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Monday, January 31, 2011

Monday, After the Close!!!

The Russell has already taken out the 20 day MA, and now is testing the 50 day at 773.53. If the 50 day gets taken out, odds are good we would see a bearish cross of the two averages.
If by chance, the Baltic Dry Index is a leading indicator, we are going to see some very scary days ahead.
The VIX closed outside of the upper Bollinger band today (19.51 is the top of the BB, and the VIX closed at 19.53), adverting a buy signal in the equities markets which would of happened if the VIX closed back with-in the bands. So, far the trendline that was broke Friday is holding, opening the doors for the VIX to go longer-term bullish
So far everything is playing out OK, as long as the SPX does not break above the 61% retrace level at 1292, odds are best that we are in a 2nd wave up. Once the 62% level gets violated odds quickly diminish that this is a 2nd wave and new highs became the highest outcome. The short-term indicator STO on the bottom of the chart has gone from over-sold this morning, too over-bought now at the close and the RSI is now testing the trendline of resistance.
Breadth for the day was typical of a correction, closing at 2.24:1, on 1.2B shares traded on the NYSE. As long as advancing Breadth stays down at these low levels, odds stay with the bears, any breakout, with increasing Breadth would be VERY bad for the bears case.
Oil went crazy today with Light Sweet Crude Futures coming very close to making new highs. This Egypt mess is a large wild card right now, if things quiet down quickly, the bulls have a small chance, on the other hand, if things keep escalating as they have been, a 3 of 3 down is in the cards this week. Also of concern this afternoon is the number of shippers cancelling trips down the Suez Canal, this could be very bearish for Europe and would carry thru to the US markets quickly. The reason I mention this is because Technical Analysis can not take into account "Black Swan" events. We are over-bought long-term, but when you throw in unpredictable events the results seen in the Markets can get CRAZY!!!
The first level of support for the SPX is Friday's low, this in my opinion would really start an accelerated sell-off that would quickly challenge the previous low of 1271.26, breaking thru and taking out the important low at 1261.70. At this point in time, odds are definitely higher for a large move to the downside, compared to the same size move to the upside. If the SPX does stick around this level for more then more few hours, that would start giving odds back to the bulls, because if this a 1-2 down set-up, we need to have a very large move ASAP.
The Trend Finder II has been updated with two changes today. Any guesses?
-Trendlines: How a Straight Line on a Chart Helps You Identify the Trend

1 comment:

  1. Hi Michael.
    Another great report sir.
    Buyers daily chart still have control above 1271
    Sellers 60 minutes chart have control below 1295.
    Close 60 minutes above 1295 possible mkt will go new high 1310 first target and next 1324.
    Tuesday, February 1, 2011SPX - SYSTEM EOD - Still long 70% Entry 1206 . Reduce 20% if fill 1294
    System remaim bullish above 1271 but DIV_PRO alert potential Major or Minor top time to reduce risk.

    System sold 15% 1297+91pts - January 18, 2011
    System sold 15% 1291+85pts - Jnauary 29, 2011
    1294 if fill reduce 20% longs from 1206
    1310 if fill reduce more 15%.
    Stop all positions (70% remain) if close below 1271
    Have a great session and a suporb week All.