03/22/2014 Weekend Update

[TWT]

$DUST: Definitely in my buy radar screen

[Mr. BachNut]

A lot of excellent work here this weekend. Thank you.

One comment regarding posts by Rhight, Al D and Flumanchu.

One issue I am dealing with is that my composite trend signal has been turned up by the recent rally but one very important sub-indicator in the composition won't confirm it.
This signal is based on a collection of sub-indicators that have shown correlations of 74% + to intermediate term trends.
As the current signal turned up from neutral rather than down, a resumption of the prior trend is indicated rather than a new trend.
This is important because my win rate % on trend resumption trades are a good 18 points below fresh trend signals. (Still worth doing given gain to pain.)
The history is limited, but it suggests a resumption signal without confirmation can pay but trades should be on a tight stop.

What's my point?
I will share that the problematic sub-indicator that won't confirm the signal is a set of money flow calculations.
Rhight's first chart highlights the negative divergence in SPX Money Flow Index.
If you look closely, you will see how the recent rise has been particularly weak.
If one looks at SPY MFI, it is even weaker than SPX.
This aligns well with Al D's observation that SPY has been getting liquidated. I would suggest that the underlying stocks are still being bought (BPSPX has been upticking).
Flumanchu makes the point that QE flow has been adequate to lift the market but may slip to inadequate soon.
So, my point is that the recent up move and the new highs have not been supported by robust money flow.
Marginally positive money flow can produce additional new highs but perhaps with added volatility (kinda like last week).
Money flow indicators may be worth paying closer attention to as a tell in the days ahead.

[Mr. BachNut]

My NYMO chart is nebulous and supports a wide range of outcomes.

The recent low is above where it typically bottoms. So, there is a case for a drop down to the target zone.
NYMO ended the week negative and down from Tuesday's high. So, a downmove to target may have begun.

However, Friday's low was an uptick from Thursday.
If NYMO continues to rise and breaks Tuesday's high, we'll have a higher high and higher low suggesting an uptrend with the bottom in.

Mr. Market will probably show his cards one way or another next week.
My summation signal says it will be down. My composite trend signal says it will be up.

Given the above along with conflicting technical signals, higher volatilities and recent choppy trading, I am entertaining the possibility of some kind of megaphone (top?) in the days ahead.
I have marked some boundaries on the chart with blue lines and orange extensions.
THIS IS NOT A PREDICTION. I just believe that the current technical state of affairs can support price action to either or both ends of the megaphone.
This could include a trip to the upper keltner band at SPX 1905 and/or to various support levels at SPX 1849, 1839 or even the 50 day MA at 1832.
There is also a case for choppy trade in between.

This is, needless to say, a very challenging environment for folks who want to position for trends.
I have been honoring my trade signals, but as of late last week, gotten active in managing positions to limit risk and reposition opportunistically. (Strongly prefer to set and forget.)
To the extent things go megaphone, I may end up on the sideline waiting for clarity.
A trend will become clear soon enough.

[Mr. BachNut]

One last thought.

Biotech rolled over pretty hard last week.
If it follows through, it may be like the rats leaving the ship. Sell beta.
Anecdotally in the past, I have observed biotech having a good season from the big JPM (formerly H&Q) conference in January until tax time in April.
So, it may just be seasonal profit taking, but keep an eye on it.

[rhight]

One last thought.

I'm working on a response, check back later

[Mr. BachNut]

One last, last thing.

We're in a Bradley Turn window.

[rhight]

With regard to flumanchu's well argued post, I would offer that within the context of QE3 for over a year, while the over all trend is obviously UP, there have been regular pull backs, and so there is not a tick for tick relationship over the short term. (see chart and ss image)

I share Mr Bachnut's frustration with the conflicting nature of the current set-up. As a primer on MFI see : http://stockcharts.com/school/doku.php? ... _index_mfi

On the Bull side there is a bullish cross (bear touch depending on setting) on the Daily Stochastic, DI+ is over DI-, although they have been range bound over the past 6 weeks, while ADX=15 (trendless), and there is a Positive Price Reversal = 1889 on the SPX Daily RSI. Just technically, this opens the possibility of a move to 1890 next week.

On the Bear side is a complete loss of momentum in the Weekly and Daily time frames, as noted by DellGriffith, the Daily BB width nears 2, and the Weekly BB width is now <7, all really saying the same thing - that momentum is FLAT even though ATH's make the headlines. Meanwhile, there is a Bear Set-up on the Daily Stochastic that implies that the next bear cross in the stochastic will be tradable (sell longs.) And so, in the context of waning price momentum, sentiment, volume, and strength gain import, IMHO.

Volume : look at a MA of Daily $NYUD, or $NYUPV/$NYTV to see waning up volume
Strength : NYSI, BP's, and % stocks above 50dma all show neg dev's
Sentiment : I'm looking at CPCE over the past 6 years and it is telling a story, see chart, although at this juncture the jury is still out (see ?) but definitely leaning
FX : check out 60min 6 month UUP/FXY, FXE/FXY, FXE/UUP, FXA/FXY correlations to SPY and divergences

Finally, note SPX April-May 2010, 2011, 2012
and this article (comments please on credibility, especially the 2014 Liquidity Guage chart) http://www.safehaven.com/article/33104/ ... nd-in-2014

[TWT]

$IBEX: It could be forming a Triangle. The next to the last pattern

[TWT]

$ES_F Globex: A trend reversal requires an impulsive decline

[TWT]

$EURUSD: The countertrend bounce could be unfolding a DZZ

[Cobra]

good bull bar, possible double bottom, follow up next bar needed.

[MrMiyagi]

qqq

[MrMiyagi]

Stocks bottomed intraday here?

Probably not but looks that way. Maybe. Maybe not.

[Cobra]

double bottom still possible, at least this rebound may have small legs. lunch time, will be back.

[MrMiyagi]

qqq2

[Cobra]

double bottom or C&H target. I'm not sure but most likely this rebound may still have legs.

[MrMiyagi]

spy

[kaiboliu]

Cobra, you update the wrong thread, this is 3/22/2014 weekend update, not Monday.

[Cobra]

possible another push up.

[MrMiyagi]

COBRA YOU ARE STILL ON WEEKEND PAGE!!!!!