Stock Market Commentary: Hello Bears!

A bad day for large caps saw the Dow slice through its 50-day and 200-day MA with the S&P losing the 50-day MA. Any improvement in the technicals for the S&P were quickly erased. Luckily, volume was not excessive so this may play as nothing more than a once off blip or it could suggest a level of complacency on the part of bulls who have managed to maintain this rally in the face of broad skepticism.


Ironically, the index which looked like it was going to take the Nasdaq and Nasdaq 100 down, the semiconductor index, had a quiet day. A narrow doji on the 50-day MA didn't change anything and the possibility of further gains are not off the table.


Small Caps also had it rough as the mid-June breakdown could only run alongside former support before it dropped through its 50-day MA:


The July holiday weekend means no trading for Friday so it will be a edgy weekend for bulls. One more day of downside over the next couple of days may end any hope bulls had of challenging May/June highs until probably the end of the year.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Black Gold Rally Done?

A weakening dollar will keep commodity bugs aflutter but what can it mean for commodity prices; gold and oil in particular? The chart below shows my June 22nd annotations for the EURUSD which are still in play. If the dollar was to weaken another 10% what impact will this have?


Looking at the historical relationship between oil and gold prices any spike into the upper 20s (ie when gold trades at 25-30 times the price of oil) has been a good opportunity to buy oil. This has shown itself well on the recent spike.


Prior to 2000, spike lows in the ratio in the 6-10 range have not been a good time to own either gold or oil.

But the questions the aforementioned chart asks are

[1] Is now the time to sell the oil given the relationship has dropped to the 1997 spike low at 13.50 when oil prices peaked?
[2] Will a further deterioration in the dollar potentially see this ratio fall back to sub-10s (although a weak dollar will boost both oil and gold prices, but would oil benefit more)?
[3] What of the elephant in the room from 2001-2008 when the ratio effectively traded in a tight range of 6.00-15.00 as both oil and gold made tremendous gains - oil in particular?

Whatever the short term implications of a weakening dollar the long term picture for oil may not be so hot. Yes, we live in a very weak economic environment but with considerable inflation pressures down the road. However, it is rare for any asset to emerge from a strong trending period to kick straight into another. Oil is likely to spend the next decade trading in a range probably between $30 and $80 a barrel.

As a finite commodity it has a built-in appreciation level so it has excellent potential for future price growth. It is an ideal asset to have in a retirement account (either as a related stock or ETF) where timing short term appreciation is not the goal.

As a trading instrument any drop into the $30s is a buy irrepsective of economic conditions. Anything pushing $80+ is a good reason to take some profits with a psychological break and hold of $100 probably enough to see it challenge 2008 highs.

Gold is a trickier beast. Given the relationship to oil has never cleared more than 28 times its value one could assume gold has the potential to trade up to $2,240/oz if oil traded at $80. However, weak periods for oil over the past 20 years have not been strong periods for gold. Gold Bugs will probable argue differently but it seems unlikely for gold to get past $1,000 this time around.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Stock Market Commentary: Indecision

The last few days have seen some tight trading with doji or small real bodied candlesticks dominating action across the indices.


One area which saw some bullish strength was the switch in relative strength from Large Caps to Small Caps; this left markets in their most bullish relative strength alignment (Small caps > Tech > Large Caps). This could be the basis for a budding rally but June highs need to be breached soon if momentum is to be maintained.


Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Jeff Goldblum on Colbert

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Jeff Goldblum Will Be Missed
www.colbertnation.com
Colbert Report Full Episodes Political Humor Jeff Goldblum

:)

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Transports Lagging

Bulls will have been following the gains in the Nasdaq and Nasdaq 100 with great pleasure, even the Dow managed a piece of the bullish action in recent days. However, Dow Theorists will be concerned by the lack of participation from the Transport Index. If ever there was a trading no-mans land the Transports are in it.


It would take a sustained gain for the Transports to generate a "Golden Cross" and it's hard to see this happening as broader indices struggle to challenge June highs. Bulls can take some comfort from a potential ascending triangle but should the index fall back from its 200-day MA and test its support there isn't much wiggle room should support break.

A 50% trim of the March-June rally could see this challenge 2,800s (or the early April reaction low).

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Stock Market Commentary: Tired Rally

The early collapse in the market had worrying tones but there was no follow through even if volume registered as distribution. The Dow has the greatest interest simply because it's in a support battle at the 50-day and 200-day MAs.


