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The Markets in Development Briefing for January 27, 2015

Below is the link to today’s Briefing.  Today’s move lower could be the beginning of something greater to the downside.  However, the Russell and NYSE did not confirm the move in the S&P and NASDAQ.  While the market internals did appear to support the move lower, they did not reach a point where I could say the move was impulsive from a structure perspective.  Certainly it was impulsive in price, but price needs to be supported by the internals.  That said, there is the possibility the Indices are building up to a much greater move lower.  Trading below 2020 in the S&P and then below 1980 will confirm a greater degree move down.  Otherwise, they are still in a countertrend rotation and a basic “pause” in the initial move down.

Tomorrow’s trading will give us more information to make a higher probability analysis.

The Markets in Development Briefing

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The Markets in Development Briefing for January 21, 2015

Below is the link to today’s Briefing.  So far, the rotational pattern in the Stock Indices is corrective in nature.  This suggests when it is over there will be at least one more thrust lower.  What would change this would be breaking out above 2060 in the S&Ps and doing it on increasing volume and strong Breadth.  Alternatively, if the S&Ps trade below 1985 it will increase the probability the next leg lower is in process.  Note as well, the Russell diverged from the other Indices on a development basis today and the day patters are bearish day patterns.

I am concerned over the reversals in Gold and Silver today.  However, if the single prints from today’s reversal begin to get traded through, it will suggest buyers coming back into the market and will be a sign of strength.

The Markets in Development Briefing

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The Markets in Development Briefing for January 16, 2015

Below is the link to today’s Briefing.  In the previous Briefing I pointed out the entire move off of the January 6 low appeared to be corrective.  I also stated the move down to test the January 6 low appeared to be corrective and not impulsive.  That corrective move continued in Friday’s trading.  While the rotation up appeared to be impulsive, it has all of the characteristics of a countertrend move.  Volume fell off, Breadth was strong, but the Indices reached an overbought condition by the end of the day.  Anticipate a continuation of the move higher on Tuesday but if the Indices trade back through Friday’s high, or cannot trade above Friday’s high, expect another rotation down.  At some point, if the Indices break through 1985 in the S&P and 4080 in the NASDAQ, they will likely accelerate to the downside. 

The move higher in Gold was confirmed by Silver.  Finally, the rotation up in Oil also appears to be a pause in the downtrend.

The Markets in Development Briefing

 

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The Markets in Development Briefing for January 15, 2015

Below is the link to today’s Briefing.  The move down from the recent high this week does not feel impulsive.  With that said, the Indices appear to be wanting to see buyers capitulate, which would bring about a large move lower.  If that is the case, then I would expect to see lower support tested and then a bounce to work off an oversold condition.  Tomorrow will be very important, if that scenario is to play out.  If we see rotation up from the open and today’s low is not traded through, then the entire move off of the January 6 low is part of a greater degree timeframe corrective rotation.

If the Indices sell off largely tomorrow, look for a divergence in Breadth and/or Volume going into support levels, and a 30 minute candle wick.  That would signal sellers are exhausting themselves and we will see some type of rotation up to work off the oversold condition.

The Markets in Development Briefing for January 15, 2015

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The Markets in Development Briefing for January 12, 2015

In Friday’s Briefing I outlined two possible scenarios, but suggested the higher probability was for a move lower today, due to what occurred just after the cash close.  New sellers certainly entered the market in the Initial Balance Period.  However, today’s action does not appear to be impulsive and, as described on Friday, could be part of a more complex countertrend rotation.

I outline in today’s Briefing what to look for in terms of trade location.  In either case, the Indices will likely make a good move.

The Markets in Development Briefing for January 12, 2015

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The Markets in Development Briefing for January 9, 2015

Below is the link to today’s Briefing.  Last night I said the Indices should start down immediately today.  I spent some time explaining what to look for based on the exhaustive day patterns.  They played out exactly as I outlined.  While there is a chance for some rotation the first part of Monday to work off a short term oversold condition, the trend should be down the first part of the week.

Today’s day pattern was exhaustive in nature to the downside.  That suggests rotation up on Monday as a higher probability.  However, if new sellers come into the market early on Monday and today’s low is traded through and holds below that low, then the strength of sellers is increasing and lower support will be hit.  Unless there is some news event that changes the current development and structure of the market, the higher probability is for a move lower the first part of the week.

The Markets in Development Briefing for January 9, 2014

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The Markets in Development Briefing for January 7, 2015

Below is the link to today’s Briefing.  As I suggested in last night’s Briefing, the market appeared to be oversold and in need of a countertrend rotation.  That is exactly what occurred today.  In fact, today’s move higher has all of the characteristics of a countertrend move, including going from extreme oversold to overbought in one day.  That does not mean the move is over, but the Briefing outlines what to look for to determine if it is complete or not.

The Metals did not extend their bullish day patterns higher.  However, they did not sell off either.  Use the extremes of today in Gold for trade location.  Whichever way it breaks could usher in a good move.

The Markets in Development Briefing for January 7, 2015

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The Markets in Development Briefing for December 18, 2014

Below is the link to today’s Briefing.  To summarize, today’s rally was strong.  I was extremely surprised to see Breadth be as strong as it was.  While the Indices were overbought yesterday, they are at an extreme overbought condition that I cannot remember seeing.  I always look at the day after an FOMC meeting as more important than the day of the FOMC announcement.  That being the case and with volume and Breadth supporting the rally, the higher probability is to see the upper trend line tested in the 2090 – 2100 area in the S&Ps.  That said, the Indices have been quite volatile.  If most of today’s range is retraced tomorrow, that would be a significant event.  Unless that happens, I expect some type of rotation to work off the overbought condition.  How that develops will be important.  Watch the internals carefully on any additional move above today’s high for divergences that will signal rotation.

The Markets in Development Briefing for December 18, 2014

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The Markets in Development Briefing for December 17, 2014

Below is the link to today’s Briefing.  In typical fashion the FOMC announcement caused exuberance in the Stock Indices and yesterday’s range was traded through.  However, I have found the day after the FOMC meeting is typically more important.  Therefore, what happens tomorrow will be more important than today’s rally.  The Indices reached a point of being extremely overbought like I have not seen in a very long time.  As a result, I have to expect some type of rotation back down.  How that develops will give us a better understanding of the intermediate term direction.  Keep in mind, the environment that caused the selloff in October and the December selloff has not changed.

The Markets in Development Briefing for December 17, 2014

 

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Below is the link to today’s Briefing.  Structurally, the move lower today was strong, even in light of an attempt to drive the futures prices higher.  It was clear in the first hour of trading the Indices were going to head lower.  I have included this in the analysis tonight.  

Monday’s are typically bullish and the market has reached a point of being oversold in the short term.  Therefore, while we may see persistent selling on Monday, watch Breadth.  If it is diverging from today, that will suggest some strength coming into the market and expect some rotation to work off the oversold condition.  There was a good divergence in NASDAQ Breadth today.  However, if the internals continue to weaken on lower prices, then persistent selling will occur. 

Additionally, the Russell is at an important inflection point.  The NYSE has traded through it and the S&P is approaching its inflection area.  What happens next week could be significant.

The Markets in Development Briefing for December 12, 2014