Thursday, February 10, 2005
so pat
This is so pat ... so very pat. Last week, the NASDAQ had the opportunity to score both a Real Accumulation Day on Friday as well as a Real Accumulation Week because the percentage gain was strong enough. However it squandered the opportunity to do so because volume was dismal not only on Friday, but the whole week.
Today (Wednesday), the NASDAQ scored a Real Distribution Day on the downside, with volume barely making it over the 50-day EMA of volume. Well, if that is how the market wants to talk, we had better listen. For what it's worth, it was probably a Real Distribution Day on the S&P as well, although I do not have the volume stats with me to confirm it (my volume stats come in only in the morning; heck its 5.24am --- already morning!).
We are now at the Feb 9/10 cycle turning point, and my gut feel based on pattern failure and negative divergences is that this timeframe in the cycle turning point has defined a high for the US market. Therefore, I have strong suspicions that the oversold rally is over and the next leg down should commence. A break of 1183/84 on the S&P should generate momentum selling and fireworks to the downside.
To me, the market has spoken. Unless I see a powerful reversal to the upside on heavy volume, I cannot but be bearish.
Today (Wednesday), the NASDAQ scored a Real Distribution Day on the downside, with volume barely making it over the 50-day EMA of volume. Well, if that is how the market wants to talk, we had better listen. For what it's worth, it was probably a Real Distribution Day on the S&P as well, although I do not have the volume stats with me to confirm it (my volume stats come in only in the morning; heck its 5.24am --- already morning!).
We are now at the Feb 9/10 cycle turning point, and my gut feel based on pattern failure and negative divergences is that this timeframe in the cycle turning point has defined a high for the US market. Therefore, I have strong suspicions that the oversold rally is over and the next leg down should commence. A break of 1183/84 on the S&P should generate momentum selling and fireworks to the downside.
To me, the market has spoken. Unless I see a powerful reversal to the upside on heavy volume, I cannot but be bearish.
Sunday, February 06, 2005
Real Accumulation Day, Week recorded on S&P but not on NASDAQ
Friday saw the S&P scoring a Real Accumulation Day, but not on the NASDAQ. Although the percentage gain on the NASDAQ was above the 50-day moving average of the Reif AVX, the volume on the NASDAQ was below the 50-day average of volume, and hence it cannot be considered a Real Accumulation Day on the NASDAQ. Additionally, it was a Real Accumulation Week for the S&P (RAWs are determined based on 10-week averages), but it was not a RAW for the NASDAQ for the same reason --- NASDAQ volume was subpar all week. Thus although the Friday rally and the price action has emboldened the bulls somewhat, we have seen a negative divergence. This negative divergence is somewhat troubling because in any sustainable rally, it is usually the case that the NASDAQ outperforms the S&P and the DJIA.
The other negative divergence is based on price --- the last time the S&P was at this level (on Jan 18), the NASDAQ was back above 2100 and closed at 2106. On Friday the NASDAQ closed at 2086.66. Unless the NASDAQ makes a significant push higher, I will count this as a second negative divergence. The NDX (NASDAQ 100) is currently languish at the 1535/38 level --- barely challenging Wednesday's highs.
The S&P is also right smack at resistance at 1203. This was around the low of the Jan 3 Real Distribution Day that not only saw the S&P plunge to 1200, but also saw the S&P delivering an Expansion Breakdown Sell Signal. Hence I would expect the 1200-1203 level to give the S&P significant difficulty, at least in the immediate term.
Sentiment as measured by the put/call ratio is still considered bullish. This coupled with the negative considerations I mentioned above suggests that the market might either drift around at the current level before trending lower into March, or the market might decline and consolidate in the current timeframe before launching an advance to challenge S&P 1250 --- as per my Big Picture Expectations detailed in so many emails ago.
Bullishly, the S&P displayed very encouraging behaviour on Friday, by not only completely reversing the first pullback day (Thursday) after a classic 1-2-3 pushout sell-signal, but also delivering both a Real Accumulation Day and an Expansion Breakout. As such, I give the bulls the benefit of the doubt at this point in time, and strongly discourage shorting the market. Never stand in the way of a freight train.
The other negative divergence is based on price --- the last time the S&P was at this level (on Jan 18), the NASDAQ was back above 2100 and closed at 2106. On Friday the NASDAQ closed at 2086.66. Unless the NASDAQ makes a significant push higher, I will count this as a second negative divergence. The NDX (NASDAQ 100) is currently languish at the 1535/38 level --- barely challenging Wednesday's highs.
The S&P is also right smack at resistance at 1203. This was around the low of the Jan 3 Real Distribution Day that not only saw the S&P plunge to 1200, but also saw the S&P delivering an Expansion Breakdown Sell Signal. Hence I would expect the 1200-1203 level to give the S&P significant difficulty, at least in the immediate term.
Sentiment as measured by the put/call ratio is still considered bullish. This coupled with the negative considerations I mentioned above suggests that the market might either drift around at the current level before trending lower into March, or the market might decline and consolidate in the current timeframe before launching an advance to challenge S&P 1250 --- as per my Big Picture Expectations detailed in so many emails ago.
Bullishly, the S&P displayed very encouraging behaviour on Friday, by not only completely reversing the first pullback day (Thursday) after a classic 1-2-3 pushout sell-signal, but also delivering both a Real Accumulation Day and an Expansion Breakout. As such, I give the bulls the benefit of the doubt at this point in time, and strongly discourage shorting the market. Never stand in the way of a freight train.
