Charts

The S&P hit 875 on Friday...where every possible resistance level was converging at. So as expected, we had a nice sell-off today. Market sentiment is still naturally split - it will take more than one down day to change anyone's mind. Almost everyone with a brain believes that this bear market is far from over; however, there is plenty of disagreement as to whether we see 700 or 1000 first, before heading lower. One thing that people can agree on, is that the market ran too far too fast in the last 30 trading days. At the moment, and given what is happening with earnings/guidance, I expect a more serious pullback. Now enjoy some charts.

SPY


QQQQ


VIX


SHORTS
TIE


OIH


WYNN


MMM


X


XOM


LONGS
TXN


USD



UUP

Unstoppable

This rally has been unstoppable. Fortunately, this silliness will come to an end - but remember that the market is operating on its own time frame, not yours.

In the very short-term the bias remains bullish. I am doing my part at least, to put an end to this - via voodoo magic blue lines, drawn for you, on the charts below (click charts to enlarge) - which will undoubtedly act as fiery hellstorms of resistance.

Keep the prevailing trend in mind. I will still be looking to add to my short position, via SSO, if SPY gets to its trendline, as drawn below.

By the way, as the govt is working tirelessly to 'loosen' the credit markets, read this: Bespoke

QQQQ


SPY


SPY - with fibs (drawn from the gap down on 10/03)


GS - resistance at trendline & 200 day MA


X - resistance at trendline & 50 day MA

Follow Up

Due to some significant moves today, here is a follow up to last week's charts. Most notably, there is SPY, which closed below 80. Be aware of the possibility of a reversal, such as the one that took place in November (SPY went from 74 to 90 in one week).

Assuming that doesn't happen again, 75 will be the next target. There will be a bounce between now and 75, so don't chase.

Short term conditions are getting oversold (2 & 5 day RSI), so as usual, either cover, or wait for some strength before getting short. Shorting oversold stocks is a guaranteed way to lose money in the long run and usually in the short term as well.

SPY



X



TIE



MA



OIH



JPM



XLE

Free Range

The path of least resistance is SPY 80. If we get there, remember, the more times support is tested, the weaker it gets. Below are some additional setups that provide defined levels of support and resistance.
SPY



X



TIE



MA



OIH



LLL
not range bound, but rounding/topping off





Well, that tears it. I'm going skiing. Have a good weekend.

X - debit spreads

It's anybody's guess these days but I think before heading lower there's a good chance to the upside. It's still pretty hard to justify trading options but using spreads will make the risk manageable while still allowing for some profits. In this example, consider US Steel with a short-term price target of low 60s.














Volatility has come off its highs... relatively speaking of course.


















Trade calc screenshot -

Le Resistance

SPY (10 yr)
Notice how the market 'bottomed' in 2002... same pattern appears for '33, '42, '87, etc. The likelihood of a v-bottom here is also highly unlikely so I will play the odds. To understand why this happens, go review market psychology of bottoms, support, resistance, etc. - long story short, there are very good fundamental reason for why and how these patterns are created.




SPY - looking for the underside of this channel to get kissed before heading lower




















BNI - trading range




















MON - gap fill - that was quick




















X - if you're looking for a follow through day, X has some room to run




















XLP - look for 26




















XLB - If XLB has the audacity to climb its sorry ass to 34....




















AAPL - low risk setup developing...




















COST - low risk setup has arrived.

Pattern of the Year

I am finding that this is becoming the price pattern of the year - and it ought to look quite familiar to you by now. It has been more popular with the commodities but nonetheless it has become very common (ACI, POT, BTU, MOS, etc. come to mind).

It starts with a nicely trending stock (often 45 degree angle or less) that at some point begins to quickly pull too far away from its trendline...only to come crashing back down with a momentum too great for its former support line to hold.

Then one of two things have been happening: it has either been a free fall (above) or it has climbed its way back to the underside of its old trendline before making new lows.

This pattern is one that I believe can be anticipated if you see it enough times. In case you're curious, the stock shown above is US Steel (X) as of today. And while in this case, hindsight is 20/20, there are likely other similar opportunities out there.

I would look toward the transports, who have over the last several months have held up pretty well. They took it on the chin today and I think there's more downside to come in the intermediate term. Here's a head start: CSX

Weekend Watchlist

Click on symbol to view chart.

X - broke long-term support; short entry would be on a retracement back to the underside of old support

POT - same as above.

OIH - same as above.

GNK - same as above.

BIDU - downtrend

XLY - downtrend; reaching resistance

CME - short if closes below horizontal support line

ICE - short if closes below horizontal support line


MA - establishing a downtrend

QQQQ - bearish diamond pattern

QQQQ - presenting a low-risk setup

Look for a short-term bounce in oversold stocks... similar to the following:

X

OIH

OXY

Ag stocks are all now comfortably under their 200 day MA but may also be due for a short-term bounce.

And to the immediate downside, I like TIE back down to ten.

OptionSpot

SPY | X | FSLR | FXI | JPM

SPY - 2 yr chart

SPY - 6 mo chart

X - short term overbought

FSLR

FXI

JPM