Tom

SP500 Set Up for a Wild Monday and First Week of New Year 2010 ?

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The charts are saying that this first week of the new year 2010 has the potential to be quite a volatile week.  I am considering the possibility at least that we finally get a meaningful hard down week this first week of January or at least start to see a lot more volatility as compared to last month.

The bollinger bands on the SP500 have contracted into a very narrow band over the last month but they have started to slightly expand.  I suspect that the volatility expansion is going to be to the down side, but a lot really depends on how we close Monday, the first trading day of the new year 2010.

Looking at the uptrend line that has defined this bull run since March 2009 we do see that the SP500 is once again sitting on this uptrend line and at risk of breaking down and through it. 

sp5002010103

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The Short Side of the Market is Not Working

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My little experiment at trying to pick another top in the market did not work.  I dumped FAZ and will now stay on the sidelines and look for long opportunities in stocks and/or ETFs again, but very selectively of course.

I said in my previous post that we really needed to see the market do some real damage to close this week out to keep a nasty bear trend going into next week.  But it did not happen at least 20 minutes before the close today and now it is looking like the complete opposite will happen.  A continuation run in the markets that may even accelerate into new year time frame and beyond.

We are now piercing on the SP500 ABOVE the 50% fibonacci retracement level of this entire bear market instead of breaking down and failing below it.  In addition the WEEKLY MACD sell signal I had mentioned some time ago has turned into a failed signal and the market has once again evaded a possible bear trend signal.  This is the same type of thing that occurred in the 2003-2004 period were the weekly MACD kept repeatedly failing time and time again and the market just kept doing very small 2 to 4 % corrections but then just kept trending higher and higher, although it was flat for quite some time too.

We may enter a similar type scenario next year, where the market does have corrections but they are never more than 3 to 5% and the market moves still in a more modest uptrend and then sometimes long sideways trend.  That type of market environment would make it very difficult for bears to get large amounts of ripe fruit so to speak and it would probably be extremely frustrating over the longer term for them.

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FAZ Triple Bear Financial ETF is Still Setting up for a Big Move

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FAZ20091222

The rest of this week is pretty much a non event as far as the market goes.  Volume has dried up to almost nothing in recent days which of course is no surprise given the holiday week we have this week and the half day of trading on Thursday.

I still think this market is within a 1 week window of a significant top at these levels.  If the market is up very significantly the next two trading days and/or the last 4 trading days of the year next week, then I am probably wrong about this being a top.

However, if we are down tomorrow and either flat or down on Thursday, then we may be set up for a nasty plunge sometime next week or end of next week.  That is how all my charts are set up.

The Bollinger bands on the major indices are extremely tight right now which makes sense given the tight trading range we have been in for about a month.  Volatility is at record lows as well.  At some point the Bollinger bands are going to start expanding and create a new volatility trend.  It could be either up or down, but my take is that it will be down and possibly fast and furious down.

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Direxion Daily Financial Bear 3X Shares Look Very Good To Me

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FAZ20091218

The FAZ Triple Inverse Financial Bear ETF looks extremely attractive to me right now based on everything I am seeing in the market.  The UNG performed as expected and is now getting to be a tired trade already and I suspect it will pull back some before building higher down the road.

But now the FAZ has flashed all sorts of buy setups and looks very good to me going into next week and end of year and early January.  I think we could see FAZ blast higher into the high 20’s range during the next 1 month time frame.

As I indicated in a previous post, the WEEKLY MACD has now turned down on the SPY and the SP500 index.  That means that the market will have weekly bearish headwinds going into next week.

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SPY ETF Shows some Possible Ominous Bearish CandleStick Patterns

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SPY200910172009

There are only about 8 real trading days left until the end of the year if you exclude the days around Christmas.  So that means about 8 trading days to create the final YEARLY price bar close and then start the next one for 2010.

The market has powered up so fast and so persistently in 2009 that one would think people would take at least a few points of profit and capital gains.  For us to close the 2009 yearly price bar only a couple points from the yearly high seems improbable.  Just like on a daily price bar right before 4PM you see day traders exiting, I think we could see similar type price behavior going into end of this year.

In addition I should also tell you that I have noticed some OMINOUSLY bearish looking candlestick formations in recent days on the SPY ETF and DIA ETF and also the SP500.

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UNG Natural Gas ETF Still Has an Interesting Price Chart Setup

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UNG20091214

I continue to be long the UNG natural gas ETF since I first mentioned going long at 9.38 on December 8th.  Despite all the negatives you will hear on stock message boards and elsewhere about how no one needs Natural Gas anymore, the chart is quite compelling to me.  There is so much negativity on this ETF right now that just based on that alone it is at least worth a look.

Did you know that if the Dow Jones Industrial Average was up the same percentage amount as the UNG ETF was on December 10th, 2009, the Dow would have been up about…

787 Big Dow Points in One Day!

So my point is that the market is always throwing you different pitches, each with a different risk reward.  Where the risk appears to be the highest it is often the least, and where the risk appears to be the lowest it is often the highest. 

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SP500 Yearly Candlestick Chart Shows Bullish Bottoming Tail and Range

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sp500yearly

This is a very interesting candlestick chart of the SP500.  It is the YEARLY price candlestick long term chart.  There are few interesting things we can see from this chart.  The most obvious is the very clear long term trading range almost 10 years long.  Despite all the bears endless preaching the fact is that so far at least the market has not been able to break DOWN out of this trading range and therefore keeps the cause building consolidation case intact.  The longer the market trades within this large trading range without breaking down under 900, the better argument can be made that eventually it will break topside.

The other thing to note is the current 2009 yearly candlestick.  This massive yearly candlestick has a large bottoming tail which indicates the strong demand that came in and held prices within the trading range.

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