happy new year???

Attached is the daily chart for the nasdaq as of December 28, 2009. As you can see, we've had one heck of a rally since the lows of March without as much of a measily correction. But as you can see from the chart, the Q's are approaching heavy overhead resistance. The recent rally has occured on low volume. You have a major resistance point at 46.8 dating back to August 2008 . If the Q's manage to rally past 46.8 then you probably have 48.6 as the next resistance point upwards which is the (lower) high of August 2008, just before the spectacular crash. These resistance points are further bounded by the turquoise and red ascending trend lines.

So what will the new year, and especially January bring us? Well basically any knuckle head can tell you that either the market will continue to rally, or the market will correct. Based on this chart pattern, and also based on historical precedent that during January a rather significant correction occurs in the market in the past, I would place my bets that we see a long awaited correction. The big boys seem almost ready to pounce and knock down equity, commodity prices, shake out the small little fish, gobble up cheap shares, and then ride them higher with all that free money being printed by uncle Ben.

If the Q's correct (along with everything else), look for support at 40.5. Perhaps the 200 DMA will also meet at that point later on too.

Happy new year :)

dec 18... thoughts for the end of December and into January '10

didn't have much time to post lately... but looking at the mid term, it does look like the SPY is experiencing distribution right now, and a long overdue correction is in the cards. This is what I and many others expect... if we're wrong, then a major mid term rally will occur.

looking at the charts, we see the dollar UUP is rallying, oil and gold are tanking, so this would support the thesis of a correction coming up in the markets and commodities. Following this correction, then getting long commodities would likely be a good idea.

If GLD corrects to between 100 and 104, that would be an ideal buying time... probably won't happen until January. But for the next two weeks until after new years, we will likely just chop around current levels because the powers that be won't want a market to tank before Christmas.

3 weekly doji stars

We have three weekly doji stars, the SPX is hitting up against major resistance. Right now we have a major battle between the bulls and the bears on the short term. I find it hard to believe that the market can just keep on going up without some sort of correction. That correction when it comes will be a good time to load up long. In fact that correction could come quick and fast in December, last a week or two, and then we get a Santa Claus rally. With all this money printing by the FED, and with no plan to ever change course, we can expect to be in a raging bull market for the next little while. All those dollars need to find a home, and probably the best tangible assets to accumulate during any long awaited correction would be commodities like gold and oil.

jobs report tommorow... prepare for whipfest

If you take a look at the SPY chart above, you'll notice that the market for the past two day tried to make a high for the year, only to get smacked right back down. Today, the market actually dumped out near the end of the day to an upper resistance band of 110.4.

With the jobs report due out tomorrow, if we experience a gap down, I don't think we will break below 109 unless we somehow get really ugly jobs numbers. Anyways if we do gap down, that will probably mark the lows of the days, because whatever crappy job numbers, I think it was likely already baked into today's price action near the end of the day.

wierd pattern 3 days up, 2 days down...

Well don't we have crazy trading these days? Anyways I was watching inthemoneystocks research, and they pointed out something rather funny. On the SPY, if you note the major resistance band between 109.6 and 110.4, for the past two trading weeks starting two weeks ago on the Monday (and referring to the chart), you'll notice that the market gapped up above the major resistance on Monday (day 1). On day 2 and day 3, the market meandered around the highs of day 1 but never really making much gains (eg. no confirmation of the upmove on day 1). Then on day 4, the market collapses below the major resistance band, and stays below on day 5. The cycle continued again next week, and today Tuesday December 1, marked day 1 of the five day cycle, and the market gapped up. If this continues (not that it necessarily will), then day 2 and day 3 (Wednesday, Thursday) will be pause days, and day 4 (Friday) should see a major gap down. Friday also happens to be US employment numbers. What the numbers are don't particularly matter, because as I noted before, the market can act opposite to what the news should rationally dictate.

So perhaps we have not so crappy jobs numbers, and yet the market will find an excuse to pummel stocks. Or we have very crappy jobs numbers, and the market will be excited and bullishly drive the market to new highs... personally if I have to bet, I'll bet on the former scenario.

if the market wanted to go higher, then we should have had more impressive weekly closes. For the last two weeks, it looks more like it's topping, then consolidation.

thoughts for December...

