Tom

A Major Down Week Coming ?

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This week is supposed to be a big down week according to a few top traders I follow.  It is supposed to be a potentially pivotal week.  One of the main arguments being the mass complacency in the market right now based on sentiment figures.

This market sentiment chart is only up to date to August 4th, and I imagine the latest data point to even higher bullish sentiment.  I believe we are seeing bullish readings that are as high as existed when the Nasdaq topped out in the year 2000.  From a contrarian perspective this is a concern. 

It means that too many people are on one side of the fence and it could mean we could be in for some nasty and sharp downward spike corrections that catches most people off guard.  That is typically how it always begins.  You get this near zero volatility market action that puts people to sleep and gives them high confidence that the market just cannot break down.  Then there is one key day that turns into a huge down day causing significant short term technical damage to the market trapping those who are heavily long.  Then you get a more involved correction after that as fear starts to replace the complacency.

You have heard me talking bullish on the broad market and making mid 1970’s comparisons and saying that we have good potential to go much higher.  I am still biased to that side.  But how we get through the seasonally dangerous months of September and October remains to be seen.  If we can get through these two months without too much severe damage then I see us getting a good stepping ground into end of year.

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Gold Price to Break Out by Labor Day?

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goldfutures20090828

Spot gold has some good upside action today but it is still early and we still do not know how the day will end.  But so far today I am seeing bullish signs and a good possibility of a bullish closing weekly price bar to set us up for next week.

It would be superb if we can get a bullish weekly close going into next week.

I am seeing that the daily MACD has crossed up on the spot gold price for the fourth time since being in this large triangle.  In the near term there is a slight tendency to an ascending triangle formation (green shaded area) in the chart.

Still, the spot gold price has not achieved a move above the 970 to 980 area that is necessary for me to say we are in breakout mode and have much higher confidence that the breakout is for real.

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Larry Pesavento Says the Market Goes Down Big Starting Next Week

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Larry P, a superb trader who uses precise Fibonacci pattern analysis has been talking about the market being at an important top starting end of this week and beginning next week.

Larry P is also the one who made one of the greatest market calls I have ever seen.  During the October 2008 period he precisely called the worse declining portion of the ‘crash’ at that time.  I believe it was October 6th to October 10th, 2008.   Larry P is also heavily into Astro Trading and uses precise planetary alignments to pinpoint turning points and continuation patterns in the market.

The time frame of October 6th to 10th 2008 was a similar astro configuration to the one that existed in 1881 during the banking panic at that time.  So the planetary aspect that he was talking about was almost the same and existed over that period of 4 trading days.

Those 4 trading days led to huge price destruction and volatility during 2008 and the rest they say is history.

When I look at the SP500 I can see the possibility of a break down coming soon.   But I have said before and I will say it again… We need to break down under 1012 to 1014 as a first sign that we may be heading into a more severe correction.  When and if a correction starts it may happen very quickly to start it off as a big sign of weakness. 

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I Can See the Future and it Looks Like the 1974 S&P500

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I don’t have a crystal ball that tells me what is in store for the future.  But the closest thing to a crystal ball that I have found so far is the 1974 time period of the S&P500.  The entire structure of the market during the time frame of 1968 to 1982 has given me a lot of good perspective and understanding about our current market and has helped to give me great clues and better confidence about where our current S&P500 may be headed in the future.

Now you may be asking yourself, what on earth does 1974 have to do with today ? Nothing actually.  But what I have found over the years is that sometimes past market movements tend to rhyme and show similar structure and trend development.

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LEAP Leap Wireless International May Be Set up for a 10% Upside Move

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leap20090826

LEAP looks like a good setup to possible deliver about 10% returns starting from tomorrow in the AM.  I found leap by doing a stock scan of over 4700 nasdaq and NYSE stocks filtering for MACD daily buy signal and RSI less than 50.

Only 6 stocks came up from the scan because I had put the limitation that they should also be trading greater than 1 million shares.

LEAP looks good to me for several reasons.  It is doing a retest of an important late November 2008 swing low.  The daily MACD has extended to the downside and has given a bullish cross.  Relative Strength Index is very oversold and looks like it will soon give a buy signal.

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What I saw in the Broad Market Today: Absolutely Nothing

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Watching paint dry.  That is probably the best way to describe today’s action.  Up a little and then down a little and by the end of the day about dead even.

I am thinking that the next 2 weeks after this week ends are going to be flat to sideways.  I just do not see any major  market moves happening as far as the indices are concerned.

There still exists this shorter term possible bearish divergence in the SP500, but so far that has not led to any significant price destruction and the market may once again evade this bearish divergence if the SP500 can hold above 1014 the next couple of weeks.

There are three days left in the month of August and so the market has to make a decision by Monday how the August monthly price bar will look.  If it closes near where we are now then it could bode well for September.  But if by some miracle the SP500 starts to break down badly the next 3 days and slices down through 1014 very fast then it might be saying the first week of September could be hard down.

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CBL CBL & Associates Properties May Get a Cup and Handle Breakout Soon

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CBL looks like it has a cup and handle setup and if CBL can get a price move above 8.80 I think we could see breakout type action and a continuation uptrend. CBL probably should have been the first stock I mentioned today.  All the others I have talked about so far today are not … Read more

GRRF China GrenTech Corporation May Fill the Gap then Find Trendline Support

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grrf20090825

GRRF had a huge upward breakout spike in early August on some good earnings numbers.  Since that price spike the price of GRRF has been trending down within a steep down trend channel denoted by the yellow dotted lines (click on chart to see full size).

Right now I am thinking that GRRF is going to retrace this huge move and attempt to fill the large opening breakout gap and maybe come down into the low 4 range.

If it can fill this gap and hold support at the 4.10 range then I think GRRF may have a shot at resuming the uptrend and get a test going of the high volume swing high that created the gap.

GRRF should be able to fill this channel and make a decision no later than September 8th, 2009.  But I am going to have to watch price and see how it behaves when and if it is able to get into the low 4 range.

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DRYS DryShips May be Headed for a Triple Bottom

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drys20090825

DRYS DryShips over the past year has had some really huge swings and enormous daily volumes.  It rallied from a price of 3 to 16 in the past and then made a double bottom and rallied from 3 to 11.  Clearly  DRYS is capable of making some big moves on the upside and downside.

The current structure of the chart suggests to me that DRYS is still not done with its bear market yet despite the huge intermittent rallies.  It has a strong down trending force defined by the green down trendline and so far has obeyed that downward force.  Price has not been able to break above this line. 

So we still have a generally bearish trend in DRYS.

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HBAN Huntington Bancshares is Nearing a Decision Point

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hban20090825

HBAN is nearing a decision point after a somewhat lengthy uptrend since March of this year and a few intermittent spike rallies.  HBAN has a somewhat similar setup to the FITB setup that I had written about in the past.

HBAN has been consolidating between roughly the 3.5 and 5 level for several months now and has already touched the bottom up trendline 5 times giving it good significance.

I cannot speak as to whether HBAN will be able to get an upside move off of this structure into the green shaded area.  Typically the market in general is vulnerable this time of year to some downside shakeouts.  But so far the broad market is holding up like a champ.  The retracements have been intraday retracement and not significant corrections.

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