What’s Missing For A Top On U.S. Stock Market?

Several weeks ago I discussed with you that there was a big chance that the U.S. stock market had finally topped out.

Well, the decline from the July’s top was initially looking as a five (meaning an impulse move), but eventually remained correcitve. And as no surprise S&P500 rallied strongly last week.

The Ending Diagonal pattern from Oct 2013 low i still theoretically possible but is no longer prefered. But even without this Terminal pattern, the price pattern remains toppish here. The sentiment had also reached (and is still at) extreme levels. But there is still no top in the market. What’s missing?

Well, two things are missing, in my opinion.

First, the Advance-Decline line is still rising which indicates the majority of stocks continue to participate in the rally. Usually the A-D line tops several months before the market tops, and obviously this is not the case now. The last top in A-D line was also in late June which is just a bit before the July top in S&P500. That’s not enough to signal a major top. So, I am pretty confident now that the market is still far from its top, at least a couple of months.

And the next thing that is missing is the breakdown of the chart of S&P500. Yes, it broke down a month ago below the 1955 level and that brought a fast decline twd 1900. But on the daily and weekly charts, the trend is still higher and is still strong. We need to see a break below 1900 level at least (this month’s low). And preferably this breakdown should occur after the market consolidates above that level for several weeks. Right now, there is no topping phase on the daily chart, not to menstion the weekly chart which remains in massive stage two bull market.

Bottomline, it is not over until it’s over. So, the trend remains higher. I am cautious, but right now I still prefer to look for stocks that have bullish patterns rather than for stocks that are likely to break down.

Trade with the Trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

The Price Pattern in APPL

Back in August 2013 when Apple stock (AAPL) was trading near $70, I wrote an article that discussed the current trend in the stock and its recent breakout out of the basing formation below $65. You can view this article, if you want to, again here:

http://www.trendrecognition.com/education/articles/220-apple-has-traded-in-opposite-direction-vs-sap500

Just pay attention, that the stock is now trading at a split adjusted level.

Now, what can we say at this moment? As I see it the basing pattern that I discussed with you almost an year ago, has played out well. Here’s the updated chart of APPL:

As you can see, the stock has moved nicely. Even the negative earnings news caused only temporary setbacks. The most recent breakout was in late April of this year when the stock gapped up after a positive earnings news and thus made a breakaway gap on its daily chart.

Now, the trend remains positive and thus one can favor the upside. However, right now it is more difficult to find a low risk entry point in the stock unless you are a very short-term swing trader. Based on your way of making investment decisions, you may decide to invest or not. But from a money management perspective, it is always better to get involved in stocks after they breakout, not after they are extended.

What do you think of this analysis and what’s your opinion of the AAPL’s chart? Please, post your opinion below. I’ll be glad to see what you think.

Trade with the Trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

It Is Still A Bull Market

Last month I discussed with you my concerns that the U.S. stock market was topping out. I was looking for a potential Ending Diagonal pattern in S&P500 from Oct 2013 low. And the underpeformance of Nasdaq and the small-cap stocks were another warning signs.

But you know, the uptrend ends when it ends, i.e. when the prices roll over and decline below the 100-day or 150-day moving averages. And these moving averages should be declining or trading flat at least. So far we have not seen that. Both S&P500 and Nasdaq 100 have remained abv their long-term moving averages and these movig averages are trading up. And now the indexes are making new highs for the year (it is an all-time high for S&P500).

So, what’s the most likely scenario from here?

Well, first I’d like to say that the Ending Diagonal pattern in S&P500 from the Oct 2013 low is still possible. It will take a move abv 1960/70 to negate this potential very bearish pattern. So, one should remain careful. On the other hand, it is the current trend that is the most important and it is up. So, one cannot justify the short side here under the approach that I follow on the stock market. And that means we should trade with the flow (i.e be bullish). But again, there are still many signs (in addition to the Ending Diagonal pattern in S&P500, I can add the underperformance of the small-cap stocks which continues and the downtrend in some of the big momentum stocks from earlier this year) to be cautious here. Bottom line, it is a bull market, but we cannot blindly stay bullish.

As for the downside, only a move below 1860/50 chart support will indicate that bears have finally taken control here. And I personally will not attempt any shorts as long as the market stays abv this support area.

Trade with the trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

Has U.S. Stock Market Finally Topped Out?

Last week I discussed with you the critical situation in U.S. stock market. I showed you several signs of weakness that were suggesting the top was not in, but that one was fast approaching. And while both Nasdaq 100 and S&P500 remain well abv the rising 100-day and 200-day moving averages and the Short-Term trend on daily chart is still up for both indexes, we now have further evidence that important tops are likely in place.

