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The Structure of Stocks Weakens Significantly

I was traveling all week and returned late Thursday night. As I reviewed the development of price for the week in the Stock Indices and the structure of that development, I was extremely surprised. The S&P moved right into the 2125 area, but it did it on declining volume, declining breadth, the number of new lows exploding and declining volume increasing over advancing volume. In other words, a few tech stocks were carrying a speculative move in price development that was not being supported by the rest of the market. The structure of the move was weakening fast, leaving no other alternative but a move back down.

The importance of what occurred last week is significant. Unless the structure of the market strengthens early next week, I expect to see the S&P test 2030. That will be significant support. However, if that is broken, the continuing weakness of price structure will weigh on price development and there could be a substantial, sustained move lower. Keep in mind, the Indices have been in rotation and unable to breakout since February of this year. 2030 in the S&P is the lower extreme of that rotation. Trading and closing below that level suggests a greater degree timeframe is taking over that will lead to a greater move to the downside.

Markets never move in straight lines. They run and pause, then run and pause again in all degrees of time. Expect periodic pauses on any sustained move. How those pauses develop will be important to analyze in determining the continuation of any move.

The Metals were slammed this week. I have felt and stated many times I think the Metals may be reaching a point where we could see a significant move to the upside. I have not suggested long positions because I have expected a continuation of selling, but I am looking for a bottoming pattern. One possibility is the move lower this week could be a blow-off bottom. This occurs when sellers dump all positions and exhaust themselves. There is nothing left to sell and buyers begin to step in. If this is the case, we will know through an analysis of the structure of any move off of the lows. However, until that time, be wary of any long positions.

Oil appears to have much lower to go. Price development and the structure suggest a possible move down to the 33 – 34 area.

The coming week will be very important to the intermediate to longer term analysis.

This is the link to the full Briefing:  The Markets in Development Briefing

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Market Structure Not Supporting Price

Below is the link to today’s Briefing.  I took a little longer time tonight to analyze the price development and structure in multiple timeframes.  I think you will find it informative.  Basically, the current rally up to test the upper Key Reference Areas is not supported by the market structure.  In fact, today there were declining new highs and increasing new lows.  Breadth was negative most of the day.  Volume is non-existent.   Unless those change, the Indices are in a position of a potential rotation down and are at significant resistance where rotation has occurred since February of this year.

I will be traveling the first part of next week and will be unable to prepare a Briefing.  However, if there is a significant move, I will address it in an email to subscribers.

The Markets in Development Briefing

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Price Development Is Confirmed By The Structure

Below is the link to today’s Briefing.  Yesterday, as I suggested it might be, was a one day wonder.  Obviously someone was trying to kick off a significant rally, but they failed.  Yesterday’s range was completely retraced today.  I am not interested in the news events of today.  What I am interested in is the participants reaction to the news in the various markets and the strength of their conviction to any price move.

Yesterday I pointed out the incredible rally in the Indices was not confirmed by the structure of the market.  That left the rally very suspect, unless the structure strengthened.  That did not occur today and we were down significantly.  The Indices reached an important low today that was confirmed by the internals.  However, they are at a point of being extremely oversold, suggesting the possibility of some type of countertrend rotation to work off the oversold condition.  This does not preclude the Indices from trading substantially lower first.  However, it will be important to look for the potential for a bounce, especially if there is a divergence in Breadth tomorrow.

Trading and closing below 2032 will open up the higher probability of a move down to the 1970 in the S&Ps.

The Markets in Development Briefing

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Stock Indices at a Critical Level

Below is the link to today’s Briefing.  I have taken the time to explain the run/pause functions of the markets and a trend.  Important to the explanation is to understand the markets run/pause in all degrees of time.  Significant to this is the fact the Indices have had a good run coming into the lower support levels.  Volume confirmed the run and did not diverge going into support.  This suggests sellers did not exhaust themselves but merely may have taken a rest.  If that is the case, when selling begins again, it should produce a move that is at least as great as the previous run.

However, while the current pause may be part of a greater degree trend change, if the upper extreme of that rest is traded through and volume is increasing, it negates the analysis above and will raise the probabilities of a move back up to test the highs.  This is a lower probability but must be considered as a possibility.

My point is, while the pause has a wide range, the extremes of the rotation are offering areas of excellent trade location where a large move may develop, especially if that break is to the downside.  As always, on any breakout, volume should confirm by increasing to support the new trend.

The Markets in Development Briefing

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Stock Indices Break Below Important Support

The link to today’s Briefing is below.  From a price development perspective a lot of damage was done today in the Stock Indices.  The S&P has broken down below 2065.  The Transports closed below 8250.  The Industrials appear to be breaking down outside of their rotation.  The NASDAQ closed below its lower support.  Most important, the structure of the move was strong internally.  The day patterns suggest additional selling tomorrow.  However, the Indices reached a point of being extremely oversold today, where we can typically expect some type of rotation to work off the oversold condition.

