Cyclical Bull Market within Secular Bear Market

The tech bubble at the turn of the century led to a secular bear market. Within the secular bear, we enjoyed a cyclical bull market from 2003 thru2007, followed by a fresh round of selling in 2008. Today is the one year anniversary of the so-called bear market bottom and as we can see from the NASDAQ monthly chart above, we are approaching a test of the secular bear's trendline. Until that trendline is broken for good, we are in a cyclical bull market within a secular bear.

Technical Picture - Overbought

Despite the weak open, the market was able to notch fresh February highs before succumbing to pressure in the last hour and half. Transports lead with a test of YTD highs. Financials also managed to test resistance. However, the spike in volume we see on the S&P chart was courtesy of sellers. A pause here would be a good thing. IMO, we need to work off the overbought posture before we attempt to break higher.

Technical Picture - Prices Stall Ahead of Jobs Data Friday

Spinning tops with long upper wicks suggest a loss of momentum. Expect a pause or shallow retracement ahead of Friday's jobs data. I noticed a lot of bearish engulfing patterns on stockcharts.com predefined scanner page.

$USD moving back towards trendline.

Spotted MON on the TI momentum scan in early trade. Wait for price to consolidate the early move. Eventually, it carves out a cup & handle. Enter long on base BO. Price moves nicely to 50% FE. Take a partial as price is extending too far from up-sloping 5 period EMA. The shooting star leads to an evening star reversal pattern when the next stick closes more than 50% into the 1st stick in the 3 bar pattern. So, we close the balance of the position and short. Price swoons into the close.

Technical Picture - Bulls Defend Support

Unfavorable data (Initial Claims 496k vs. 460k consensus; Continuous Claims 4617k vs. 4570k consensus) set the stage for the early slide. But no follow through developed as buyers stepped in to defend the support zone.

Dollar weakness also contributed to strength in Gold and commodities. I'm expecting the greenback to continue to consolidate, gently moving towards its trendline.


The 15 minute chart of CLF above is a good example of buying the 2nd test of support. Point A was a long entry last week. Point B was the first test of support of the solid base which formed a point A. Today's opening breach of support (point C) triggered some shorts, but the snap back led to short covering which propelled the stock in a decisive move back up to PDH.

I like to fade the second test of support/resistance (turtle soup setup). The third test is usually the BO.

Bull Flag - Acme Packet, Inc. (Public, NASDAQ:APKT)

Last week we highlighted APKT as a good swing trade candidate. As you can see from the daily chart above, yesterday's market sell-off didn't deter the stock as it notched a higher close.

After today's move, we see from the weekly timeframe below that we are testing resistance. Volume is very strong so I'm hopeful APKT will eventually retest all time highs.

If you didn't have a chance to swing long, you can still day trade long when the opportunity presents itself.

APKT opened strong, eventually carving out a bullish flag. Place fibs from ORL to top of flag to plan the target.

I took half off of my swing trade after price printed the red shooting star. Some consolidation at this level would be helpful.

Technical Picture - Broad Based Selling

We were expecting weakness in the ambush zone as the markets were technically overbought and last week's advance came on light volume. The 10:00 consumer confidence data was so far below expectation (46.0 vs. 55.0) that the bottom fell out leading to a broad based retreat into midday. Attempts to rally from there were lame, with the bears firmly in control.

POT and MA printed inside bars with long upper tails foreshadowing weakness. Both trades triggered at 10:00.

Flat Base Breakout - Direxion Daily Finan. Bull 3X Shs(ETF) (Public, NYSE:FAS)

FAS carved out a flat base as it consolidated early strength through a series of higher lows. The third test of resistance is usually the BO. Since the market is overbought, trade it conservatively. Here I placed my fibs from the ORL to the base to calculate my measured move target of 100%.

CLF moved into resistance and is extremely overbought after last week's run. Still, it spent most of the session grinding higher. Finally near the end of the day, it failed to hold R1, setting up a quick short into the close.



HGSI triggered in early trade on an analyst upgrade, but failed to follow through.

The SPY ambush strategy, discussed in last night's post is still in play. The ORH was the HOD, followed by low volume chop and a weak close ripens the setup for tomorrow.