Technical Picture - Best Week Since Sept. Surge

Jobs data reported significantly better than expected, but the upside was somewhat limited in the wake of the surge and the rebound in the dollar.

As we can see from the weekly chart of the S&P above, we have cleared the 200 week MA and retraced 61.8% of the 2007-2009 crash ie. ambush zone. We are likely due for some consolidation/corrective action prior to moving to the next resistance level.

Despite extended technicals, there are no short-term reversal signals for the S&P yet.

The USD carved out a lower low on Thursday in the wake of QE2, but Friday's shakeout bar (bullish engulfing pattern) and the positive divergence of RSI to lower prices, foreshadows a reversal. Inversely, the EURO confirms this analysis with a bearish evening star reversal pattern and negative divergence of the RSI to higher prices.

If the $USD bounces here, look for energy, commodities to correct. Also, look for sector rotation with financials set to lead on the upside after finally breaking out of the doldrums.

Technical Setups

LVS extended beyond 100% of the previous impulse leg (A to B) after a minor correction to C. It carved out a bearish shooting star reversal pattern on Friday at point D.

We note that there is no consolidation beyond the earnings gap up day and expect a decisive move back to the 50% retracement level of the last impulse leg up (C to D).

LVS got ahead of itself as we can see from the 15 timeframe below. Price surged out of the channel in morning trade, retested and surged higher still. The last thrust higher saw negative divergence of the RSI signaling the end of the move. The high volume for the day was more on the sell side than the buy side.

SOHU is flagging and looks poised to break higher very soon. Friday's price/volume action was NR7.

BIIB is also flagging and could benefit from some sector rotation.

Technical Picture - Solid Recovery from Intraday Lows

Markets gapped down on the open amid concerns over Euro debt issues, $USD upticks, and weaker durable orders x-transports (-0.8% vs. consensus +0.2%). The SPY held near last Thursday's lows. As we can see from the 5 minute chart below, the SPY printed a lower low in early afternoon with positive divergence of the RSI, which triggered a long. The dollar index pulled back during the afternoon after stalling just shy of its Oct high, prompting the rebound in equities to take hold. The Nasdaq outperformed the broader markets with strength in Semi (SMH +2.2%), Networking (IGN +1.7%), Software (IGV +0.6%) and Biotech (BBH +0.6%) and managed to finish green on the day.


FFIV earnings gap. On the daily we reached the 1.27 Fib. level of the recent recovery. Next target is 1.618.

Because the markets were weak, I decided to enter long from support rather than trade it as a BO long as I usually do. Good thing. because it failed about 1 pt. into the move and slipped back under $116.00. Eventually, it established another base for a second long.



LRCX is well on its way to the 1.62% Fib. extension. Over the previous two sessions, it had carved out a base. After the initial thrust and breach, it retraced 50%, allowing for a decent entry. It managed to hold support and eventually retested the highs, scalloping its way higher. When it took out the 1.27% FE, it rallied quickly to the 1.62% level.

RIMM broke out and followed through on huge volume yesterday. Today it consolidated in the upper range of Tuesday's WRB. I'm targeting $58-60.00

ISRG, one of the weaker stocks on my watchlist, set up a nice bear flag after gapping down, with the markets on the open. The solid recovery off of the morning lows, leads me to believe, it has double bottomed near term.

I posted about BIIB before it BO of its daily base. I've had a couple of decent day trades since then, but today I missed the sweetest. I didn't spot it until it was well underway and didn't want to chase.

Which brings me back to CELG and AMGN. They still look good for further upside. AMGN had a little earnings setback, but it's holding support. Add these to the WL.

This is a weekly chart of BRCM. High volume earnings gap on the daily. I think it can go back up to $50.00 as long as the market rally continues.

Technical Picture - Minor Gains

The markets opened on a positive note and quickly broke above resistance on the heels of some favorable earnings reports from NFLX, EBAY, CAT, MCD... However, there was a clear loss of momentum as depicted by the negative divergence of the RSI to higher prices on the 15 minute chart below.

As the $USD found support and started to bounce, equities succumbed to some profit taking into midday and early afternoon. GLD was also very weak and acted as a leading indicator.

In the last two hours, the bulls were able to regain control and pushed prices back up to the unchanged line, plus a smidge, to end the day in the green.



AMZN is a good example of how I use Esignal's RSI price bars to help guide my trades. AMZN was basing at intraday support $164.00 and had printed two NRIBs on the 15 minute timeframe. I took a short position on breach of support as depicted below.

RSI 14 did not confirm lower prices on the breach. In fact there was slight positive divergence on the lower low, so I expected the trade to fail and scratched the trade before it cost me.

About an hour later, AMZN setup again at the base. This time it carved out a perfect handle before breaking and the RSI price bars confirmed right away. I covered the short when I noticed positive divergence to a lower low, and shortly after, entered long. The positive divergence to lower price foreshadows a reversal in trend.

Technical Picture - Wide Spread Weakness on European Banking Concerns

Concerns over the health of European Banks led to widespread selling on the open. Not surprisingly, banks (BKX) paced the ways down, giving back all of Thursday/Friday's gains. All but Gold was in the red by days end. Volume was light.

Banking concerns fueled money out of stocks and back into treasuries as depicted on the TLT chart below. Until the trendline is broken, I doubt we can have a meaningful rally in stocks.

Banking concerns stoked volatilty as the VIX gapped higher after testing four month lows on Friday.

And as expected the USD rallied versus the Euro.

Despite today's low volume retracement, we have to keep a close watch on the TLT, VIX, and USD to monitor the underlying strength/weakness/fear inherent in the markets.

Today's trading was light given the overbought conditions and general lack of setups.

Using the RSI price bars, I was able to catch a quick point in GS. Positive divergence to lower prices foreshadowed a trend reversal. GS forms a mini base and I used a buy stop order above the base to get long.

MON broke the downsloping trendline, but failed to hold. Now it should retrace into the support zone/5 day MA and we'll see if it can do something from there.

NTAP - two pivots into the $45.00 base. Needs to consolidate/retrace back to first level support. As you can see from the monthly timeframe below, key resistance dates back to 2000.