The good news – the market avoided collapse on heavy volume.  The bad news – the reversal didn’t occur in very convincing fashion.  At this point, it’s very difficult to play the market either way.  A bit late and/or too early for aggressive shorting and muuuuch too early for aggressive buying.  Best to remain largely in cash right now with a bias to the short side. 

A look at the Nasdaq below highlights the breakdown, followed by the bounce, then the resistance.. and now the retest of support and possibly previous lows.  I’m too lazy tonight to include a long term chart as well, but I’ve included where the long term trend runs through (which the Nasdaq has been testing).  This is an absolutely critical level of support for longs.  If the market can’t hold here, we’re most likely headed for "bear market" terrority.  There really isn’t much room to run from here .. The bounce off support today was important, but the lack of conviction behind the move is a concern.  It didn’t have the same oomph (hope I spelled that right) behind it, that the reversal on the 24th had.  For one, the volume was above average (barely) and higher than the day before, but you want to see that volume way above average on reversal moves.  Additionally, we didn’t get a close at the highs of the day (it didn’t even clear the opening price).  At this point we need more clues as to direction.  Some kind of confirmation move (meaning a 2% gain with very heavy volume) in the next week or so would be the signal for bulls to begin putting money to work on the long side.  Of course, a high volume move below key support levels (where we’re at or close to now) would give bears the signal to go ahead and pursue more short positions.  I’m currently dabbling on both sides just a bit, but with a bearish bias.  It will be interesting to see if the market can follow through on today’s reversal and hold the gains for the day.  It will provide another clue to just where in the heck this market will be in the next couple months.  Stay tuned!

I’m throwing in a chart of the Dow to give a look at the longer term picture.  You see the violation of the trend line off the October lows, followed by a fairly weak bounce to resistance and a retest of support.  There me be some psychological support around Dow 11,000, but more important will be that 200 day moving average around 10875.  In all likelihood it will test that support line in the coming days.

It’s on.. Let the bull and bear tug ‘o war begin! After the bears had the run of the place over the past couple weeks the bulls have begun to step up and defend their ground a bit, but today they looked tired and counting the days to the 3 day weekend.  It seemed nearly everyone expected this morning’s bounce to be the beginning of a little buying spree from bargain hunters and short covers, but that will have to wait.  While the bleeding has stopped, it’s clear sellers still have the upper hand for now.

Today I take a close look at the S&P, starting with a long term weekly chart and ending with a one month daily chart to get an idea of what kind of shape we’re in.  In the 2 year weekly  chart you can see the long term trend line and what I would call the last line of defense for sustaining the bull market.  This support area appears to be in the 1235 – 1240 range.

On the 1 year daily chart of the S&P you can see that the area between about 1240 and 1255 is a major area of support convergence with the 200 day moving average (~1258), channel support (~1250) and the long term trend line (discussed above ~1240) all coming to a head.  I’d like to see some sort of massive capitulation (high volume selloff in the morning followed by massive volume to close out the day) with the lows at some point in this range.  That kind of action usually signals a bottom.

The one month chart provides a nice close up look of recent action.  You see the high volume distribution days and the bouncing around at support of the 200 day moving average.  On the 18th of May, the instensity of the selling subsided with a lower volume decline.  Following that, was a nice higher volume reversal day off support which can indicate that the bulk of the selling is done (much of that move was probably short covering though).  You can see there are some positive signs but we’re not out of the woods, especially considering todays big reversal off the highs to finish at the low of the day.  There is work left to do and I wouldn’t not be an aggressive buyer here (nor would I be aggressively pursuing shorts at this level).  I personally have begun nibbling on some liquid, larger caps names such as Google and Apple, but that’s about it.  I’ve been sitting on mostly cash for some time and will remain there at least through next week.

Here’s a longer term weekly chart of the Nasdaq which allows you to better see volume levels over a longer time horizon.  Notice the violation of the one year trend line.  Next stop: the "not quite" 2 year trend line around 2140.

Last but not least, the daily chart of the Dow.  Notice the violation of the trend line off the October 2005 lows which sets up the probability of a move to test the next level of support: Dow 11,000 in the coming days.

Howdy all, good to be back and attempting to get my arms around the market.  After spending a week in Sayulita Mexico (wow, what a place) it’s been more difficult than imagined to get back into a market mindset and try and get my arms around whats going on.  I’m getting there slowly but surely :).  While I was away, the markets continued to push higher, albeit on meager volume.  With each uninspired up day came the greater likelihood of a significant fall to retest key support levels.  It’s where we stand currently.  The Nasdaq has been hit the hardest, but the good news is that strong support is on the horizon.  Look for some sort of capitulation around this area for a signal that a bottom has been put in place.  Before that happens, I imagine we’ll get some sort of weak oversold bounce.  This may provide an opportunity to exit weak long positions and/or initiate a short trade or two.

