Index Trading

SP500 Breaks First Critical Wedge Support Today on Heavy Volume

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The SPY slammed down through first trendline support today on substantial volume and once again confirmed the bear case that I have been talking about this week.  It was really bearish action today and the dip buying that used to work so well in recent months clearly failed this time. Right now I am thinking … Read more

The TZA Direxion Russel 2000 3X Bear ETF the Best Online Trade for October ?

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If you have read a few of my recent posts you know that I have become very cautious on the broad market now and am looking for a downward retracement and profit taking to commence soon. The weekly MACD is flashing major warning signals and is structured very similar to the first major down leg … Read more

S&P500 weekly MACD is Going to Nail the Top

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sp50020090928

The chart above shows the weekly MACD plotted against the S&P500 for the 1975 period (left half) and the 2009 period (right half).  The downside weekly MACD crossover that occurred in the 1975 period was the first major turn in that market after a super sized rally that was in progress from the major 1974 bear market lows.

The weekly MACD is nice to use for turning points sometimes because it evens out all the extra noise and helps to identify more meaningful turning points.  Sometimes it fails during extremely persistent trends.

I have written a few times before here at BestOnlineTrades about the similarities between the current mega rally from the March lows and the mega rally that occurred from the 1974 bear market lows.  The likeness is quite surprising and if the similarity continues then I expect we will get a bearish downside crossover on the weekly MACD similar to what occurred during the 1975 period that led to an eventual approximate 15% downside correction and then went into a 5 to 6 month basing period.

The current weekly MACD has not turned down yet and it has not achieved a crossover yet.  But I think we are close.  I calculate that the cross should occur within the next 1 to 3 weeks, most likely by mid October.  For the weekly MACD to start turning down so that the MACD signal line gets close to crossing the moving average line (dotted line), we need to see in the week ahead and the week after price CLOSES that are not much higher than the recent all time highs.  Preferably we want to see price closes that are in the current S&P500 trading range for a week or two.  That would help this weekly MACD towards a bearish cross.

The mid October time frame is consistent with Terry Laundry’s latest T Theory Update. (He has an audio update and PDF chart that goes with it).

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Bounce Next Week for the SP500 ?

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I would have to describe the decline so far in the SP500 as ‘labored’.  I am not seeing panic or a total loss of price support at this point, instead just a slow and steady profit taking move.  The chart in this post shows that the SP500 is at the close of Friday sitting right on the steep blue uptrendline support and also at the minor horizontal support as defined by the red horizontal dotted line.

I am thinking that whatever type of decline we get in the weeks ahead may not be rapid or involve very large one day percentage moves like we saw during the 2008 period.  The reason for this is that we are just now coming off of an extremely overbought market and slowly transitioning to a mini bear leg. We are still trading above key moving averages and still to large degree the bulls are in control.  That is the mindset I am trying to keep right now because I don’t want to be too aggressive on the short side. 

I have a feeling that the coming decline in prices is going to be slow, labored and to be honest somewhat boring, especially when compared against the 2008 extremely rapid price declines.

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Superb Shorting Opportunities Developing Now in the SPY ETF and Elsewhere

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spyetf20090924  The SPY ETF got some bearish downside continuation today from yesterday’s key reversal day on heavy volume.  The bulls tried to get a rally going many times throughout the day to try to create a price swing reversal bar but failed to accomplish anything meaningful by the close.

Volume came in heavy again on the downside on the SPY ETF at least relative to the upside volumes we have been getting over the last month or two.

Tomorrow’s action is key because it will create the closing weekly price bar on the SPY ETF, and if we close near the lows tomorrow or at least have a decent down day then it will create a bearish looking weekly reversal bar which will be the first one since June 14th, 2009, the time period of our last more extended correction.

Then next week the first three trading days of the week will finish off September and will create the closing monthly price bar on the SPY ETF.  If we get enough price destruction the next 4 trading days then it may even set up a bearish looking MONTHLY price bar on the SPY ETF which could potentially signal more bearish continuation into a good part of October.

I suspect this will be the case because I am already seeing the bearish divergences play out and generally the price destruction starts slow and then gets to an acceleration point after the bulls finally give up.  But we will have to see how the weekly and monthly price bar closings come in during the next 4 trading days.

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