Technical Picture - Markets Carve Out Lower High

As depicted above, the SPY is testing its trendline which has been holding since August 2010. The high volume selling over the past week, in addition to the lower high from the last trendline bounce leads us to believe the trendline will be broken.

The first day of a new month and there were no buyers. We weren't surprised. As discussed in last night's post, we expected the Nasdaq futures to retrace between 62-78% and reverse. That gives us a lower high and now we expect a lower low to follow very shortly. My prelim. target is 2250 or 1.272 Fib. ext. as depicted above.

Of the three focus list shorts, highlighted last night, only one triggered. ACOM gave us a fast move down right out of the gate. After three consecutive days lower, we expect the name to consolidate.

Technical Picture - Small Caps Lead as Markets Extend Rally

Small caps recently corrected to 50 SMA. Friday they provided leadership. As noted on Thursday, the situation in Egypt would affect trade. After testing and holding support, the markets retested resistance and rallied on news that the Egyptian President had stepped down.

On the Emini futures chart above we see that the uptrend continues after two tests of the trendline on Thursday and Friday.

On the SPX chart above we see that our measured move target was met on Friday. I've adjusted the pivots to take into account Thursday's dip. The new target would bring us to the 1342 level.

JDSU - huge volume on this extension. Keep on the WL. Shallow pullbacks are good buying opps.

I missed the early run, but managed to catch the last leg up on Friday as JDSU consolidated a printed NR7.

TUP was on our focus list. Price gapped and retested the base, so I entered long. Choppy until it formed a handle and extended higher. Hard to move the initial stop until the handle broke.

GMCR, another runner, flagged for a low risk entry point.

CELL - I felt that I had traded this one badly, but I think it was just a failed BO. Best not to trade small caps on 15 min. timeframe.

ISRG was a HCPG pick and it worked perfectly. For momentum stocks, I recommend using weekly pivots as opposed to daily pivots, to avoid folding too soon.

Add to Momentum WL - ARMH - bull flag

RL - Coiling after huge earnings beat.

Other earnings gaps on WL include AKAM, BWLD DIS, OTEX ATML.

Technical Picture - Bears in Control

As you can see from the 15 minute timeframe of the SPY above, the bears are in control, keeping the bulls in check and not allowing price to break above the trendline, which has been in play since the sell-off began.

After hours, prices continued lower to ES 1188.50, currently tracking at 1194. I got a buy signal around 9:30 PM - positive divergence of RSI to lower prices, so I am long overnight using the trendline as my stop.

An oversold bounce is very likely tomorrow, but don't expect the rally to resume anytime soon. We've had institutional selling in many of the tech momo names and that money isn't coming back until prices correct at least 10%.

Talked about AMZN on the stream Friday. Narrow, bottom range trade Friday afternoon led me to suspect further selling despite the daily 20 EMA.

Shorted on breach of Friday's low. Took a partial at the 62% FE of the previous day's range. Stopped out on balance midday, but got back in for the swoon into the close.

If price has a memory, and I believe it does, $157.00 support, should see an oversold bounce.

As we can from the monthly timeframe below, the AB - CD move is complete. The impulse move from A to B retraced 78% to point C and then extended almost 100% to point D. It was a sweet ride, but now it's over.

Someone asked me to do chart analyses of AMZN, AAPL, GS, and MS. This is AMZN and I'll do the rest when I have more time. The only chart among them with short-term potential on the long side is GS.

P.S. Taking Tuesday off. ES trade stopped out for a small gain.

Chart Request - MasterCard Incorporated (Public, NYSE:MA)

MA has rallied 100% from its base (lower blue line). It has recently printed two distribution days, today and Thursday. Today's close breached the trendline. Preliminary support is the 20 EMA, followed by $230.00 (former resistance). Major resistance is $250.00.

The trendline is too steep to be maintained. Corrective trade into the two immediate support levels noted above would be constructive over the near-term.

Technical Picture - Minor Gains

Opening spike down in bellwether AAPL set the tone for early trade. As we said last night, the weak close, left the door open for further downticks.

As you can see from the chart above, we shorted the break of closing lows and covered half at gap support. Price continued lower, almost reaching the second target which was a half gap fill.

Despite, notching minor new highs intraday, the markets could do further backing and filling. Watch the trendline off of today's lows to see if it holds as support.

Some large cap tech stock charts are still very unclear. AAPL's intraday 15 min. chart (below), for example, looks like the flash crash, so we need to take a cautious approach until all the backing and filling is done. Because if AAPL decides to go lower, it can affect the entire market.

We also need to see some more sector rotation. Now that semis are finally catching up, we need financials to kick in.

Technical Picture - Market Retests the Base

The S&P rallied back up to the baseline (highs of the left shoulder) and price was firmly rejected, resulting in a fast move down to the trendline. Price tested the support of the breakout point twice with no traction. We closed below the trendline on the cusp of the 5 day MA. If price fails to hold support tomorrow, the SPY could easily break lower - next supports at $112.00, followed by the gap fill at $111.50 as depicted on the chart below.

