SP500

Today’s action in the stock market was really pathetic for those looking for more downside price action.  Actually it was somewhat neutral.  The last two candlestick bars including today simply formed an expanding triangle.

The volume on the SPY ETF was weak as well.  We really need to break below 1311 during the next two trading days to get the bear scenario cooking.  Otherwise I might have to switch back to a long signal by the end of this week.

This decline is still quite cumbersome and orderly.  Where is the beef?  There really is not much at this point.

There is also still a pattern of higher highs and higher lows since the mid March 2011 swing low, but if we do not break down by the end of this week then this ‘higher lows’ situation is still at least some type of potential platform for the market to be considered in an uptrend.

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The sp500 is confirming a weekly MACD histogram sell signal today and today’s action puts the market in my opinion now in ‘bear mode’ for the near term and intermediate term future.

We correctly turned to a BOT Short Signal on the market on May 11, 2011 at 1338 and since then the market has complied with the signal.

I expect 1250 to be tested on the sp500 eventually.  How long that would take is a guess at this point but generally speaking downside price action tends to be faster than upside price action.

I am a bit confused at this point on whether the June 13, 2011 turning point has occurred a few weeks ago or whether the sp500 is moving into a panic low on June 13, 2011.  It is still too difficult to make a decision on that point.  It does seem as though the turn has already occurred and the current negative price action is a sign that the cycle turn is occurring NOW and that this could be an important phase shift for the market.  But I will keep an open mind and see how the waters look as the weeks progress.

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The action in the stock market indices as of late has been out right boring in my opinion.  Where is the volatility? It is almost non existent.  This market is lately reminding me of the 1995 to 2000 time frame.  Slow trending markets, low volatility for the most part with occasional brief corrections, and sometimes more notable corrections.  It is utterly boring!  I want to see volatility like we had in 2008, at the low in 2009 and the mini flash crash of May 2010.  But I do not think my wish will be granted any time soon.  I think it is fair to say that for the most part markets spend most of their time oscillating slowly in trading ranges or slow trends.  Very high volatility is indeed a rare bird.

We are getting into the summer time frame where the market moves into a low volume typical trendless fashion anyway.  But we are only in late May now.

The market has declined since I issued a BOT short signal on May 11, 2011 at 1338 and we are currently trading slightly above that right now.  But this has hardly been a severe decline of any magnitude.  I will keep the BOT short signal active for a while longer depending on how the market behaves the next few weeks going into the June 13, 2011 Marty Armstrong Cycle Turning Point.

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Today was a somewhat muted reaction to yesterday’s negative price action in the sp500.  The volume was light and I got no real sense that the market is ready to show a heavy bout of weakness.

But I have been in this environment before and it is typically characteristic of the market to be very subtle and quiet before any major significant trend change is about to take place.  I could be wrong about us starting to form a top now and the market may revert back to my original theory of the sp500 moving to 1470 before any more sustained downside reaction is to occur.

The market should provide an more definitive answer about whether it is at a top level or wants to progress to 1470 within the next 20 to 25 trading days, or somewhat earlier.

The answer should come in the form of either an upside breakout from the rising wedge formation we are currently in, or a downside break down.  The parameters seem to be quite clearly defined.

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The sp500 today broke down through key support and volume was robust again.  A day like today is not supposed to happen if the market is still bullish.  Indeed today could be an important warning sign that this market wants to transfer into a more complex correction.  The up trend at this point may be on pause.

At this point I am still going to refer to the red dotted channel line as the key level that either holds or not for me to switch to outright bearish again.  This is a key channel.

Interestingly, the test of the bottom portion of the channel may coincide with some type of decision on the debt limit increase of the United States.

I do see that the daily MACD is in bearish mode and also the WEEKLY MACD is re confirming a bearish mode and trend.  The bearish weekly MACD is not something to be taken lightly now because if it continues it can eventually start to affect the monthly MACD and really start to roll this market over into a new down trend.

But it is still early and again, I want to see a break of the red dotted channel before I throw my hands up in the air and call this a new mini bear.

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So far at least the sp500 is doing a typical Wyckoff retest of the previous high and on the SPY the volume was robust but not unusually high.  But still it was at 182 million shares today versus the 2/18/2011 high which was on 130 million shares.  This is normally not a good sign for any retest.  The market should not be pushing with higher volume on a retest of a previous high.

Whether or not this leads to a big drop below today’s low this week remains to be seen, but for not it is a potential warning sign.  Until that time, I am viewing today as a simply Wyckoff Retest of the break out area.

The sp500 is still trading within this red dotted channel area and also is holding support above the solid green horizontal line.  That is about as simply as it needs to be at this point.  No need for over analysis paralysis.

The NYSE summation index is starting to curl over slightly and is in a sloppy drifting mode.  It is not exactly speaking with conviction but it is still on a buy signal based on the 5 and 10 day exponential moving averages.

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The bears seem to have little or no power based on today’s price action in the sp500.  The downside volume in the SPY was horrible (meaning very light) and tells me this market is weak to the downside.  And that means of course that the right side must be the upside.  And so it shall be.

The current decline is probably now the ‘handle’ of a cup and handle formation, which means we are likely to bust north either by end of April or early May 2011.  The saying “Sell in May in Go Away” does not look like it will work this year.  Instead it will be more like “Sell in April (a very little amount) and then Come Back in May for more Drunken Hyper inflated Upside courtesy of the Fed”

The sp500 today rejected the bearish channel I was talking about in the last few postings.  We have a hammer reversal and it is likely to be confirmed to the upside tomorrow or early next week.

You can also see in the chart above the apparent development of an inverse head and shoulders pattern that has the right portion looking like a cup and handle formation.

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