sp500 Flirting with Broadening Wedge

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The sp500 is drifting slightly down to sideways and is again flirting with the boundary line of the large broadening wedge formation.  We did not close below the broadening wedge line today but came pretty close.

A close under 1323 this week will confirm a weekly bearish MACD histogram signal and I really do not know if that will happen this week.  But I will say that if we close down hard tomorrow that likelihood will start to become more probable.

This is a tough area of the market.  A big move up tomorrow would ‘save’ the market to a certain degree and keep it trending within this broadening wedge.

I think it good to keep open minded about the possibility that we are trading range bound now between 1340 and 1250.

If the current consolidation fails and starts to break down tomorrow it could be that we are going to make another move towards 1250.

The March 16, 2011 SPY volume was 470 million shares, a very high spike volume number showing heavy price action, participation and capitulation.

The rally since that swing low has drifted back up to the highs and seems to be struggling.  It would not be so uncommon for a retest of this high volume swing low on March 16, 2011, assuming we fail to push higher anymore on the current mini consolidation.

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How to Trade One Thousand Dollars into One Million Dollars

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The answer to this key question, “How to trade one thousand dollars into one million dollars” is very interesting to me and I have been thinking about this a lot lately.

Now you might be wondering why I am choosing the 1000 dollar level as the starting level for such a question.  The answer is simply because it is a nice even round number and it is reasonably ‘low’ and also somewhere close to what initial minimum deposits are at several popular brokerage houses.

What got me first interested in this question were those ads for Forex Trading where they offered starting accounts at only 250 to 300 dollars and then promised the ability of high leverage.  After seeing those adds, it occurred to me how great it would be if someone could start with 300 dollars in a forex account and then trade it into very large amounts.  It seems like an impossible feat, especially with the complications of leverage in forex.

But a starting brokerage account of 500 to 1000 dollars is quite common these days.  We see ETRADE showing commercials with a baby and a kitten trying to woo new trading customers.  It would seem that a TV ad showing a baby and a kitten is targeting a more general widespread audience.

So there are likely millions of trading accounts out there that are starting at these minimums.   But even if they are not starting out with a 500 or 1000 dollar minimum, most people can usually scrape 500 to 1000 dollars somehow.  A lot of people at all income levels still somehow manage to spend 1500 per year for an iphone or a $1000 60” HD TV.

So Why Not Set Aside $500 to $1000 into a Brokerage Account with the Intention of Trading it Into 1 Million Dollars ?

It seems like an enticing goal.

But is it possible?

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SLV ETF Continues to Power Higher along with Gold

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Both silver and gold continue to blast higher.  I think it is an important point to observe that gold and silver are pushing major new highs while the stock market seems to be drifting a bit.  For the first time in a long time I am maybe starting to wonder if we will see them decouple here.  In other words, see gold and silver start to feed off of paper equity market weakness.

I wrote about the SLV trading in an expanding wedge formation and a low volume retest situation near the 36 range.  This has since led to a huge upside move.  Initially I talked about how SLV could hit the 40 to 42 range.  It could be that there is room up to the 45 range now.  The SLV is currently trading very strong in the RSI power zone and I suspect will continue to do so for a bit longer.

The metals really are the real bull market and this fact is likely to remain true for many years.

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Tricky Analysis Currently in the sp500

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I have to say that currently the analysis of the future direction of the sp500 is quite ‘tricky’.  I am thinking that I can make equal arguments for the short term bull or bear case.

There are several reasons for this.  One reason is that currently the weekly MACD on the market is on a sell signal and I have been waiting for the market to provide a northward confirmation of the weekly MACD histogram buy signal.  We did not get any confirmation this week.

Instead, on the weekly chart of the sp500 we now have a potential bearish triple M on the weekly MACD histogram which is unconfirmed.  This means that the bearish weekly potential trend could be re confirmed on a weekly close below 1333 on the sp500.

There is also the issue of the overhanging supply from the 2/28/2011 top.  It is unknown at this time how much supply still has to be worked off of this level.  We are seeing the sp500 trade in dojis and then some selling today to work off of this supply, but it is a tough call to say that we are finished working it off, we may not be.  The NYSE summation index seems to be at a resistance zone and may start to stall here.

You remember that expanding broadening wedge formation in the sp500 ? 

As it turns out, we have currently climbed right back into that large broadening wedge formation…

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TSLA Tesla Motors Looks Great

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Today I sent out a notification email to BestOnlineTrades Letter Subscribers about TSLA.  This stock looks quite good to me right now, and may be timely on both the daily and weekly time frames.  I think TSLA could evolve into a great swing trade.

Before I even get into the brief technical discussion, it seems to me that a pure play electric car company has some huge advantages the next year or two.  Yes, the other auto markers are all working on electric vehicles as well, but TSLA is a pure player in this space.

If oil sky rockets to 200 dollars a barrel ( I believe it eventually will but may take 1 to 3 years) the demand benefits to TSLA could be huge and if they are able to ramp up production to a high enough level economies of scale would kick allowing them to offer more price competitive cars.   But this auto maker seems positioned as a niche player in the high end space.  And it seems to me that everyone would like to avoid filling up at the pump, no matter what ‘class’ they belong to.

Porsche has a market cap of 80+ billion and TSLA has a market cap in the 2.6 billion range.  Seems to me like there is a lot of potential upside for this niche electric auto company especially if the oil price gets out of control. 

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sp500 Does a Sound Rejection of under the 1332 Level Today

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Today my take on the market is that the sp500 did a quite sound rejection of below the 1332 level.  The bears had every opportunity today to seal the deal and get this baby of a market to CLOSE down town below 1332 AND at the same time confirm the recent cluster of doji candlesticks we have seen for the past several days.

Did they get the job done? In a word.. No.

The sp500 dipped its toes into the still icy cold early spring water and decided not to jump in today.  Instead we closed back above the 1332 range and now gives the market at least a chance of trending higher again either tomorrow or early next week.

Having said that, today’s reversal hammer would prove itself even more if the market can get a pop above it tomorrow to finish the week.  That would not only confirm the power of today’s rejection, but it would also give the market a shot at confirming the weekly bullish MACD histogram setup which is still as of today unconfirmed.  Confirmation would come with a close above 1337.85 on the sp500.

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Gold Does Exactly what it needed to do today

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The gold price did exactly what the doctor ordered today.  It consolidated in a small hammer doji type candlestick after yesterday’s monster gains.  This is a bullish sign and bodes well for future days weeks ahead. The GLD ETF could easily pull back to 140.72 tomorrow or Friday and the whole chart structure would still … Read more

VG Vonage Holdings Pulls Back to Support Today

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I am already underwater on Vonage Holdings by 2.56% today after today’s drop to support.  I would like to see VG hold 4.5 support for an eventual move higher.  Ideally there will be no close under 4.5 in the next several trading days.

In hindsight entry should have been at the lows of today rather than the price action of the last few days.

It is possible that VG is currently doing a similar Wyckoff low volume retest to the one that occurred in the SLV ETF several days ago.  The low volume Wyckoff retest in silver led to the recent huge upside move.  Certainly VG is not worthy of comparison to SLV in a literal sense, but price and volume on the most basic level is essentially the same whether we are talking about tech stocks or obscure commodities.

I do see that VG has an unconfirmed earnings date of May 2, 2011 which may complicate matters a bit.  Still for now I stay long VG and see if it can hold 4.5 support on a closing basis.

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