Last week S&P500 advanced to new yearly high and new high for the bull market from early 2009 low. But then on Friday it reversed lower and today continued lower for most of the session. That is bearish. At the same time, Nasdaq has remained well below its March top. When Nasdaq 100 is lagging, that does not speak well for the broader market as well. Remember the situation in year 2000!!

And many sectors like biotechs and internet stocks (and social media stocks in particular) that have been leading market higher are now in strong downtrends. That’s another strong sign that either Short-Term tops in S&P500 and Nasdaq 100 are already in place, or we will only see marginal new highs later this month only to be followed by trend reversal to the downside. So, I am now turning bearish here against 1910 in S&P500.

The only bullish factor is that the trends on daily and the weekly chart of $SPX and $NDX are still higher and the fact that the Advance-Decline line is still advancing. But everything looks bearish to me….

To confirm the bearish outlook that I am suspecting now, we need a move below the early Februarly lows. That is, we need a close below the 1730 level in S&P500 index.

Trade with the trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

 

Is S&P500 Topping Out?

The U.S. stock market experienced rather big swings last week. Initially S&P500 dipped to 1815 and then rallied strongly back to the 1850 level making marginal new all-time high. But then it pulled back again. So far the VIX index does not reflect this increased volatility, but it appears the volatility is indeed picking up. And as George Soros used to say, volatility is usually increasing near the turning points, so we have to be careful.

Today, I am going to make available to you my latest Short-Term update on S&P500.

Here’s my chart from this weekend (this is the daily chart of S&P500):

As you can see from my chart, the uptrend is still intact but it is losing momentum. Notice the big multiple divergence between the prices and the daily MACD oscillator. Of course, that does not mean the market will reverse lower, but it is a warning sign. And here’s what I wrote in my update to my subscribers:

The market declined below 1823 last Monday but then quickly returned above that level and rallied to 1850 level again. But again the 1850 level turned out to be a formidable resistance and the market pulled back. Now, if our wave count is correct, we will see one more rally attempt that will likely fail just abv the 1854 Fibonacci pivot level. So, based on our analysis, we have to conclude that we are very close to an important turning point. And if we add the excessive bullishness that is present on the market, we should really be cautious here.
On the downside, below 1815 will likely indicate that a Short-Term top is already in…

So, unitl we see a breakdown below 1815, we have to respect the current strong uptrend. But at the same time we have to understand that the upside is probably highly limited for now. The sentiment is also extremely bullish which is another factor that suggests caution. It is stupid to call a top in such strong uptrend, but I simply feel that we are close to an important one.

Trade with the Trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

Will There Be An Year-end Rally In Stocks?

Usually there is an year-end rally for the stock market. But of course, not every year we have such a rally. And when we don’t see such a rally usually that spells trouble for the stock market in the beginning of next year. So, apparently, if this observation of mine is true, it is important if we will see an year-end rally this year or not.

Well, it is too early as there is lots of time by the end of the year. Sometime the year-end rally starts in the middle of December, other times – in very late December. But let’s see how the conditions have set up now and what will determine if we will see an year-end rally or not.

As always, the most important thing is the price pattern and the trending conditions. The U.S. market topped out in early December and has been in a corrective mode since then. Now, the hourly picture in Nasdaq 100 and S&P500 has become quite clear. Both indexes have found support near important chart and Fibonacci pivot levels: Nasdaq 100 at 3450 and S&P500 – at 1773 level. My take here is that as long as the market holds above these levels, the bulls are in control and inevitably the market will rally through the end of the year. However, if the market breaks firmly (and sustainably – not just for a couple of hours)  below these levels, then the odds will shift in favor of the idea that important Short-Term tops have already been made. In this case, we may not see an year-end rally and the market will likely undergo a much deeper pullback – toward the October 2013 lows.

Right now I don’t know which scenario will play out, but I will monitor closely the key levels mentioned above and will act accordingly.

This is my last post for this year. From Sunday, Dec 22nd, I will take a 2 and half week long vacation. I am travelling to Florida with my wife and my kids for the holidays. We have planned amazing time there as Florida is probably the best plays to have fun in the world. I wish you a pleasant and relaxing holiday and a very profitable and fulfilling new year!

And with this, I’d like to thank you for being a reader of my work this year. I am blessed to have lots of people like you that I can reach with my work. Thanks again!

Trade with the Trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

Remember: Market Tops Aren’t Formed On Bad News!

