Index Trading

Market Reaction from March 2009 Trendline Shows Positive Trend

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The market reaction off of the up trend line in force since March 2009 has so far been touched 3 separate times.  The more times a trend line is touched the more it tends to validate that trend line.  Key also is the observation how the market reacts off of an uptrend line.  The way … Read more

No Breakout Today

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Today was very uninspiring for the bull case on many indices and in many different aspects.  Volume was lacking today in a big way.  Price conviction was lacking also.  There were also plenty of reversal hammers created which would be confirmed on a close below today’s price low. The Dow Jones Transports Average is showing … Read more

SPDR S&P 500 ETF SPY Fails to Test Swing Lows on Increased Volume

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We are once again at a crucial juncture in the market and possibly a very significant turning point.

The SPDR S&P 500 ETF SPY today did yet another reversal and showed that the market is lacking enough energy to bust through the very critical lows of the large swing trading range since April 2010.

Today was a very very important day in terms of what the SPDR S&P 500 ETF told us.  Today the SPY tested several very important key swing trading lows going all the way back to March of 2010.  In each instance the lows were tested on substantially lighter volume which is a bullish reversal sign for the market once again.

The ultra bearish scenario may be completely dead as of today and I would say at this point to be extremely careful about being heavily short this market going into September 2010.

We closed out our short trade today on the SPY ETF and intend to go long in the morning with the following two conditions:

  • We need a bullish confirmation of the recent two day bullish engulfing candlestick pattern.  This means we need a close above 106.39 in the SPY.
  • Secondly, we need a bullish close above 605.71 on the Russell 2000 as a confirmation of a MACD Histogram buy signal.  The Russell can tend to lead the market on both the bearish side and the bullish side of the market.  Right now it seems to be leading and showing a leading bullish possible buy signal on the Histogram

Probably most traders to not pay that much attention to trading volume.  But if you think about it, volume can potentially be the most important clue the market can give us because the volume is essentially the energy that moves markets.  It is the real money, the power that either has the force, or not.

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iShares Barclays 20 Yr Treas Bond TLT ETF Into the Power Zone

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The iShares Barclays 20+ Yr Treas.Bond TLT ETF has just entered the power RSI zone above the 70 level.  The last time this occurred with decisiveness the market plunged into the May 6 2010 so called flash crash. We are into the power zone again now and the TLT is blasting higher into what looks … Read more

IWM iShares Russell 2000 Index at Bottom of Swing Trading Range

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The iShares Russell 2000 Index IWM ETF today had an opening gap down and then a reversal topside for most of the day.   The volume today was typically light which is no surprise this time of year. Today’s action was a pretty typical bottoming type action with the bearish opening gap down and then the … Read more

Another Look at the Russell 2000 and iShares Russell 2000 Index ETF

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I wrote about the Russell 2000 Index a few days ago and at the time I was writing about it the Russell 2000 looked like it was going to print quite a strong looking reversal hammer by the end of the day.  As it turns out the final candlestick was not a reversal hammer at all.  It was instead just a somewhat smallish looking doji candlestick.

I am not sure if my data provider was feeding bad data or what the exact problem was, because it was showing me that the Russell 2000 candlestick had a long bottoming tail similar to previous key reversal points in this index.

It is a very important difference because the smallish looking doji we printed on this past Thursday 8/12/2010 can now be simply interpreted as a minor pause in the previous down trend and the half way move towards the bottom of an important channel that this index trades in.  See the chart below for clarity.

rusell2k20100815

In addition to the recent doji it can clearly be seen that the candlestick the day before was a sign of weakness that broke the uptrend in force since July 1, 2010.

If we look at the chart of the iShares Russell 2000 Index (ETF) (Public, NYSE:IWM) in the slightly larger time frame a more clearly defined picture starts to emerge. 

First lets start with a simple truth about the IWM trading pattern since the April 2010 top.  It can clearly be seen that the IWM has attempted to rally to a higher high during this entire downward trending trading channel but has each time failed (see the blue solid squares).  It has attempted to trade to a higher high 5 separate times but has failed each time.  In the two most recent attempts it failed again and made a small double top, and the second top that created the top also was not able to trade to a higher high.

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