Over the past two sessions several leading stocks succumbed to profit taking - CRM, AKAM, NTAP APKT to name a few. When leading stocks slip, it usually means the market is tired and needs to rest.

Tomorrow's economic data should help set direction.

The Euro has broken out of a cup & handle pattern. The $USD continues lower.

Semis started to slip just shy of their 200 SMA.

Several important sectors have yet to breakout of their multi-month bases, including transports and financials. Financials are of particular concern as we can't seem to hold above the 200 SMA.

Trade of the day - AKAM - Over a two day period, price made multiple attempts to break resistance but failed. Yesterday, we closed on the trendline and 5 day MA (orange MA). Price breached the trendline and lost the 5 day MA in opening trade and fell through to second level support.

Technical Picture - Markets Breakout of Range

The markets gapped up slightly on the open, followed by a brief period of backing and filling. Once that was done, prices advanced through a broad based rally, cruising past last week's highs. Orderly consolidation midday, before the next leg up.

Markets are quite extended in the wake of the run off of August lows, and the NDX which has been leading the advance is approaching resistance -April topping congestion zone.

Map out support/resistance levels as well as trendlines.

Housing data in pre-market and FOMC at 2:15 EST.

SPY- Last week's broken trendline was resolved through time as opposed to price - sideways chop. Today, we established new recovery highs and therefore we have to draw in a new trendline as depicted below.

BIDU carved out a bullish flag chart pattern intraday. Full extension was reached as well as a new all time high.

Swing Trade Update / Gold - $USD Technicals

POT reported strong Q2 earnings and had an upbeat conference call regarding supply/demand issues which are improving - inflection point is near, which it describes as a point where demand reemerges, supply tightens, and pricing opportunities return. Recent supply and demand developments are favorable. In Russia grain production is expected to decline by around 20%. While Canadian wheat production is forecast to be down 23%. China which places a priority on food self sufficiency is facing significant challenges as a result of adverse weather and nutrient imbalances.

As depicted on the chart above, we can now draw in a trendline because POT broke out of its base and printed a new high. Next resistance level is the 200 SMA. Today's volume spike is very bullish as well.

Day Trade - POT retraced and carved out a bullish hammer reversal stick just below the ambush zone. Normally, we prefer that price close within the ambush zone, so in this case, we have to wait for confirmation. Enter long above the base (blue line segment), partial at the weekly pivot R2. Price rallied just shy of the full fib. extension.


ABX had strong earnings and increased the dividend by 20%, so price gapped on the open. I didn't panic and cover my short because GLD was weakening in pre-market. I placed a stop at 62% fib. retracement of last leg down as depicted on chart below. When price filled the gap and reversed, I covered half my swing short.

We'll see how this plays out. Price closed just below daily 200 SMA.


USD and Gold Weakness:

The $USD is trending lower and will likely remain weak until the economic data, and more specifically, the employment data shows a meaningful improvement. However, we are extremely oversold, in a congestion zone, approaching the 200 SMA. So, expect a technical bounce back to the trendline in the near-term.

The last chart shows the $USD (red) vs. GLD (pink). During the crash the $USD was a hedge against falling stock prices. During the recovery, GLD was a hedge against the falling $USD. Earlier this year, the $USD and GLD started trading in the same direction as a hedge against a falling $Euro. This last hedge is out of favor because the $Euro is making a strong recovery.

The gold hedge vs. the $USD will likely come back into play if the slide continues. We just have to monitor the charts closely for any tells.

Technical Picture - Rally Testing Key Levels of Interest

Another accumulation day after a solid start to earnings season. Price is now testing the downsloping trendline and the 50 SMA.

The S&P has rallied 8.8% already this month from intraday low to high bringing the numerous technical levels of interest into play. Despite the extensive six day surge, however, the market has a catalyst after hours (INTC earnings) for further gains in early trade Wednesday. An initial resistance above is in the 1105/1107 zone with a more important area at 1112/1115 (200 SMA/50% retracement of April-July slide).

Chips stocks should rally back to the top of the recent trading range.


Euro continues to show strength vs. $USD which breached its trendline on closing basis today.

Expecting Gold to breakout on next test of trendline.


AGU - Good example of one of my favorite leading indicators - MACD divergence. Positive divergence of MACD to lower prices foreshadowed a reversal. Price reversed sharply and has come into resistance of 200 SMA. I'd like to see a shallow retracement (38%) for entry of a swing trade long.

APKT forming an ascending triangle.

$USD versus Gold

The first two charts show that the $USD has had thrusty move off the bottom to a resistance zone. The RSI is flirting with 70 so its likely to pause to consolidate or retrace somewhat at this level.



The last three charts show how gold rallied out of an inverse H&S pattern, approaching a full measured move of 100% from the BO point in relatively little time (parabolic move), but stalled , carved out a bearish island reversal pattern, followed by a steep decline back to the accelerated trendline. Price and the accelerated trendline are on the edge of the ambush zone of the last leg up, so this is a possible area for a retracement.

Click on charts to enlarge