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Keep an eye on CPST Capstone Turbine

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CPST seems to have an nice larger structure and a weekly smooth trend that is somewhat reliable.  This low priced alternative energy stock has been trending up for the last 6 months in a steep up trend and has recently been consolidating in a falling wedge for the last 2 months.

It has a nice large resistance structure going back to 2005 and some nice large swing trading ranges.  CPST looks like it wants to make a challenge of the 2.5 level and possibly break through to the upside and trade into the green shaded area that would define a breakout in the chart below.

However the stock has had a reputation of collapsing after hitting this long down trend channel line since 2005.  So I think it better to assume it will fail up there, but then only give it a second chance if it shows constructive price action near the resistance channel line.

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Getting Cold Feet Already on the Short Thesis

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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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US Dollar Index to Decide on Bull or Bear Scenario

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The US Dollar Index is at an important juncture.  On the long term monthly candlestick chart the US Dollar Index has shown us that it has broken down through and out of a very large symmetrical triangle formation.  This was very bearish action and seems to imply much more longer term bearish action for the US Dollar index.

The problem is that sometimes symmetrical triangles on all time frames turn into failures and busted patterns.   A busted pattern symmetrical triangle exists when you first get a downside breakthrough out of a symmetrical triangle and then the price loses downside momentum, reverses, and then busts back up inside the structure of the symmetrical triangle and then busts back up topside in an upside breakout of the pattern.  Busted patterns can be very powerful signals on all time frames.

The location of the US Dollar Index right now on the monthly chart is not suggesting to me that we are about to be in a busted pattern, but the chart is showing that there could be some potential for a busted pattern to occur.

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sp500 Confirmed Weekly Sell Signal Today

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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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SLV ETF Looks like a Great Buy in this Range

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The SLV ETF looks to me like it is evolving into a great buy zone right now after the previous mini crash.  I indicated several times in the past that the 5/5/2011 climax low would be difficult to exceed given its blow out volume and also that the swing low of 33.58 would not be exceeded or only marginally exceeded.  Currently this appears to be exactly the case.

I think the SLV is a good buy in the current zone and I think it could move into a topside move that creates a trading range.

I would definitely be wrong if we break under 33 again significantly and close under there for several sessions.

It always amazes me how many are so quick to talk off the ‘silver crash’ and the end of silver and that the run is over after high volatility moves as we have seen.  The hysteria over new margin requirements and all the panic associated with that will eventually burn off.  This is not the end of the silver bull in my opinion.

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This is a Boring Stock Market

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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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Minor Follow Through on the Downside today in the sp500

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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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Sp500 could be Working itself Into a Major Top

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The price action in the market since the 4/21/2011 swing low has been quite laborious.  Yes we have been in an uptrend, this is true, however the nature of the uptrend concerns me relative to the 2/18/2011 swing high.

This market is currently struggling to exceed the 2/18/2011 previous 52 week high, in fact it looks like it is embarking on a process to roll over (down).  The observation which earlier today led me to initiate the BOT Short Signal was simply a quick look at daily, weekly and monthly MACD along with monthly MACD histogram.  In addition I made an observation of the tape action itself from the mid March 2011 swing low and observed the angle of incline combined with the time it took to do the incline.  This is definitely more art than science, but I have look at so many thousands of market charts over the years that one begins to get a good sense when the market is rolling over just by the pattern it is forming and not even looking at any indicators.

The fact remains right now that the daily MACD and the weekly MACD are in sell mode.  The monthly MACD is in buy mode, BUT there does exist a large potential bearish divergence on the monthly MACD histogram that has the potential to crack this market down LONG TERM.

One could also make the argument that the monthly price chart of the last few months resembles a little bit the monthly price chart topping action of mid to late 2007.

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