So what's gonna happen in December? while I was right about Monday being a good day (relatively speaking), there is one thing I noticed on the weekly chart that any trader should be aware of. On the SPY weekly chart, there is a heavy band of resistance between 109.6 and 110.4. The one thing that concerns me is that the market tried to penetrate that heavy band of resistance, and was never able to close above that resistance on a weekly basis. The market would usually have started the week bullish rallying to over 111, only to fall back down by the end of the week to below 109.6. Therefore there was never any confirmation break to the upside. The thing that concerns me is that any failed breakout like what we might be currently witnessing on the SPY, would usually lead to a sizable breakdown. Whether this happens remains to be see... we'll have to allow price action to tell us, but I have a feeling with this week's jobs numbers, and the mess that is going on in Dubai, we are quite near to a conclusion as to what the market will do in the short term.

personally i'm still biased towards the upside because I believe the FED will not allow a decline in the markets, but will not allow my bias to make a wrong move... what the FED says, and what they do are two separate things... they have proven themselves willing to destroy the dollar...

all is good - Friday Nov 27.

while the markets did end down on Friday, considering the news about Dubai, the ugly gap down, only for the market to push back, it could be quite possible that the SPY has seen the short term bottom for now after reaching 108.3, which isn't too far from my thoughts of 108 being support... in fact when ugly news can't shake down the market, and in fact the market rallies, I have a feeling the market will continue in the opposite direction (which in this case is up)... The SPY, USO all reclaimed some major support levels, so there is no confirmation of a down move, rather we are sitting on support right now...

looking at the dollar UUP, while it did gap up big time, it just fizzled throughout the day... probably cuz the powers that be want to prop up the stock market... so I still think the dollar has to take out 2008 lows, before we see a significant correction...

edit: sunday nov 29: judging by how gold is reacting up sunday night, and how UAE central bank is coming out pumping the markets, I have a feeling we'll have a good day Monday...

Dubai: there's nothing wrong with not paying your debts...

So Dubai decided that it needs more time to pay their debts, and is closer danger of defaulting... SO WHAT? just flood the market with lots of printed money and all will be solved... after all that is what the US gov't is doing...

So this thing with Dubai is probably going to give us that downdraft that is long overdue... whether it's a significant correction, or just a slight pause or bump in the road remains to be seen... The SPY was trading around 111 which is major resistance... so it makes sense that we're going to see some small downside pressure, to perhaps 107-108... if we go below, then maybe this will be a somewhat significant correction, but not enough to stop a mid term up trend... eg. the US gov't will do all it can to prevent a market meltdown... at the expense of the dollar... I still think we should see 120 on the SPY before we have a major correction, and the dollar has to trade below 2008 lows before a snapback to cause the SPY correction...

gold is going to the moon, however i think that one last major shakeout will be coming that will destroy hope in those who have invested in gold, before the real up move happens... a 10-15% correction would be ideal, and would be a nice time to get long into gold...

critical day Wednesday Nov 25...

USO is sitting on a level of support (38.5) will it break lower? I'll just observe that even with a lower dollar, oil hasn't really been doing that well lately... Is oil telling us something?

SPY is sitting at a rather major level of resistance of 111... will it break higher? Trading on Tuesday is rather uninspiring, and the market is starting to look tired...

the dollar UUP seems to be carving out a base... will it break lower? or will the dollar bulls be able to push the dollar up from above it's base?

and will throw XLF into the picture, since the SPY often depends on the performance of the financials, and right now it seems like the XLF is just coming off the upper descending trendline on the very short term...

so what will happen on Wednesday? while I'm leaning towards a decline for the market because it looks tired, I must say that at this point, anything can happen... and people already have some expectations as to what will happen... you can be certain that if people's expectations of what the market will do is wrong, then the market will typically reverse in a violent way...

so I figure the first 1/2 hour of Wednesday's trading will probably tell us where the market is going for the day... keep in mind that volume will likely be light because of Thanksgiving coming up... judging by what's happening at 5:30am EST, my guess is that we gap up in the market... just observe whether this gap fades or not...

whipfest nov23...

I thought today we were going to breakout above resistance, and prove my thesis that I posted yesterday wrong. As the 10am timeframe rolled around, SPY resistance was tagged, and from then, the market just rolled over... (see that big tail?) That means I still stand by my thesis that we're going to have a small downdraft to 108, unless we somehow are able to clear the 111 resistance tommorow, and confirm it the day after... (somewhat unlikely given today's price action)...