Below is a longer term, weekly chart of the Nasdaq.  You see the long term uptrend remains intact with key support in the 2200 range.  I’ll be looking for some kind of high volume reversal in this area as a signal that a bottom may be in place.  Until then, I remain largely in cash with the possibility of a short position or two.

Rotation in Medical/Health?

With sizable corrections often come rotations from sector to sector.  With money flowing out of commodities, it’s important to get a feel for where that money is being put to work.  It may be a bit premature to say that health and medical related issues will lead in a new market upturn, but over the past several days, these industries have been leading the way and moving up despite heavy losses in just about every other nook and cranny of the market.

For example, here are the top 15 performing industries over the past 5 trading days.  9 of the 15 are medical/health related.  Look for the trend to continue.

1. Long Distance Carriers
2. Long Term Care Facilities (SUNH,  GHCI)
3. Drug Delivery
4. Health Care Plans
5. Medical Laboratories and Research
6. Music & Video Stores
7. Entertainment Diversified
8. Catv Systems
9. Drugs Wholesale
10. Drug Manufacturers
11. Medical Equipment Wholesale
12. Specialized Health Services
13. Hospitals
14. Personal Products
15. Beverages – Soft Drinks
24. Biotechnology

It was just a couple of weeks ago that the the major indices broke to new multi year highs and were at least in position for a sizable, sustained move up from there.  After today’s move, that optimism has faded as the market again finds itself up against a wall.  Just a wall of worry?  A temporary pitstop before breaking to new multi year highs once again? Perhaps.  But with key support levels being threatened, now is not the time to be making large bets in either direction.  Leadership in commodities which are at sitting at lofty levels?  I’d much rather see strength in tech and medicals, which have been anything but strong.  Tomorrow will be an important day.  Let’s take a look at the charts.

The Nasdaq is the strongest of the major indices and still hovers above significant support where the upward trend line and the 50 day moving average converge around 2300, but the emerging weakness in telecom and networking (see my post at ETF Central) is a concern.

The Dow sits right at key support where the upward trend and 50 day moving average converge.  It wouldn’t be surprising to see the market continue with downward momentum at the open tomorrow, but its how it closes that’s important.  Another high volume move below this key support level tomorrow would be significant and signal further selling in the coming weeks.

The weakes of the major indices is the S&P, which will have to muster some significant strength in a hurry to avoid a meltdown.  You can see that it has already taken out support of the upward trend line and is barely hanging on to support of the 50 day moving average as sell volume picked up significantly today.  There is minor support at 1275, but another high volume move down tomorrow would most likely signal a move to 1250 in the coming weeks.

It’s official, the Nasdaq has joined the breakout party enjoyed by both the Dow and the S&P over the past couple weeks…and it did so in impressive fashion as volume rose considerably higher than the day before.  If there was one area of concern, it was the lack of volume behind the advancing stocks in the SelfInvestors Leading Stock Index (the stats can be seen on the right there).  However, this is a big step towards a sustained breakout in the market… now lets see if the old resistance can be a new found source of support (another bullish indicator).  A few more moves like we had today and maybe the real estate speculators will continue to move money into the market!

The market was looking for a party, but the Fed wasn’t in the celebratory mood.  It seems before every new Fed announcement on rates there are predictions that we’re in one and done mode.. or maybe one and another and done mode, or…  ah well, predictions never mattered anyway.  What’s important is that it’s clear the Fed doesn’t have any idea what the future holds as all decisions appear to hinge on the fluctuation of commodity prices, which as we know can be quite volatile.  The market was hoping for some sense of certainty today and once again didn’t get it and the market immediately sold off as volume picked up. While today’s negative technical action is fairly significant, we’re by no means in danger of breaking down.  Rememeber, that the first move after a Fed announcement is often misleading, so we’ll need a day or two to get a true sense of this market will hold up after the latest Fed decision.  Here’s a quick look at the charts:

You see the Nasdaq remains in consolidation mode, but the fact it has had 2 failed breakout attempts in addition to multiple distribution days in the last 2 weeks is a concern.  However, support levels remain intact, so we shall see.

In both the Dow and S&P, there remains quite a bit of wiggle room left before we need to be at all concerned.  Following today’s move, that momentum will most likely continue in the coming days and a test of support is a great possiblility.  Keep an eye on these key support levels.

