct, the upside is limited. Seasonal periods are accompanied with light volume so it is unlikely that price will generate a significant game changing move.

S&P - Points of Resistance

This is a follow-up of the previous chart to illustrate the overwhelming resistance overhead for price. Do understand that any rally attempt will be short-lived and quickly given back.

S&P Moving Averages 

Now looking for the 10 day MA to cross the 20 day MA to validate the bearish alingment of these 3 moving averages.

Charts to show you

I have a family obligation to meet at this time. Here are some charts below that are self-explanatory. If you have any questions feel free to email me at Darah@live.com. Oh and by the way- this rally will amount to nothing. If it continues over the next several sessions it will soon fade and give back. One more thing- Tomorrow, the Fed will be selling $17 Billion worth of treasuries, so we'll see what happens. Have a good night and ill try to get to your emails as soon as possible-  The CC Report

The Daily Chart of the Dollar

A closer look at the Dollar today 

The Vix Daily Chart 

SPX Daily Chart 

The VIX weekly chart 

NOT a correction

The SPX daily chart suggest several bearish implications that undermine the bullish correction pattern. I have annotated several points in the chart where volatile high/low range expansion candlesticks produced very little follow through. These volatile periods were a direct result of the reactive nature to headline risk that many investors experienced. Volume and Volatility in price action are known to break key levels of support or resistance. The sell-off in late July revealed large body candlesticks that broke the neckline/support level of the Head and Shoulders topping pattern. Notice the blue arrows drawn to  point out large upside moves that faded when prices met resistance. In order for the pattern to play out as a bullish correction, prices would need to continue its upward movement and have the staying power to produce higher highs and higher lows. So far, prices have met resistance at the declining 200 day moving average(red line) and can't seem to stay above it. This price action clearly favors a contratrend  to the overall structure in play. To validate this pattern as a contratrend would require a  break of the October 4th lows at 1074.77  Be on the lookout for a break of these lows in the coming weeks! 

Weekend Report

SPX Monthly Chart

 The monthly chart is often overlooked by the amateur investor who becomes easily distracted by the short-term fluctuations in price.The chart provides accurate sell signals given by the MACD indicator as highlighted above. The recent sell-off in price during late July allowed for this indicator to produce a bearish cross. Following each sell signal, price managed to rally back up to backtest each trendline drawn for the 2008 Bear Market and our current Bear Market of 2011. Bear Market rallies are powerful in strength and coupled with convincing optimism. The retail investor in a bear market is extremely hopeful of a fundamental outcome to validate his bullish case as news dissapoints and errodes sentiment. I hear so often that the recent sell off was nothing more than a correction, the 08 crash was an exception to the market, and last but not least, QE3 will save us. The Market has anticipated for a QE3 announcement from the lender of last resort since the ending of QE2. Quantitative Easing is not warranted during markets that are indicisive, but instead during panic selling as it will act as a cushion. I anticipate a drop to come in the market as I am fully confident Bernanke will then print money.Below I have annotated several charts that are self explanatory.

The Vix

The SPX Daily Chart

The U.S. Dollar Weekly chart

Have a Good Weekend- The CC Report

Resistance is now Support

The Dollar appears to be setting up a bull flag or consolidation just above its new support level. The consolidation pattern is a sign of profit taking that can be expected from the recent breakout. The highlighted section of the chart illustrates a similar profit taking event before prices resumed higher.The 10 day moving average should catch up to prices as they continue to consolidate. By the time prices pullback to the purple line, both price and the purple line should reach horizontal support. Together the 10 day moving average and horizontal support will act as a level of dual support . This area will be met will new demand that will rocket prices higher to test the next resistance level at $81.50.

Have a great weekend and be around for tomorrow's weekend report.

Not buying it

Today produced an inverted hammer which is a bullish reversal candlestick and better fitting when levels in the market are oversold. Inverted hammers show that buyers rally prices up at some point in day but encounter sellers which cause for a pullback or consolidation. The selling pressure is the wick of the candlestick and can often be twice the size of the body. It indicates that selling has diminished and buyers hold prices at the lows of the day. However, the indicators of today's action did not support the positive close in the marketplace. The MACD Histogram indicator produced a downtick which represents prices favor bearish implications. The RSI below 50 validates a lower high from the 1292 peak in the SPX. The RSI will now find resistance at the 50 level if the market sees a short-term bounce.

Daily Dollar

The U.S. Dollar index daily chart marks the second session that prices remain above the upper bollinger band. I have highlighted previous points at which the second day out of the bollinger band acts as a short-term top. Bollinger bands expand with the upper band and lower band turning opposite of one another in uptrending markets. Prices follow suit and will hug the upper bollinger band to better define the existing uptrend. Today's action may warrant a slight pullback or consolidation before prices resume higher. The indicators above are revealing that this short-term uptrend will likely give way in the next couple of weeks. The MACD is forming a negative divergence of this most recent price swing and the Stochastic indicator has now reached overbought levels. I would expect the stochastics to remain overbought, produce its own negative divergence, then drop below 80 as the MACD produces a bearish cross. Until then, investors should closely watch the next swing high of the dollar index as the 82 level seems like a likely target.

Today's importance

Another sell signal given today as weakness persists within the marketplace. The SPX index daily chart managed to produce a bearish cross on the MACD indicator. This particular sell signal validates the early warning of lower successive histogram bars of the previous 3 sessions.  Today's close at 1211.82 which stands close of the 38.2% Fibonacci retracement level. Prices falling from this level would meet a confluence of support at the 50% retracement and trendline drawn. A confluence of support is an established level based on several points of support.  I expect prices to find a meaningful bounce at 1180ish area before resuming its current downtrend. I'll have more posts later.