The other index to watch is the semiconductor index; the second indecisive doji after the 'shooting star' with the 20-day MA overhead is suggesting further gains are looking more and more unlikely. It's still holding the 50-day MA but I am liking a test of the 200-day MA before a run on June highs is attempted.


In defense of the markets I thought it was going to be a whole lot worse.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Markent Sentiment: Bull Cross or Bull Trap?

The recent rally has put a little bit of fire into breadth's belly. However, not all breadth indicators took the bait. The Nasdaq Bullish Percents is best placed with the bullish cross of the 5-day EMA as the Ultimate Oscillator worked a 'buy' signal from oversold conditions. Whether this evolves into a bull trap or a genuine 'buy' signal remains to be seen but it's a positive at least (and is still a good 5 points away from traditional bull market overbought levels).


I was surprised not to see a stronger technical response for the Percentage of Stocks above the 50-day MA. Given we are near the highs of June the indicator shows 30% fewer stocks trading above this key moving average than back at the start of May when it peaked. This is a bad omen and a potential low risk short using June highs as a stop.


Buyer beware...(again)

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Stock Market Commentary: Dow Pops Over 200-day MA

Old news for every other index which are well over their respective 200-day MAs but the Dow managed to fight back to close over its. It's very close to a "Golden Cross" of its own.


Other indices finished neutral with former support playing as resistance; the Russell 2000 been a prime example


It's hard to read too much into typical summer trading. May/June lows are the best line in the sand if you are a bull. No confirmed reason to sell but hard to be a buyer.


Enter to win the Trader's Business Plan prize of a free psych test and free access to the trading plan development program. Retail value $398

[1] Register at Zignals.
[2] Go to Charts and select a stock (you will be prompted to download Microsoft Silverlight)
[3] Click on the YourCall Icon


[4] Enter a Call by giving a stop and target price; make sure the Time Period is set to Short (month)
[5] Enter as many calls as you like up until the end of June; these can be long or short signals
[6] Send me your Zignals Userid so I can track the calls made (declan-at-zignals.com) or post it in the comments section of this post. In your email make reference to the competition.
[7] The Zignals member with the stock giving the highest return from either a target hit or expiration after 22 trading days will win the prize. Only stocks or FX prices listed on Zignals qualify for entry (no pink sheet stocks). The announcement of the prize winner will be made at the end of July.

Good luck!


Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Weekly Stock Charts review from Stockcharts.com Publishers

Will the markets break? Another week where early week weakness was reversed. What had the stockchart.com ers to say about it all?

Anthony Caldaro of the Elliott Wave lives on has labelled a '1' / '2' of a new 5-wave down. '2' for the S&P is just over 930. It's an alternate count to his original ABC correction (which is still labelled) but it's worth keeping track of.


Richard Lehman has gone with new short term upchannels - but sees the broader downtrend taking control over the next few days.

6/27 -- Laggards like financials (XLF) and China shares(FXI)have now finally broken into new upward blue mini channels, joining the others. The small caps have had the greater pop upward, but all the indexes are showing this pop to be narrow and somewhat steep, suggesting a brief life. I am still expecting that they will peak out with a few days at levels below the highs of June 11th, forming peaks that will determine the angle of the larger descending channels here.

6/25 -- The broader indexes all broke clearly upward through the purple downtrends today. With that, we are in new blue upward minis and I now see the bigger picture developing. In my view, the purple downchannels were really just minis, as I suggested early on. That means the purples formed the first leg down of a larger downchannel and the current upmove is leg #2 up. This new upleg is narrow and will not likely last more than another few days or so. I've drawn this larger downward scenario on the DJIA and Nasdaq hourly charts.

This scenario would work well with expected end of quarter window dressing and is supported by the substantial drop in VIX today. A continuation of the downtrend beginning near month end would be supported by the even larger premium now in VIX futures for July.

6/24 -- The bounces continued, at least up until the Fed announcement, at which time a 'sell on the news' party ensued. Some indexes reached the upper lines and some only got close, but the result was that everything held trend in the purple channels. VIX declined, even with the sell-off, so maybe that is a sign that a more lasting turn upward is close at hand.