The Indices can stay oversold for a long time and selling can certainly persist tomorrow, but we must be aware markets never move in a straight line.  Therefore, I have to expect some type of rotation up.  How that rotation develops will be extremely important.  Also, holding the S&P below 2065 and the Transports below 8250 will be critical.  If they do hold below those levels on any rotation, it will suggest we have are transitioning into a greater degree timeframe move lower.  If there is a break above those levels and close above those levels, the probabilities will have switched to today’s move being a false breakout.

As I said in the previous Briefing, expect volatility this week.  That is certainly what we were faced with today.

The Markets in Development Briefing

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A Week of Much Volatility May Be Coming

The link to Friday’s Briefing is below.  I wanted to wait as long as I could this weekend to do the analysis and recording.  It appears the Greek situation is not going to get resolved.  Asian and Middle East markets are already down.  If this persists at the Globex open this evening, we will likely see a large move to the downside.

As you will see in the Briefing, Breadth was strengthening going into Friday’s close.  This suggests the higher probability of a more higher on Monday.  However, internal divergences typically are eliminated on a news event.  We certainly have a significant news event in front of us.  Expect a lot of volatility and for the powers that be to put as good a spin as possible on any Greek default.

Markets are closed on Friday.  Normally, as the week progresses, volume would fall off in anticipation of the long weekend.  However, that may not be the case, due to events in Europe.  Additionally, we may begin to see the Metals making significant moves as well.  This is the time period when I am looking for the Metals to begin bottoming.

Expect a roller coaster ride.

The Markets in Development Briefing

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Stocks May Be Entering Critical Area in Terms of Time and Price

Below is the link to today’s Briefing.  The Stock Indices are looking very tired.  For quite some time price has held up longer term in spite of weakening internals.  While the rotation back down does not have the appearances of being impulsive, that can always change.  Yesterday’s volume was strange.  Today’s was better, but still fell off as the market moved down.  There is a slight divergence in Breadth over yesterday.  Unless that is eliminated tomorrow early in the day, it could be signaling some type of rotation back up.

The Transports are right at the 8250 area.  Breaking below that could usher in selling in some of the other Indices.  The S&P closed below 2096 today.  As long as it remains below 2096, the probabilities are such that we will see a retest of the 2065 area.  If and when that occurs, it will usher in a very important and decisive time for Stocks.

The Markets in Development Briefing

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Critical Week for Stocks, Metals and Euro

The link to Friday’s Briefing is below.  It is extremely important to recognize changes in the environment of any market or information that can come into the market that will change the environment or perception of value by the participants of that market.  There is much speculation as to what will happen in Europe in the coming week and the potential for Greece to exit the Eurozone.  Expect leadership to play down the repercussions as they did with the failure of Lehman in 2008.  However, the actual outcome will only be known after the fact.  If the proverbial can is kicked down the road, I would expect the markets to take that as a positive.

In any event, in analyzing price development and price structure, there is a larger probability for a continuation of rotation down to test the lower extremes, as outlined in the Briefing.  While Breadth was not extremely negative on Friday and volume declined going into the low of the day, the Indices closed on the lows, suggesting the selling would have continued if the markets had not closed.  Based on this, I would expect some follow through on Monday, not taking into consideration the European situation.  Remember in Thursday’s Briefing I suggested there would be some rotation down on Friday and how that developed would be important.

Silver is not confirming the strength in the Gold market.  However, any Euro weakness the first part of the week will have a positive impact on the Metals and the Dollar.  This could be a case where we see the Metals and the Dollar rising, as individuals move to safety in lieu of an unknown impact of a Greek default.

Most European markets are six hours ahead of us based on EST.  What happens in the Globex session may set the tone for the next few days of trading.  If Globex can hold at or just below Friday’s low, it would indicate a positive situation and potentially higher prices.  However, if Globex is substantially lower, I would expect a the S&Ps to test 2065 and that would give an opportunity for a breakout to the downside.

The coming week will be very important in terms of price development.

The Markets in Development Briefing

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Stocks Rally Supported by the Internals But Now Face Resistance

The link to today’s Briefing is below.  As discuss in yesterday’s Briefing, the Indices were poised for a large move in one direction or the other.  Today’s rally was definitely supported by the internals, so it should be taken seriously.  While there can be additional upside tomorrow, the Indices will reach a point of being extremely overbought, suggesting some type of rotation to work off that overbought condition.  Also, they are approaching significant intermediate term resistance.  

Short term, the first hour of trading will be important.  Intermediate term, what happens above the 2124 – 2134 area in the S&P will determine the next potential larger degree move higher.

The Markets in Development Briefing

 

 

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Stocks Continue to Rotate But a Large Move May Be Coming

Below is the link to today Briefing.  A confluence of timeframes may be coming together that will result in a large move in one direction or the other.  The determining factor may be how traders interpret the FOMC announcement overnight.  This makes the initial balance period extremely important tomorrow.  Unless the longer term structure of price development changes, the higher probability will be for a move lower.  Watch 2065 carefully in the S&P.  Alternatively, if they decide the announcement was bullish, expect the structure to strengthen to support price.

The Markets in Development Briefing