We find ourselves again on the doorstep of another major market breakout with the little bear on the shoulder saying "its gonna fail again, its gonna fail again".. I suppose the bit of uncertainty and fear of past failures is healthy and a necessary component of any bull run.  If I look just at price performance in the indices, I do the like the market here and think it has some legs, but the volume behind the moves of the past 2 days just doesn’t have me tripping over myself to push the buy button.  I’ll go ahead and insert the old cliche "cautiously optimistic" right here.  That’s where I’m at.  Easing back in to some positions. 

Looking at the chart of the Nasdaq, its clear that it has a lot to prove yet.  It’s still got a ways to go just to get to the top of that trading range.  On the positive side, it did bounce around the bottom of the trading range and volume has been increasing to the upside as it surged back above that upward trend line.  If the Nasdaq can break out of this trading range i’ll remove the cautious from my optimistic.

The Dow has been leading the market higher and that is a bit of a concern as traders have been moving to the more defensive blue chips of late.  I want to see smaller, new leaders emerge and lead this market higher.  There has been some of that in telecom and a bit in biotech, but the action seems more speculative rather than breakouts of new leaders.  By the way, where’s the conviction in that move in the Dow?  Each move up off support over the past week has been with at or below average volume.  Technically, the last 2 days could be called accumulation, but you really want to see the moves occur with above average volume.  I think many traders are waiting for that bust out confirmation move with huge volume before jumping in with both feet.  I know I am.

You can see the S&P bouncing off of support of the upward trend line and 50 DMA and breaking out of that "squeeze" I discussed in the last market report.  The S&P looks real good here as volume as picked up in the past 2 days.  Now let’s see if it can hold above this new found support area.

Are you ready for the final days of frustration, ready for this bull/bear battle to resolve itself?

With the market getting squeezed between an intermediate upward trend line and upper resistance, I think it happens very soon.  When a bull and bear are backed into a corner with nothing between them but a 16oz. tenderloin, something has got to give right?. (OK my analogies need some work, but it may be better than the dead cat bounce)

Here’s another bold prediction…  I have no idea where this market is headed.  While I’m still moderately bullish considering major support levels are intact and we’re making higher highs and higher lows, the market has failed to follow through on rally attempts twice now in the last couple of weeks and selling volume is beginning to overshadow buy volume.

Lets take a look at the squeeze on the charts.

You can see in the Nasdaq we’re right on that upward trend line which continues to squeeze the Nasdaq up to resistance.  We’re running out of room creating the likelihood of a big move in either direction very soon.  My feeling is we sell off a bit tomorrow morning but continue to hold up at that trend line for at least a few more days.  But time is running out….
(apologies for the grainy charts, the screenshot was taken a bit too wide)

The "squeeze" is also evident in the S&P as we sit right on that upward trend line as well.  Strong support at 1275 (notice the 50 day moving average converges there as well, adding strength to the support).

While there isn’t a well defined area of resistance around the highs of the Dow like there is in the S&P and Nasdaq, there is a clearly defined upward trend line.  It was discouraging to see that the Dow wasn’t able to hold up at 11,000 today, but it still has some support at the 50 day moving average as well as that upward trend line.

Howdy all, apologies for the silence here of late.  Out of the blue I was struck with a nasty case of bursitus/cellulitus and am just now regaining my strength and getting better every day.  Having been in a hospital for the first time in nearly 20 years, it was a firm reminder that my health is not to be taken for granted.  I had been lucky and suppose I was due!  Anyway, I’ve been scrambling to get caught up and get my head back in the game.  It’s amazing how fast you can get behind in this business.  I do like the market here but am not 100% convinced quite yet.  The big volume just isn’t there yet and the Nasdaq has made what I would call a breakout move.  I’m just going to rundown the charts of the indices quickly, but will have a flurry of posts for you over the next week or so.  Stay tuned.

IN the  Nasdaq you can see the downward trend of lower highs over the past couple months.  We need to break that with significant volume .. then maybe i’ll get excited and say WOW!.

The dogs of the Dow continue to bark and lead this market higher.  I was looking at all the components of the Dow the other day and have to say without a doubt the most surprising component of the Dow was AT&T.  AT&T??  They’re still a company?  I thought they went bankrupt a couple years ago.. Kidding aside, Its up around 15% in the last month!  Yeah, I don’t follow too many of the Dow components.  Verizon is also joining the party.. another forgotten company.  Looks like some of that oil money is going to the old growth, dividend players.  Looking at the chart of the Dow, the price move is impressive. The volume behind that move isn’t.  Not bad, just not great.  Considering the amount of chop in this market over the last several years I want to see a convincing move.  A WOW! move.  Not quite there yet, but may be close.  Look for a new line of support above 11,000 as further confirmation that the move in the Dow is real.

The S&P is approaching another multi year high, it just doesn’t have a whole lot of steam behind it.