BullBear Trading: Stock and Financial Market Technical Analysis

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Crucial moment at hand. $NDX is on the verge of breaking out of the bear flag to the downside.  It is noted that the other indexes had broken out of the bear flags several days ago, rallied back into it but failed to hold and back at resistence.  Bollinger band width is at a relative low and is ready for a big move.  It is hard to image that big move will be to the up side at the moment, but it will be better not to hold this opinion as a belief and just let the market decide.  

Yesterday price action issued a daily sell signal confirm the previous day 60 minutes sell signal.  With the market moving at the speed it is moving recently, a daily sell signal may actually be a get ready to cover and  buy signal.

The volume on the chart previously posted probably is wrong. Also, it is noted that the daily sell signal yesterday is for SPY.  PPO histogram for $NDX issued a sell signal 6 days ago and had not turned to a buy signal like other indexes probably because of its higher strength in the prior up move.

Excerpts from Sy Hardings' 9/30/11 Report,

 

"On Friday the Economic Cycle Research Institute notified its clients that a recession is now unavoidable, saying, "The vicious cycle is underway where lower sales lead to lower production, which leads to lower employment, which leads to lower income, which leads back to still lower sales, and the cycle feeds on itself." The ECRI said its call is based on dozens of its leading indicators. In response to the question of why should its warning be heeded, the ECRI replied, "Perhaps because, as The Economist [financial publication] has noted, we've correctly called the beginning of the last three recessions [1990, 2000, 2007] without any false alarms in between. In contrast, most of those who have accurately predicted a recession or two have been guilty of also predicting recessions that did not occur - in 2010, 2005, 2003, 1998, 1995, or 1987."

Their recession call ties in with my own research firm's prediction that the stock market also has unfinished business on the downside.

There has never been a recession that did not involve a bear market for stocks.

Separately from the high odds for a recession, our expectation of a further decline in the stock market is based on dozens of our own fundamental and technical indicators.

It's also interesting that although the 30-stock Dow and 500-stock S&P 500 are down only 15% from their April peaks, the DJ Transportation Average, which often leads the rest of the market, and the 2000-stock Russell 2000, home of small stocks that are the favorites of individual investors, are both down 24%, across the 20% threshold that defines them as having entered bear markets."

 

"It is time for the market to put up or shut up!

Guy Lerner 

9/30/11

Many of the indicators that I look at suggest that the markets are at an inflection point. For example, some of our shorter measures of investor sentiment from the Rydex data series have gotten so extreme that they are suggesting there can only be only two outcomes to the current volatile trading range. Either the market will go strongly higher or we should have a waterfall decline. There is nothing insightful to analysis that says we will go higher or lower, but the point is that the resolution to the current volatile trading range should occur soon and the move should be substantial. The direction just isn't known.

If I were to put numbers or probabilities on to which scenario is most likely, it would probably be 80% resolution to the upside and 20% resolution to the downside. That is what history would tell us, and identifying what the outcome will be is only a guess in my opinion. Furthermore, I don't think you need to know what the outcome will be to survive in the market. It is more important to understand what is happening and then take action.

Figure 1 is a daily chart of the S&P Depository Receipts (symbol: SPY) going back to the bear market top in October, 2007. The red dots are key pivot points. Look to the right hand edge of the chart and the cluster of 3 pivot points. A close below three pivots is only seen in a bear market. The low pivot here comes in at 112.58. So if we close below this level, we should see continuation of the bear market for equities. The alternative is that this level will hold and prices will move higher. (Emphasis added)

 

Figure 1. SPY/ daily
SPY/ daily

 

In summary, I see the equity markets at a pivotal juncture. The three pivots will either be the bottom or prices will head significantly lower."

 

SPY Closed @113.33, just .67% about pivotal low of 112.58.  Let's see if THEY* can turn thing around Monday morning.  If not, let's hop on for the slide.  The train, which already rolling out from the Station, is not likely to decelerate. ??

 

(Short term) bottom may be near in term of time but may be far in term of price. ??

 

*THEY are not the bulls or the bears.  THEY are the Dealer/the Market Maker.

 

 

Mr. DiLiddo, Chairman of VictorVest has the following to said this weekend,

 

"HANG ON SLOOPY, HANG ON.
I don't consider myself to be a quitter, but I have lived to regret the few times I've thrown in the towel. The most memorable occasion happened in December 1974 when I sold all my stocks at the very bottom of the brutal '73-'74 bear market.

It was a huge mistake. No sooner than I sold them, they took off like birds. One stock in particular, Teledyne, still sticks in the craw of my throat. I sold it at $10 a share and watched it go over $700. I was so dumb I didn't even know we were in a bear market. All I knew was that I was buying what I thought were good stocks, and they went down. I was so resentful that I refused to buy back my Teledyne even as it went higher and higher. What a dope!

Well, I may have been a dope in 1974, but I was a heck of a lot smarter in 1982...I had my shopping list ready when the market exploded in August 1982, and I had no regrets. No, I didn't have VectorVest as we know it today, but I did have its prototype and it worked like a charm. Unfortunately, there are millions of investors out there right now who are as dumb as I was back in 1974. They're selling-out at the wrong time. How do I know? All you have to do is watch the flow of money in and out of mutual funds.

Investors pulled $92 billion out of stock funds in June, July and August, matching the worst three-month period during the 2008 downturn. Another $25 billion was withdrawn in September. Of course investors are scared. There's a newsletter writer out there writing about the "End of American." He's not a flake or a fear monger, but he is scared. On the other hand, other newsletter writers are talking about the "buying opportunity of a life time." Who can you believe?

 

All I know is that bull markets are born in the worst of times...when fear and the feeling of defeat are pervasive. With our Investment Climate data showing only 37.60% Bullish Advisors, sentiment is pretty bad, but that's good. History has shown that investor sentiment is a counter intuitive indicator. In other words, it's time to buy when bullish sentiment is low and time to sell when it's high."

 

Let's God help us that the Not Smart and the Too Smart to become Smart and get the timing right.

 

Mr. Sloopy DiLiddo.

 

I will have to make fun out of you if you keep holding onto your 10% long position on AAPL while the market is on the verge of collapsing.

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