USO looks likes it's ready to hit the lower channel and 50 dma of 38.50. From then maybe we'll have another inflationary rally

The dollar certainly declined, but from trading on the UUP, it looks like this is as low as it will go in the very short term. Ultimately I still think the UUP has to trade to 2008 lows of 21.90, before we have some sort of significant rally in the dollar, and a sizable correction in the SPY.

week of Nov 23 09... continued modest declines

Well for this coming week, I expect modest declines for the SPY... (to 107 - 108 50DMA)... I don't expect a bloodfest. The dollar appears to have caught a small uptrend thus supporting lower stock and commodity prices, but nothing that will stop the larger timeframe downtrend. I don't expect a major market correction to occur, until the UUP trades around the 21.90 - 22 level which is the major low from last year for the dollar. Maybe the SPY will be at 120 at that time... In the meantime, I don't think a dollar rally will exceed 22.60 on the UUP (where the 50 DMA is).

USO can expect to continue it's small downtrend until 38.40 where it should bounce. GLD and SLV are way over extended and ripe for a pullback... when this pullback will occur is anyone's guess... I think GLD is going parabolic upwards for now... any day could yield a nasty correction, but in the meantime, the path of least resistance is up.

pause day ?

Nov 19- if you take a look at the SPY, we had a rather nasty down day, but not as nasty as it could have been, and it's sitting on a support level. Similarly for USO, we're sitting on a support level. While I think we still have a little more of a down draft to come, (108 on the SPY, and 38.4 on the USO), that's about all I can expect for a downmove because this bull does not want to die, and it has the FED on its side... so for the 20th, I expect a pause day, because of an not so steep pullback today, and then a continuation of a bit more of a down move.

since I really don't have time to play shorts, I think I'll wait for a bit more of a pullback before going long. I keep hearing about, "nasty correction coming"... "we're way overbought"... I do agree with that, but somehow I don't think the FED will allow the market to crash right before Christmas shopping season... for now the big boys are just playing games... notice how BAC decided to say today that INTC won't be doing too well? Is it a coincidence that they published some scathing notes on INTC just when the SPY was hitting 111 resistance? Why did they wait until today to say that? And are they really saying something that we don't already know? All that is happening based on my speculation is to shake people out, so that the big boys can scoop shares for cheaper, and sell it back to the little fish who will blindly chase it up higher before they play some more games, to shake people out. The big boys are doing the right thing... buying low and selling high... for this to work, there's got to be dumb money that is willing to buy high and sell low.

small decline in the immediate future?

Didn't have much time to look at stocks lately... but based on today's trading November 17, it looks like the SPY is hitting along resistance with little will to break through the 111 resistance band. Similarly the dollar appears to have hit support, and is at least ready to rally a bit before a resumption of the downtrend. Combined with the fact that oil is hitting resistance, and gold appears to need to take a breather, it looks probable that we'll have a small decline very shortly. Perhaps tommorow's jobless claims numbers would be an excuse to take some profits... A brief pullback of the SPY to 107 or 108 wouldn't be surprising, as long as trading remains above the ascending yellow trend line.

But definitely in the mid to longer term, there's no stopping this raging bull market... all that printed money sloshing around out there needs a home, and as long as the dollar declines in a controlled fashion, the illusion of a healthy economy can continue. In the even longer term, well we'll leave that to another day... no need to worry about things that may happen a year from now, but if you followed my blog long enough, you know what I think will happen.

rally continues...

If you look at the charts that I posted in the past, you'll notice that the USD continues it's steady trip down, and the SPY continues it's steady trip up. If I have to gamble, I'd say today's pullback in the SPY and GLD is a good time to load up on long positions. If you notice the UUP chart, it hit up against the upper descending trend line. I'd place my bets that the UUP will continue to decline, especially what happened at 12noon to 1pm today, where the UUP rallied to the upper descending trend line only to pull back.

triple top SPY ?

Well I wonder if a triple top is developing on the SPY... 108 seems like a formidable resistance point, and a pullback from the 108 level would not be surprising at all. Furthermore today (Oct 12), trading on the SPY appears to be uninspiring producing a kind of spinning top. Given our run up recently, a small correction would appear to be reasonable (perhaps to 104 on the SPY). The market has already acted as if all is well, nothing bad is going to happen. Well when the banks report earnings, they really have better blow away people's expectations (eg. beat the whisper number) otherwise, we're going to tank. I have a feeling that at least a small decline would be reasonable because personally I think the market has gotten ahead of themselves, and the bulls appear to be getting a little tired. XLE also produced some kind of topping tail, so it favors the downside on the SPY at least on the short term.