I have repeated this for years, but I’ll say it again: the market tops are formed on excessive optimism which usually comes with plenty of good news. The tops are not formed on bad news. That’s why I was so confident a couple of weeks ago when the government shutdown news came that was not the top.
Last week we saw a dramatic decline only to see a nice comeback on Thursday and Friday as the lower prices were welcomed by the byers (what else can you expect when in an uptrend!?).
Now, we saw another gap down today on continued fear from Washington that the U.S. government may default. But the market is now quickly filling up this gap and I will not be surpriced if we finish on the green today. Once again the gap lower is being bought!

That price aciton makes me confident that a Long-Term top is not in place yet. The technical picture however deteriorated a bit with last week’s decline and now it becomes really difficult to count the current uptrend from the October 2010 low or from Nov 2012 low as an impulsive wave. But as long as in an uptrend, we should respect it. I have learnt (in a tough way) that fighting the trend will not cause you any good. The market (“the tape” in Livermore’s words) is always right.

And finally on today’s e-mail: a few words about gold. I have been bearish for a long time and the market has justified my view. The recent decline however is quite choppy and that makes it difficult to trade. And this choppy action may cause you to think the decline is approaching its end. But I don’t think so. The fact that move lower is corrective, is actually bad for gold. When it bottoms it will likely be with a panic fast move lower. We have not seen such a move yet!

Trade with the Trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

Another Gap Down On U.S. Government Shutdown News

Last week the market gapped down on the news of U.S. government shut down but then recovered quickly. Today we saw another gap down on more scary news from the U.S. Congress. But the price action remains the same as the one from a week ago: the opening weakness is followed by buying pressure at least at the moment I am writing this e-mail to you.

These gaps down confirm my belief that I have followed for so long: that scary news cannot reverse an uptrend. A negative (scary) news can bring some fear and some weakness but eventually is used as a buying opportunity. And that will continue to be the case as long as the primary trend is up for the U.S. equities.

On another topic, I’d like to share with you that the FX Trader Magazine has just published my article “How to use moving averages to define the market trend and its strength”. As a long-term reader of my work, you are probably familiar with my views on this topic. But still, if you decide, you can read this article as it explains my approach in a greater detail. You can find the article in the October-December issue of the FX Trader Magaizine. Go to the link below and register (I believe the registration is free) and you can read my article:

http://www.fxtradermagazine.com/

Trade with the Trend!

Alexander
http://www.Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

Is Gold In Bear Or Bull Market ? (gold update)

Hello everyone,

Since I have not talked about gold for sometime, I’ve decided to write an article about its Medium-Term and Short-Term prospects. You can find on the link below: it discusses the trending conditions and what are the key levels that we should pay attention to.

http://www.trendrecognition.com/education/articles/222-is-gold-in-bear-or-bull-market-gold-update

I am travelling at the end of this week and early next week for a short vacation at the beach. So, I will catch up with you in a couple of weeks. I hope you enjoy the last days of the summer.

Trade with the Trend!

Alexander
Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.

 

Is The Uptrend In S&P500 Ready To Resume?

How is your summer? I am fully enjoying it as we have wonderful weather here in Bulgaria. It is so tempting to go out either on the mountain or on the beach. And tomorrow I am going to hike one of the mountain peaks (actually the highest mount on the Balkans) close to Sofia.

Today, I’ve decided to make today’s daily analysis of S&P500 available for all visitors of my web site. It is now posted free on my home page.

And for your convinience, I am sending you this analysis here. It seems the hourly picture is quite clear now as the pullback from the last week’s top is complete or nearly sol. Enjoy:

Chart:

http://www.trendrecognition.com/images/stories/2013/indexes2013/sp500_vst_20130813.gif

S&P500: 1689.47

Very Short-Term Trend: weak uptrend

Outlook:

Yesterday I favored a long position at 1680 against the key support at 1670. Well, the market declined to 1683 only and rallied a bit from there. And now it seems to me the corrective pullback from the last week’s top is complete. To confirm, we need a move abv 1700 level. My upside target remains far above the current prices – at 1773 level. So, the upside potential is quite large if my analysis is correct.
On the downside, the key level remains at 1670 and only a move below will turn the hourly chart bearish.

Strategy: Longs favored at today’s open against 1670.

Will talk to you again soon.
Until then:

Trade with the Trend and Enjoy Your Summer!

Alexander
Trendrecognition.com

Disclaimer: The services provided by Trend Recognition Ltd are intended for informational and educational purposes only. At no time will Trend Recognition make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. The service is not a recommendation to buy or sell securities or an offer to buy or sell securities. The publishers of Trend Recognition website are not brokers or registered investment advisors and are not acting in any way to influence the purchase or sale of any security and/or its derivatives. You should not rely solely on the information provided on this site in trading.