Equities closed the week with a string of five consecutive daily gains resulting in a 5.4% gain on the week, the best weekly performance since late June, but only the second weekly gain since the markets rolled over.
The week started on a low note as
Europeon debt fears spilled over to Monday's open, but in the afternoon attention turned to rumors that a sovereign wealth fund from China was talking with Italy about a bond purchase. That news helped stocks stage a rally, which gained traction as short sellers were squeezed out of their positions. Later in the week another boost in confidence came on news that the European Central Bank had coordinated with other central banks, including the Fed, to make dollar loans available to European banks. These measures trumped poor economic data and by week's end traders felt compelled to chase the markets higher.
Watch the 50 SMA and top of channel for resistance if we make it that far.
An update of the chart I posted Wednesday, shows that the
QQQ has leaped even farther ahead than the broader markets on the strength of
AAPL (BO of symmetrical triangle) and leadership provided by the
SMH, which has staged a sharp recovery after bottoming on August 19
th. Notice how the IWM and SPY are starting to flatten out.
Non-confirmation of new recovery highs in the QQQ by the broader markets is a red flag - caution going into next week.
As we can see from the chart below, the
SMH has retraced almost 62% of the last leg down. Friday's stick is a bearish spinning top in the ambush zone and I expect a
retracement to kick in early this week.
The chart below shows some leading names in the
SMH that I follow.
SNDK has been ripping higher since the beginning of Sept., up over 30% since Aug. 19.
Copper futures don't look very healthy. Copper is generally considered as a leading indicator for the broader markets and it has carved out a bearish H&S pattern within a double top. If it breaks out successfully, look for a $0.60 drop as targeted on the chart below.
Gold futures appear to be forming an ascending triangle.
Price stalled at the 62% Fib retracement of yesterday's range and the bears ambushed. Initially, the PDL held as support, but after the midday doldrums, the bears came back in pursuit, pushing price beyond yesterday's gap fill. We came back for a retest of morning support and it held as resistance, forming a bear flag, which broke into the close.
As depicted below, bulls are trapped and need to hold the 61.8% Fib retracement of the last leg up, if it doesn't give way overnight.
The big moves took place during the overnight session and we were left with scraps. EOD, we have a bearish black candle which closed in the ambush zone and below the daily 20 SMA. Is this the end of the dead cat bounce? I don't know, I'm waiting for a close below the ambush zone.
Last Tuesday (Sept. 20th) we had a 20/50 MA cross for a short into the close.
Markets consolidated on Friday after a week of sharp declines. On the SPY chart above, we have gap resistance above price and a retest of the August 9th lows just below. Headline risk related to tenuous global economic conditions and precarious financial conditions in Europe will continue to dominate.
Markets traded lower overnight following a disappointing FOMC statement yesterday. We gapped wide and grinded lower for much of the session. From the daily chart of the SPY above we see that our H&S pattern has finally broken out successfully with volume. We are oversold and I am expecting a dead cat bounce soon.
Markets gapped up and filled the gap from the previous day close before rallying to retest Friday's highs and the downsloping, daily 50 SMA. Price consolidated for several hours in the top of the range before selling off one day ahead of the FOMC statement. Selling was aggressive leaving us with a tweezer top reversal pattern and shooting star.
As I was watching the price action on the 5 minute chart above, I thought we could have one of two scenarios:
Equities closed the week with a string of five consecutive daily gains resulting in a 5.4% gain on the week, the best weekly performance since late June, but only the second weekly gain since the markets rolled over.
An update of the chart I posted Wednesday, shows that the QQQ has leaped even farther ahead than the broader markets on the strength of AAPL (BO of symmetrical triangle) and leadership provided by the SMH, which has staged a sharp recovery after bottoming on August 19th. Notice how the IWM and SPY are starting to flatten out. Non-confirmation of new recovery highs in the QQQ by the broader markets is a red flag - caution going into next week.
As we can see from the chart below, the SMH has retraced almost 62% of the last leg down. Friday's stick is a bearish spinning top in the ambush zone and I expect a retracement to kick in early this week.
The chart below shows some leading names in the SMH that I follow. SNDK has been ripping higher since the beginning of Sept., up over 30% since Aug. 19.
Copper futures don't look very healthy. Copper is generally considered as a leading indicator for the broader markets and it has carved out a bearish H&S pattern within a double top. If it breaks out successfully, look for a $0.60 drop as targeted on the chart below.
Gold futures appear to be forming an ascending triangle.
Also, keep a close eye on the $USD which has broken to the upside. We are consolidating the move, but once the next leg up gets underway, it will hurt stocks.