As for GLD, I think it officially safe to say to buy on dips. GLD has clearly broken up to the upside, and with the money printing going on, that should bode well for gold. It looks like that any decline will be bought into starting with a support at 101.4 (where we gapped higher as GLD broke out). Failing that there should be support at 100.5 (the highs of 2008) and very massive support at 99.6 (gap fill).

The US dollar just tends trade erratically gapping up and down, but the long term and even the mid term trend is down. As for the short term, it likely favours the upside. It looks like we just completed a double bottom, and in the short term, there are higher highs and higher lows. A rallying US dollar likewise supports a small decline in stocks and GLD, (they both look kinda tired right now).

the week ahead... further downside or a bounce?

Well the SPY has finally had some downside move last week, culminating with an ugly jobs number on Friday, and with the market gapping down big time, only to recover to almost break even. For the next couple of days to weeks, it does look like we're entering a downtrend. Whether this is the crash which I think should happen, or just a normal correction in a bullish upmove (more likely scenario given all that printed money sloshing around), remains to be seen. But the downmove will not be smooth, and if you look at the SPY chart, it seems to be within a descending channel, (blue channel), and a bounce on Monday would not be surprising. Perhaps a bounce to the upper channel, and some resistance would present a quick shorting opportunity.

The US dollar (UUP) does appear to be in a rising wedge, (yellow wedge), so it looks like a rough, but ascending price action for the US dollar, thereby supporting lower stock prices, and frankly lower gold prices as well, as gold seems to be carving out lower highs and lower lows.

If gold does move to the 50 DMA (red line) that appears to be solid support (95-96), and with a stop at 94, long term ascending (red) trendline. That area may be a good area in which to go long in gold, as continued money printing should support gold.

correction happening... watch for GLD entry

On last Friday, we witnessed that when the USD rallied, the SPY tanked, but when the USD fell, the SPY just held flat and did not rally. Hmm maybe people are starting to realize that a USD in free fall may not be all that positive for the economy. But anyways in the short term, the USD does appear to be heading higher.

In each of the three chart above, there is a red horizontal line which represents either a major support or resistance point, and is also where the 50 DMA is situated as of Friday. The markets will most likely head lower until at least that point with the USD rallying, as the market is very jittery right now. I have my doubts that we would see another huge shakeout as what has happened earlier in the month, with the markets rallying to new highs, but we must always be open to that idea. Anyways if it is true that we are in the middle of a correction, the red horizontal line might be an area where one might want to load up on gold (95-96 on GLD) and anything precious metals related if there are signs of stabilization around that area. I see GLD holding up well whatever happens to the economy, eg as inflation hedge, or as a "safe-haven" asset.

You might also be able to say that you want to load up on stocks when the SPY stabilizes around 101.6, with that being a healthy correction from current levels. But I'm a skeptic about our current economy, and who knows if a healthy correction will turn into a full blown vicious bear market. With people losing their jobs, company beating earnings by cutting expenses, I have my doubts, and the stock market is basically saying right now that there won't be any problems in the economy. If this expectation does not turn into reality, you will witness stocks being re-priced appropriately.

the week ahead

When people say with certainty that "this will happen", gold will goto X, the SPY will goto Y, they really are just guessing just like everyone else. I can say what is likely going to happen, but what is likely going to happen, does not mean it is going to happen, and once again we have to be flexible with our oppinions.

Anyways, the SPY appears to be building a little bit of a bull flag ( light blue markings), and this would support the continuation of the rally, after all fund managers have got a lot of window dressing to do to prop up their fund values, not to mention the plunge protection team doing their magic. The second piece of evidence of continued rally, is that the US dollar seems to be hitting quite a bit of resistance (see the UUP chart). Although we have to be careful because the gov't is selling more treasuries this week, and will try their best to prop up the dollar.

As for gold, it appears to be sitting on support (with the dollar sitting at resistance). So overall things look bullish for the week, although we must be vigilant for any violent turnarounds, cuz we are in a very overbought market now.