Long Term Charts

Is the 2007 Market Top in the SP500 trying to tell us something now ?

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 spx20102007

There app ears to be a pretty solid chart pattern similarity between the 2007 sp500 market top and the current 2010 market structure.  The 2007 top was a slow grinding top and almost seemed like it happened in slow motion.

The current 2010 price action seems to have the same flavor with slow trickle up price action on generally weak volumes.  It is this slow and meandering price action that seems to lull a lot of people into complacency and forget that this market still has the potential to turn on a dime and transition into fast and furious downward price action.

But actually it would be incorrect to call the price action after the final high in 2007 as ‘fast and furious’.   It was still labored price action that marked the early stages of a much longer term decline.

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Not Short Selling until 50 day moving average crosses 200 day moving average

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My mindset right now is to absolutely refuse even thinking about shorting this market with inverse ETFS or any other means, until and if the 50 day moving average of the SP500 crosses over bearishly the 200 day moving average.

Now you might say I am ‘slow’ or chicken to attempt to short this market until I get such a long term signal, but I would rather be a slow chicken that takes his time to get on the right side of a trend than super index trading expert hero that feels the need to try to pick the exact top.

For all I know this market may trade all the way back up to the old all time highs in a year or two.  In fact that situation has a decent chance of happening based on simple oscillating stock and index theory alone.

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Another Long Term Chart of Natural Gas

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This chart was sent to me by ‘Michael’ and is a nice piece of chart work on on the natural gas contract so I thought I would repost it here and let it basically speak for itself.

When I look at this chart it has me thinking that the bottom in Natural Gas may be sooner than I realize because when I look at the pattern of 2009 and 2010 and then compare it to the pattern of 2001 and 2002, one could make the argument that we have ALREADY made a W Bottom and now we are simple making a similar ‘handle’ as we saw in the 2002 time period.

Also significant is that we are right now near the 61.8 fibonnaci retracement level near the 4 range.  That 61.8 fibo level may provide some significant support to the natural gas contract as we close out the month of March.

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Did you Know this Fact about the SP500 ?

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Of all things technical analysis, I also enjoy pondering the longer term charts.  They cannot really be traded on, but they kind of give you this ‘I am the captain of this ship’ type feeling.  The other nice thing about them is they help to filter out all the shorter term ‘trading noise’ that exists in the shorter time frames.

I don’t look at the super long time frames that often but I usually do when the calendar changes to a new week, month, quarter or year.

The fact I am talking about on the SP500 in the title of this article is that the current YEARLY OPENING PRICE is exactly equal to the current YEARLY LOW price.  I had mentioned this one other time before but it is worth mentioning again because in terms of candlestick analysis it is very important.

I am embarrassed to admit that only until recently have I started using candlestick charts exclusively.  I was using regular bar charts for the longest time and never really shook the habit.  Perhaps I was just stubborn.  But I can tell you with zero doubt that understanding the basics of candlestick analysis, patterns and psychology behind the candles and their structures and patterns will give you a very significant trading advantage over the longer term.

The best book on Japanese Candlesticks (of which I have a copy) is Japanese Candlestick Charting Techniques by Steve Nison. It is really well written and provides a huge amount of charting examples to clearly see candlesticks in action and their expected outcomes.

So back to my point about the opening price of the current year 2010 being exactly equal to the low price for 2010.  The actual value for the low and opening is 1116.56 according to my price data (I am assuming that my price data is all correct here otherwise some of the conclusions I make here slightly less meaningful).

According to my data there was only one other year in the SP500 where the yearly open was exactly equal to the yearly low since 1969.  There are pointed out in the chart below with the two red arrows.

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The Gold Price Initiates Breakout from 30 Year Cup and Handle Pattern !

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I am only going to do one post today and it is going to be on the GLD ETF because I want to emphasize how important a day it was today in the gold market.

Today we broke out north from the large symmetrical triangle with confirmed volume and confirmed sign of strength.  The triangle formation has been developing since February-March 2009 time frame.  This is quite a large triangle and has significant cause for an extended move.

But there is even better news.  This symmetrical triangle also makes up the right shoulder of the much larger head and shoulders bottom formation that has been in existence since March of 2008.

And there is even more better news.  The entire head and shoulders bottom formation of approximately 1.5 years in duration is in itself the handle of a super large cup and handle formation which is 30 years long.

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Today was an Absolutely Huge Day for Gold

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Today was a huge day for gold and the GLD ETF in my opinion!  Gold got a nice bid today and held firm.  I consider it to be a possibly pivotal day for the gold market for two reasons.

The first reason is that despite the broad market break down today, the gold price (as represented by the GLD ETF) held firm all day and managed to trade up by about .60%.  I hinted about this when it happened a few days ago and could be the early signs that foretell a scenario where the gold price becomes less “co dependent” on the broad market for its direction.

The second big reason I consider today to be a pivotal day for the gold price is because gold was able to trade up today despite the significant US dollar strength we saw throughout the day today.  So we had the broad market down big, the US Dollar UP big and the gold price holding firm and managing to get a nice upside close. 

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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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Four Words Today Gold Up Dollar Down

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The US Dollar got clobbered today and gold popped up like a basketball submerged under water.  So far the supposed US Dollar rally is not materializing.  The dollar is trying to rally but it cannot seem to get any real ease of movement to the upside.  It still could, but it had better start soon because it is once again flirting with the critical longer term support line.  The price action today in the dollar looked like a real sign of weakness to me.

Meanwhile the gold price is inching closer and closer to the completion of its symmetrical triangle formation and I am slowly gaining more and more confidence that we are going to see a real breakout from this market come beginning of September.

The dollar index just keeps failing to get a rally going and I am thinking if it keeps failing like this for the rest of August it might turn into a real severe drop in September.  If that scenario plays out then it would help the gold price to finally get an upside breakout above the 1000 range.

Incidentally, if I am correct that we do get a gold price breakout, it will be important that the breakout materializes in the form of wide price spread and blockbuster volume on the upside.  We will have to take a look at the GLD ETF to get confirmation.

I still think this gold price setup has the  potential to be one of the greatest upside setups I have ever seen in my life if I am correct on us getting an upside break.  

21.70 on the DGP ETF ( The gold double long ETF ) is for me the green light signal that the breakout has started to initiate.  The “safer” upside trigger on the DGP ETF is 23.75 or above.

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