This is really a weak tape again today.. the bullish hammer of yesterday was a fluke and no follow through today. The tape looks weak to me and 1250 now looks like it will be busted eventually possibly into July 2011.
This is bearish for the overall market for the longer term. Unless by some miracle the market can stage an end of day rally to close flat today, this is setting up for much more down in the weeks ahead.
I continue to remain on the BOT Short signal for the sp500 despite my cheerleading yesterday about the big hammer reversal. Remember, regardless of what I express in these postings, if I am on a BOT Short signal, then that is my preferred bias and committed signal REGARDLESS of what I am venting about in my postings in between.
The US Dollar continues to show strength and may catch a longer term bid. The administrations actions yesterday to try to pump the market with the crude oil release may now be seen as a total act of desperation as they see signs the economy wants to contract again..
Biotechs continue to hold strong and remain on all my watch lists. Individual biotech stocks are acting like we are at disney land. They simply do not care about the weak tape for now..
RPRX blasted higher back up into the middle of its swing trading range and may move back to the top of the range and hopefully for an upside breakout.
Also ONTY is turning into a POWERFUL momentum biotech and may be positioning itself for a new momentum entry in the week ahead if it can consolidate nicely in the current range. ONTY has a shot at getting into the teens. It is doing a parabolic type up move and as long as the tape consolidates nicely it can be traded as a MOMO stock with very tight stops.
The long term up trend line from March 2009 may be at risk of breaking down soon into July 2011 !!! Watch this closely during the next two weeks. I will have forthcoming charts on this month to month transition soon and what it will mean for the longer term picture.
Hi Tom
Thanks a lot for your timely update. This is what I have been waiting for.
Tom: I very much agree with yesterday’s post in which you said the day “had the flavor of blatant manipulation from the powers that be.” The morning downward and late afternoon upward stampeding of bewildered shareholders had all the forensic evidence of the Plunge Protection Team in action. I’m a bit surprised though that the Team didn’t make at least a half-hearted attempt to jakass up the averages by futures buying in the last couple of hours before the Friday close.
Neal
i think quite a number of possible reasons why market not manipulated higher today. (1) end of quarter and funds may be writing off the quarter, (2) according to today’s WSJ (C6), the govt is selling $174 Billion of debt next week – – govt may have vested interested if market tanks so that investors take risk off and buy treasuries, (3) with Obama and Republicans at loggerheads, the Govt may be willing to have a market swoon in order to get a debt ceiling deal done – – the politicians may be scared into action and negotiation, (4) the fundamentals stink, (5) the market may be gravitating toward 200 day MA (around 1260) in order to scare the most people, (6) investor sentiment is hardly bearish – – see Aall Investor Sentiment for the latest week ended 23-June – – the bullish sentiment jumped almost 8.5% pts in the latest week, and (7) it is not until Tues that Greece Parliament actually votes on austerity plan
I think we have a fair shot at going lower, breaking support.
Geoff,
You make some good points. Also remember that next week is the last week of QE2. Seems like the dollar is getting a bit of a bounce as a result (or whatever the reason may be) and could push higher. Higher dollar equals lower markets. Also I think that the powers that be don’t want this market to tank before July 4th holiday weekend when families will be going out and spending money. SO if we consolidate and chop around these levels for a while, then that will just create more steam to bust through to the downside. But there is a lot of support on weekly and daily chart and I dont think they will let the markets tank before the holiday weekend. So even if markets fall early next week, I have a neutral to bullish bias for the latter half of the week unless of course something crazy happens with the Greece situation. After yesterdays crazy reversal, a confirmation up day today would have really bode well for the markets. The fact that we negated yesterdays huge reversal tells me this market wants to go down.
One more thing I’d like to say. The market is really at a pivotal crossroads here. A close below the 1250 level on heavy volume and conformation of the breakdown on the weekly would be EXTREMELY bearish for the markets. I’ve mentioned before that I’ve been following a long term bear pattern on the monthly on the SP 500. I believe even Tom wrote about it on one of his posts. A breakdown and confirmation on the weekly would mean that we’ve probably put in a multi-year high on the markets and will begin a bearish downtrend. If the pattern plays out, we could very well go back to the 2009 lows and possibly lower, around the mid 40s level on SPY etf. I’ve always believed that pattern would play out but not this quickly, perhaps a few years down the road. If you look at the macro economic factors at play, there is every reason in the world why this very bearish pattern should play out. If there really is a breakdown in the markets, then it will be historic. It seems like we are brewing up a perfect storm with these debt levels, chronically high unemployment, rising food and gas prices, oversized governments, etc. You know the USA has about 61 TRILLION in total liabilities of you include obligations to seniors, retirees veterans, etc. There is no way in hell we’re going to pay that off. The one positive about the economy is that business profits have been strong. But even that is a farce because most of these SP companies are riddled with debt. One reason why profits have been so strong is because Companies have become more efficient and have been able to finance their operations through cheap debt from these low rates. But One can only be so efficient, sooner or later they will start contracting if they can’t grow their businesses. And rates can’t stay this low forever. 3 years into a recovery and we still have over 400,000 initial jobless claims every week. Housing market is still in the dumps. The value of the dollar has fallen about 40% over the past 10 years and its only a matter of time before we lose our reserve currency status. I can go on and on about the negatives. I thought last summer that we had put in a multi-year high on the markets. I was wrong; criminal Bernanke came out with QE2 and we rallied for six months. I am tempted to believe that we’ve put in a multi-year high on this market, but I’m not sure. Bernanke and the powers that be will do everything in their power to keep the markets afloat. obama cant get re-lected if the market tanks. So you better believe they will do everything they can to prop up the markets. In conclusion, I really dont’ know what to think.
RMT: You made a great comment “I really don’t know what to think.” The “powers that be” succeed if they manage to confuse the trader. By powers that be I refer specifically to the Committee on Financial Markets, AKA the Plunge Protection Team, set up shortly after the 1987 mini-crash. Their weapons: stock market futures. Their mode of warfare: massive buying. The result on a large scale has been market distortions. On the scale of small traders– confusion and frustration. Let’s face it the big boys have enough ammo to annihilate any of us if we get ion the crossfire. Our only hope of success is strategy and speed. We need to run and hiode when necessary if we plan to be alive for the next battle.
Some excellent comments/posts here guys. I enjoyed reading all of them very much..
It is important now for us to consider the longer term charts on all time frames again.. I am going to do a piece covering the longer term time frames again and see if I can slice and dice it properly for some type of clarity for the rest of this year and beyond.
It is a very intriguing question to me now on whether we have hit a massive multi month, or multi year top right now… The fundamental points you mention make it hard to dispute that we have.. but I will look into the technicals to see if I can confirm the possibility.
I DO see a very massive class C bearish divergence on the monthly time frame on the sp500. A class C bearish divergence is the most bearish type of signal.. (per Alexander Elder ).
Since this class C bearish divergence is occurring on the monthly time frame we should remember it will have much longer term implications than simply weekly or daily obviously.
My bird’s eye view of this monthly bearish divergence is already hinting to me based on seasonality that the worst of the decline is consistent with the September October Time Frame but I have to confirm first my charting program.
I think it also true that the ‘powers that be’ will keep throwing as many kitchen sinks as possible at the market.. but if are entering another mid 2007 to 2009 phase then their efforts will only have short term bounce effect..
this is why it is very important to get the proper ‘trading DNA’ NOW or at least attempt to so we can determine if every rally should be shorted for a long time from here…
anyway more on this later…. hopefully by very late Sunday night.