Well two up days in a row seem to have voided the big drop on Monday (2/25) however this all seems to be a normal pull back to the 50/10 LRC lines and the volatility stops. On the Nasdaq 100 the 50/10 have crossed under bearish and the 25/5 is already below the 50/10. Unless the price gets over 2780 or the purple 50/10 LRC, this looks to be still headed south. With these wild whipsaws though, it could poke above then sell off. Who knows.
The small caps, the Russell 2000, have not yet had a complete 50/10 bearish cross but did stop their bounce at the 25 LRC and the volatility stop. A normal bounce unless it continues up and exceeds the previous high of 932, then all bets on the bear are off.
Last week I posted that the Russell 2000 was foretelling of an upcoming bear move. Generally small caps lead the way. After a bounce Friday to the 50/10 LRCs and giving the 25/5s time to cross below the 50/10s, the market is now resumed its down move. There was a bounce this morning but it was stopped at all the various resistance points. A great shorting opportunity.
Quite a reversal today with the Nasdaq 100 down 1.5% and the Russell 2000 (RUT – small caps) down almost 2%. Looking at the daily chart the RUT sliced through the 50/10 LRC and actually took out the volatility stop. The S&P, Dow, and Nasdaq stopped right above their Volatility stops but in my experience, the small caps lead the way and therefore the RUT may be telling us something. The Nasdaq needs to take out 2700 and the S&P needs to drop below 1495 before we really have something here. But back to the RUT, the last pullback was to 894.34 so that will be the first important benchmark to see broken. Many more after that including up trendlines 810ish, bolinger bands 890, and big support at 868.50. The Ergodic has crossed down and is giving a bearish divergence. The ADX turned, a magenta ball per Gail Mercer.
The weekly is also validating this possible warning sign. We have a upper bollinger band failure to penetrate, usually means exhaustion. We have a way overbought ADX at 65. And we have the ERgodic beginning to roll over. The week is not over and these are all just the beginnings so we need to see a lot more confirmation but I still think this is a warning of some significant down moves in the market ahead.
The Nasdaq 100 has been going sideways now for over a month, while the other markets Dow, SP, and Russell have been trending upward (at least till the end of Jan). Look at this hourly chart of the NDX. Simply buying around 2725 and selling around 2745 you would have made 20 handles 7 times beginning 1/9/13, not to mention the other side of shorting at 2745ish and covering at 2725ish. Dropping down to a 12min or 5min chart would have worked well in timing the entries.
Apple has had a tremendous, parabolic rise followed by a huge drop from 705 to 435, over 38% drop in price, in market value. Wow! But after such a meteoric rise what would one expect. (Interesting that 38% is a Fibonacci number.) Here is the daily chart first. Strong downtrend but not oversold per ADX. Strong, increasing spread downward on both 50/10 and 25/5 LRCs. Slightly waning momentum per the ERGO and a bullish divergence. And it stopped at strong support. Possible bounce in the making? Longer term see the next chart.
Dow: On a long-term basis looking at the monthly charts .. all is bullish, with a couple of caveats. Its nearing the previous high of 14,198 but has yet to take it out. The ADX is not showing a strong trend, as compared to say 06,07,08 since it’s under 30. It hasn’t tagged the upper Bollinger bands since early 2011, a failure to do so is a strong indicator of waning momentum. So we need to see what happens in February.
This is great! The comparison of financial stats on Apple vs. Amazon. Go thru the graphic below, starting at the top until you get to the bottom and most likely your response will be WTF!!?? The markets’ reactions are so often a surprise.
The Conference board reported that consumer confidence in January dropped to lowest level since Nov. 2011. I find this interesting in light of the stock market nearing its all time high (S&P high was 1576 in 2007). Also in light of the rising retail sales numbers. Maybe fear brings about escape through spending. The stock market is up because the Fed keeps pumping cash into the system and keeps interest rates near zero. Also because there seems to be that bubble mentality brewing.
Look how the stock market used to move in tandem with confidence and how its now diverging dramatically.
Next look at how retail sales are strong yet confidence is weak. The sales figure, however, lags the confidence I believe.
And lastly here you can can see the historic consumer confidence levels for the past 6 years. The top part of the graph is actual CC numbers and the bottom shows rate of change. Now it has obviously turned negative and is accelerating to the downside in velocity but will it really plunge or bounce up from here? Who knows, but it will be interesting to see if next month shows a trend. Also there are several measures of this, we have to see if they all confirm.
The Univ. of Michigan consumer confidence came in at 73.8 up from 72.9 in Dec. so go figure… Amazing how these different polls vary and who knows which one to trust. Also today, the unemployment rate rose to 7.9% but more importantly only 157,000 jobs added which is pretty weak. On the other hand the total added jobs for 2012 was increased up 335,000
On a weekly basis the Nasdaq 100 could be forming a Head and shoulders pattern. It could easily still rise to 2800 (the old up trend line) and then sell off. Key is the break of the neckline or a break above the September high.