Market comments
S&P
On May 3rd I wrote:
>>Therefore the current move should be bigger and take the S&P below the 3/24 low.
Well, it did, and it looks that a bottom was found for the move from 4/5 high. The question is now is this just a correction for that move - meaning upside is quite limited in both price and time - or a bigger move up.
Key numbers are
1116 April low of the first move down from 4/5. If the IT trend is still down there should not be an overlap on that low.
1103.25 fib 38.2% correction to the last move down (from 27/4) that looks like a 5er, and also very close to the 13 dMA at 1101.7 . If the S&P fails to close above that level there is still a serious chance of the fast move down resuming. Big hint in that direction would be a close below the 45 degrees Gann line from the high, today at 1087.5 and down two pts/day.
So far it doesn't look that way and NDX / Naz support a bigger move up.
NDX
9 out of the last 12 sessions were small bodies / dojis. That was strong hint for a forthcoming IT trend change.
A morning star on 5/10 failed, but another formed on the 17th, and today it got the follow thru confirmation.
A TA who's very good with candlesticks told me that when the candlesticks patterns are against the It trend (bearish in an up trend and bullish in a down trend) they tend to lose reliability. But two morning stars in a row are too much even for a scarred bear like myself.
From the 5/4 high there is a set of slightly lower highs and slightly lower lows. A trade above that high (NDX 1438.5) would make another bullish confirmation. IMO trading that high will not happen in the immediate swing, and the immediate resistance is 1432-1436, but OTOH the immediate support is high enough at 1402-1409
For drama lovers there is the possibility of going to new low without trading over 1438.5 and that opens scope for a real crash move, but that's too far fetched to trade on. The only operative conclusion is that longs should have their stops in at new low for the NDX not to be caught in the (so far) unlikely event of a crash move down.
Russel 2000
I repeat the caution. The expanding top formation (higher highs followed by lower lows) has now broken to the downside, as expected. This kind of megaphone shape is a strong distribution pattern and once completed the trend (IT and probably LT) is down. Any rally should be sold, and if you're holding mid caps that have strong correlation to the R2k take caution.
World markets
Europe
Lots of morning stars in Europe , and even a tristar in the CAC, so the current rally should have legs. But European markets have mostly showed a 5er down from the top and therefore should not make a new high. My current conclusion is that we should see one day down tomorrow and a second leg up 3-4 days on lower momentum. But the IT trend is down, lower lows down the road, so the second leg up should be sold (early next week?).
SEA
Japan, Korea, Thailand, HK all showed ST capitulation down and reversal, but no volume spikes. We have seen ST bottom but IMO not an IT bottom, and like Europe, the next ST leg up should be sold. Was long the Nikkei the past three days. Closed last night for a nice profit and looking to short a nice upside tonight, but to buy a nice drop. Will update.
Since the fall in the Nikkei was from a new high the correction up should be deeper, and a short for more then one day should wait for higher prices.
ATG |
