Friday was another slow and dull expiration day, with the SPX trading in a miniscule 6 point range. I just can't figure out why conventional wisdom holds that options expiration days are "wild and volatile". All you have to do is watch one closely to see that just isn't the case.
And now we're looking at a slow Holiday week of trading. There won't be as many shares flipping around as usual, because lots of those who flip paper back and forth for a living won't be around, or will be less active. I'd be surprised if anything significant happens this week in the markets.
So perhaps it's a good time to step back quickly and look around to see just where we are. Pulling back pretty far -- to a monthly scale -- and the market still looks like it's performing a typical retracement bounce in an ongoing bear market slide.
However the weekly chart looks....well....pretty darn good. Stock prices are still accomplishing everything they need to in order to keep this lingering uptrend alive and well. The SPX is even managing to hang onto its important 10-week exponential moving average (green line), although that line just barely held into Friday's close.
Even if you're bullish and optimistic here, you should really be prepared for a quick and nasty decline back down to the 40-week exponential moving average, which is the pink line on the chart. Even the best long-term trends visit this 40-week EMA frequently to recharge their batteries, and this one is way overdue for such a visit.
Turning to the daily candles, it looks like my "down fractal" is still proceeding on schedule, and is now projecting down to that old familiar 1015 level on the S&P 500 -- for the first leg down of the fractal, anyway. After that, we'll likely see a pretty good bounce back up to right around where the market is now -- about SPX 1035-1045 -- and that will likely be the great short entry point for a rapid move down to the by-now-almost-forgotten "neckline" at SPX 965. Or if the market is going to continue to be strong into 2004, perhaps just see a quick undercut of the 40-week average, which is currently at SPX 988.
What the markets do on a dramatic pullback from here should tell the story for 2004, as well as how investor sentiment responds to such a decline. We really need that information before we'll know if this current market is going to have any staying power, beyond the impressive but amazingly over-extended performance this year.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Drained by 4 points to 11% on Friday.
SHORT-TERM: In Neutral but with a developing potential to move into an advance phase based on its technical formation.
MID-TERM: Progressed 7 points to 67% on the decline side. but with Confidence regressing to a Neutral 0.
LONG-TERM: Progressed 11 points W/W to 20% on the decline side but with Confidence regressing to a Neutral 0.
BOTTOM LINE: The mid-term decline phase has gotten fairly mature without doing any serious damage to the SPX price. Risk Premium (as we discussed in Sunday's Closing Bell) has shot up from 1.28% to 1.72% in the process. That's a sharp, fast rise. With Confidence regressing to 0% from its higher bearish readings intra-week, and with seasonal strength looming for the coming week we're anticipating a short-term advance phase. We'll expect this little rally attempt to fail to make new highs, but let's watch what happens to sentiment fuel and the momentum of its "delta" (change) for clues as to the sincerity and sustainability of the anticipated strength.
If the short-term advance phase can't get a toe-hold and gain some price traction, then a more "waterfall-ish" decline is possible (though this is the less likely scenario).
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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