This week?s volatility may be an important sign that the bears are starting to
overpower the bulls. Since the week isn?t over yet, it?s still a bit premature to
make a firm forecast, but we now know what to look for on Friday that could provide
clues of things to come. Read on for details about what will constitute a bearish
chart
NASDAQ COMMENTARY
On Monday, the Nasdaq?s jump up at the open had plenty of us certain that the bull
run would continue this week. By late in the session on Monday, we started to realize
that maybe that wasn?t the case. Yes, we did make a nice gain that day, but the gains
we gave up from that day?s high were even larger. The fact that the heaviest volume
on Monday occurred during the late-session only added to the bearish concern. Sure
enough, that momentum carried through into Tuesday as well as today (Wednesday), as
we?re at our lows for the week.
So far we?ve made three consecutive lower highs and three consecutive lower lows.
That in itself is not a bear trend, but it does establish bearish lines. And
considering that we?ve closed Monday?s gap by falling under 1737, it?s difficult to
be bullish here.
Yet we?re still above our key 10 and 20 day exponential moving average. As long as we
are, we still have to remain bullish. Just understand that we are on the verge of
breaking under the 10 day EMA line, currently at 1720. The 20 day line is not far
away either ? currently at 1690. If we fall under these lines, the last line of
defense is the intermediate-term support line (dashed).
And what is the likelihood of moving that low? Most technical indicators are still
mixed. According to the volume trend, we?re headed in that direction. As you can see,
the Chaikin line is poised to cross under zero ? an official sell signal. Simply put,
this is a sign that the selling volume is much higher than the buying volume. It?s
important to not react to soon to a falling Chaikin line, as we might end up finding
support at zero (as we did in May). In other words, we want to be sure that the
volume trend has been firmly established; the cross under zero confirms that.
As of now, it looks as if we?re going lower, but the weekly closing level is going to
be a much better indication. If we close out this week under 1705, the bearishness
will be confirmed. A move above 1776 would be bullish, but that?s the less likely
scenario.
Daily Chart of the Nasdaq Composite (COMPX)
S&P 500 (SPX) COMMENTARY
We?re again highlighting the S&P 500 to point out the same concern we had in our last
update ? the resistance at 1015. While the Nasdaq Composite has been generally going
higher over the last three weeks, the other broad indexes have basically flattened.
We hit 1015 and failed to cross it for a third time on Monday, setting up the
weakness we have seen so far this week. In fact, the resistance at 1015 was strong
enough to send the index back down under both the 10 and 20 day EMA. As always, one
close under key support levels doesn?t mean panic, but it should be a cause for
concern. If we close under these key levels for the week, that will be a fully
bearish sign.
The technical read for the S&P 500 is even less encouraging. The MACD chart, unlike
the Nasdaq?s, has not been bullish since late June, even when the market was headed
higher. While the fall of the MACD lines (and the negative momentum divergence) has
been subtle, it?s a decline nonetheless. Stochastics is indicating weakness too, with
a bearish cross today.
Support for the S&P 500 is at 980, with resistance at 1015.
As regular readers will recall, our outlook for the short-term has been bullish, but
bearish out past that. That short-term bullishness, though, has now expired. In other
words, there?s not much (if any) upside left. We?re gearing up for a decline. The one
thing to keep in mind is that earnings season can create bullish pockets. Just keep
your focus on the bigger picture, and don?t get shaken out by one or two volatile
days. Use your support and resistance levels to help you do that.
Daily Chart of S&P 500 (SPX)
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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