Joe Reed has his weekly summary:


Didn't notice this comment of his tucked under Joe's own EWT count

6-18-09 Update: But don't get carried away with one chart. Here's a 2nd Elliot wave opinion.Another famous 'Elliot Waver', Neely, says the March-June rally is in the final leg of the correction and now ending. The Bear Market will resume sending the S&P DOWN FIFTY-PERCENT in the next 6 mos to well below 500, Yipes! We shall see, huh? In the meantime, just be careful out there.

Hurricane Season has begun.


Solid dollar chart here:


Significant bearish divergence in the Ultimate Oscillator of the SPY:


Yong Pan of Cobrasmarketview shows neutral short term conditions with bearish intermediate conditions.


Rally on fumes? Note lack of either distribution or accumulation days.


I like the idea for a complex head-and-shoulder pattern - this would translate into a boring summer and potentially torrid September on:


Gaps to fill:


Finally, Ted Burge of Tedlines.com has a point-n-figure chart showing a bearish target of 7,700:


Grim viewing all round but contrarians will see this as good news (the same good news which has kept this rally going since it started in March and ran into its first resistance level in April).

Enter to win the Trader's Business Plan prize of a free psych test and free access to the trading plan development program. Retail value $398

[1] Register at Zignals.
[2] Go to Charts and select a stock (you will be prompted to download Microsoft Silverlight)
[3] Click on the YourCall Icon


[4] Enter a Call by giving a stop and target price; make sure the Time Period is set to Short (month)
[5] Enter as many calls as you like up until the end of June; these can be long or short signals
[6] Send me your Zignals Userid so I can track the calls made (declan-at-zignals.com) or post it in the comments section of this post. In your email make reference to the competition.
[7] The Zignals member with the stock giving the highest return from either a target hit or expiration after 22 trading days will win the prize. Only stocks or FX prices listed on Zignals qualify for entry (no pink sheet stocks). The announcement of the prize winner will be made at the end of July.

Good luck!


Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

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Latest Trading Jobs

Another spread of jobs from entry level up:

Fixed Income Trader
Financial Engineer Trader
Entry Level Trader
International Institutional Sales Trader
Trader Desktop Support
Equity Trader
Commodity Trader
Institutional Equity Sales Trader: $100-150K

Good luck!

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

Read more!

Weekly Market Commentary: Contrary To Action In the Indices, Breadth Weakened Further

On a week-to-week basis there wasn't much going down for the indices. The Nasdaq was able to make a positive backtest of 1,759 support, finishing the week a couple points shy of its high.


The Russell 2000 lost weekly support of 517 (just); although the doji may be seen as bullish it must be countered by the neutral long term and overbought short term momentum.


The Percentage of Stocks above the 50-day MA for both the Nasdaq and S&P collapsed; fewer stocks holding the rally mean it won't last forever. Without broader participation the rally has the same chance of success as the 2006 divergence brought about in 2007.



It should be added the technicals for the Percentage of S&P stocks above the 50-day MA switched negative to 'sell'.

The longer divergences play between parent indices and supporting breadth the likelihood the next move down will be swift and hard. Based on some of my earlier analysis a big move down sounds too expected by the market - and therefore unlikely. But I don't know how a continued rally can hold in the face of growing breadth weakness?

May lows in the daily will probably be a significant line in the sand for bulls locking in profits from positions taken earlier during the year.

Last chance to enter to win the Trader's Business Plan prize of a free psych test and free access to the trading plan development program. Retail value $398

[1] Register at Zignals.
[2] Go to Charts and select a stock (you will be prompted to download Microsoft Silverlight)
[3] Click on the YourCall Icon


[4] Enter a Call by giving a stop and target price; make sure the Time Period is set to Short (month)
[5] Enter as many calls as you like up until the end of June; these can be long or short signals
[6] Send me your Zignals Userid so I can track the calls made (declan-at-zignals.com) or post it in the comments section of this post. In your email make reference to the competition.
[7] The Zignals member with the stock giving the highest return from either a target hit or expiration after 22 trading days will win the prize. Only stocks or FX prices listed on Zignals qualify for entry (no pink sheet stocks). The announcement of the prize winner will be made at the end of July.

Good luck!


Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

Read more!

Thank You TraderInterviews.com!

My latest Scratchback purchase is from TraderInterviews.com.


As part of the Scratchback purchase I allocate the $25 payment to a KIVA loan. Repayments from prior loans have also meant I have been able to make 10 new loans (including Tim's payment). This brings the total number of microloans to 117.

All of this was made possible by support from my former newsletter subscribers and Scratchback purchasees.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

Read more!