Market Tell - Confirmation vs. Non-Confirmation Between Indices

Non-confirmation of the NASDAQ versus the broader market, leads to late session sell-off. The S&P futures easily took out the PDH and continued to trend higher, almost reaching a full retracement of the last leg lower as depicted on the ES chart below.

The NASDAQ futures, on the other hand, stalled at the test of the PDH. When the NASDAQ failed to confirm the price action of the broader market, it was a tell. The bears stepped in on the non-confirmation leading to a late session sell-off.

Technical Picture - Bulls Get Ambushed

Yesterday, IBD changed their current outlook from "Market in correction" to "Market in confirmed uptrend" based on a high volume follow through day on the NASDAQ as depicted above. Today, they are saying that the rally is in its third year and any new uptrends can fail because the rally is tired. So what observation can we make from this? Just looking at the NASDAQ chart above, two observations can be made:

1. It took four consecutive higher closes to get a confirmed follow through off the reversal last week. That's a long time and should be considered suspect.
2. The follow through day occurred in the ambush zone (50-62% Fibonacci retracement level).

Overall economic data has been soft in recent weeks and today's ADP private sector jobs was even softer, ie. dismal. Top that off with a lower than expected ISM and we had the makings of a real market drubbing.

The 60 minute SPY chart below highlights the double top in the ambush zone. Two trendlines were broken as the bears took over with a vengeance.

There's lots more economic data over the next two days, including the real jobs data on Friday.

The $USD held minor support and bounced.

In my last post, I highlighted a number of stocks setting up. Most of those daily charts are broken after today's session, but we did manage to get some good day trading action.

ERTS broke out of a daily bull flag yesterday.

NVLS set up a long above yesterday's lower base. Took a partial at $37.00 and was stopped out on balance.

MELI, which was my favorite long setup (also included in HCPG newsletter last night), had a beautiful rip after consolidating the opening range and forming a C&H pattern overlapping with the previous session. Euphoric volume spike foreshadows the end of the move.

As we can see from the daily, the BO failed and we have a bearish shooting star.

In my last post, I said that RIMM was a box play. The box was breached in pre-market, so I placed a sell stop just below the pre-market low. Took a partial after three consecutive WRBs.

Technical Picture - Markets Edge Up in Quiet Trade

The SPY has managed to fill all of the gaps as it bounced off of the lower channel line. However, there's been a lack of momentum as depicted by the RSI. Without a catalyst, I expect more lackluster trade.

The $USD failed in a attempt to BO of an inverse H&S bottom. This has provided a boost to the commodity trade, but outside of Ags and copper, I'm not seeing much conviction yet.

ES_futures trading higher on a very weak $USD as I write this post.

Stocks Setting Up for This Week

NVLS- NR7 coiling - buy on break of $36.00 for a move back up to the base of inverse H&S pattern, and eventual BO.

Flagging - PETM (above) and ERTS (below). Other bullish flags on my WL are DISH and FL (not depicted).

QCOM has been basing in a tight formation for several weeks. Now that the Bollinger bands have tightened, I expect a BO attempt very soon.

MELI has carved out a symmetrical continuation pattern with strong volume on the upswings within the triangle. This is the most promising setup for a BO long.


RIMM is a box play.

AKAM - positive divergence of the MACD to lower prices foreshadows a trend reversal.

FFIV cleared its 200 DMA on higher volume. Look for price to consolidate in upper range and then BO.

CREE cleared its 50 DMA on decent volume. Base and break.

Technical Picture - Technical Rebound In Play

The markets continued the rebound off the 62% retracement which bottomed yesterday. Tech and small caps outperformed the broader markets. I would expect the rebound to slow or stall into OPEX over the next two sessions as pinning comes into play, and as we move towards the down trendline.

Econ. Calendar - Initial Claims in pre-market, followed by existing home sales, Phil. Fed, and leading indicators at 10:00.

IPO - Looking forward to the LinkedIn IPO tomorrow symbol LNKD

Last night I posted the daily chart of ESRX as a bullish base on base pattern. Today it pulled back to its rising 200 SMA on the 15 minute timeframe and found support , as it has over the last few sessions.

An easy, low risk entry presented itself on the 1 min. chart below.



SNDK was a low risk short after price failed at resistance (blue line). The short extended to 1.27 and reversed, setting up a long. Looks like a solid C&H pattern setting up for tomorrow.


RIMM gapped up on an analyst upgrade, which ruined my morning star daily setup. Small scalp trade.


ALTR was very strong out of the gate. I waited for a Fib. retracement rather than chasing early strength. It worked well for a 1.27 FE.

Chart Setups - ESRX, AKAM, RIMM, SINA, SOHU, GOOG

The following charts were posted on Chart.ly.

SINA is a morning star stick reversal pattern with good volume.

SOHU is a bullish engulfing stick on the support zone.

RIMM is a morning star reversal pattern on long-term support with a very oversold RSI.

GOOG is a wide bullish engulfing stick in a key support zone.

ESRX is a base on base continuation setup.

AKAM is a hammer reversal stick on support.

Technical Picture - Stocks Retreat to Low End of Range

The first chart above is a weekly chart of the SPX with the RSI superimposed. The most important element of the chart to note is divergence of the RSI. We note that when the market bottomed in March 2009, we had positive divergence of the RSI to lower prices which foreshadowed a reversal. Now we have negative divergence of the RSI to higher prices which foreshadows a reversal, or at least a correction.

This week's price action was mostly range bound, but the bears made the presence felt on Wednesday and Friday. As depicted on the 60 min. chart of the SPY above, we see a H&S topping pattern develop with in the latest price range. If we break down, I expect a gap fill. All 10 major sectors were down on Friday with Financials (-1.5%) leading the way followed closely behind by Material -1.4% and Tech -1.2%.


Overall, tech was weaker than the broader markets on Friday. Two big names that were a drag on tech were NVDA and YHOO.

SMH is still basing at recovery highs but needs to break and close above $37.00. My scans indicate that several of the old school chip names are best positioned to make this happen - ALTR, CY, INTC, MCHP, MXIM, NVLS, QCOM, XLNX.

Much of the weakness in commodities is due to strength in the $USD. As we can see on the daily above, price has bounced into a former support zone which could now act as resistance in the short-term. The RSI has moved beyond 60 which suggests this bounce is quite strong.

Keep an eye on the UUP as it trends higher within the price channel.

Ags have not performed well lately, but we could be forming a multi-month triangle pattern. I wouldn't be surprised to see a bounce here or at the 200 SMA. Note the volume spikes on up days exceeds down days over the last two weeks. We keep reading of crop delays due to excessive moisture. Over time this will affect the price of the underlying crop commodities, and in turn, the agribusiness.

Blogger

Sorry for the lack of posts over the last two days. Blogger was down for maintenance and when that didn't work, it was just down. Hopefully, it is back in business and I can post some charts over the weekend.