SPX Grinds Sideways as Financials, SOX, TRAN Pull Back...

On Monday the SPX closed at 1,241.59 after trading as high 1,246, up +1.13 or +0.09%.  The COMPQ moved up +2.81, the INDU rose +47.98.  The RUT formed a spinning top candle closing down -0.44.  The INDU closed above its November horizontal resistance confirming that the primary up trend (bull market) is continuing.  All four broad indexes as well as the TRAN and SOX are above their November resistance level.

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Breadth weakened on Tuesday as decliners led advancers 1.26 to 1 on the NYSE and strengthened as advancers led decliners 1.02 to 1 on the NASDAQ…

Exchange       NYSE          NASDAQ

Advancers      1,343              1,344

Decliners        1,700              1,305

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Index Direction      Confirmation

VIX       Up                No – SPX

SOX     Down          No – COMPQ

Leading stocks on Tuesday included HANS, WHR, TBT, FAZ, NTRI, X, WLT, ACN, HSY, BA, LDK, MHS, SWK, HAS, CMG, DE, HLF, PNC, AMX, CAT

Losing stocks included VECO, CRM, CSTR, RVBD, CREE, FFIV, LVS, SINA, LXK, UNG, CAKE, UAL, SOHU, NFLX, PCLN, DLR, CRUS, SWN, BYI, FAS, AKAM, VMW, AMD, CF, MA, SKX, RMBS, URE, AGU, PCP, MOS, AKS, TLT, CAM, SLB, SPG, GS, INFA, ESI, ICE, ATI, BAC, ATW, FDX, ARUN, NDAQ, SNDK, NETL, AIV, STI, GME, DECK, USD, NYX, UNP, GMCR, ZION, POT, FCX, TSL, GR, TIE, CHL

Typically triple witching expiration weeks show some strength and are not excessively weak.  However a mixture of positive and negative short term technical indications on Tuesday, suggest the potential for a short term pull back.  Many stocks have already broken below the low of the high day and are forming bull flags or other pull back patterns.  The intermediate trend is still up, just be prepared for a potential short term pull back.

The positives:

a new high close on the SPX and INDU,

the INDU breaking November horizontal resistance,

the move up in the VIX was very small,

interest rates rose,

bonds fell. 

The negatives:

a bearish harami on the COMPQ and RUT,

the SOX, TRAN and financial stocks have already broken below the low of the high day in a flag pattern,

leading NASDAQ stocks rolling over,

the VIX did not confirm the SPX,

the SOX did not confirm the COMPQ,

the Euro pulled back.

Be on Yellow Alert for a short term pull back.  Short term traders follow your rules, move your stops accordingly and be prepared to exit bullish short term trades on confirmation of your exit signals.  Follow your rules for short term bearish entries.

Interest rates moved higher on Tuesday and bonds moved lower.  Financial stocks XLF did not follow higher but rather formed numerous bull flags on the charts of XLF, FAS, WFC, BAC, GS, STI, PNC, NYX, ZION and others.

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The SOX moved below Monday’s bearish engulfing candle and dropping another -0.61% closing at 410.67 on Tuesday.  The SOX is still a leading group at this time and is forming a bull flag pattern.  The VIX closed up +0.06 at 17.61.

Five of nine sectors moved higher on Tuesday with Healthcare XLV +1.01% and Consumer Staples XLP +0.48% leading all sectors.   These are considered defensive sectors and can signal the start of a short term pull back.

The SPX stayed above its horizontal resistance while forming a doji which did not confirm Monday’s shooting star pattern. This doji indicates a lack of buying pressure and also suggests the potential for a short term pull back.

Both the RUT and SOX moved lower after reaching their measuring distance target on Friday from their November low.  The TRAN pulled back after reaching its 1.618 extension price target. 

XLE formed a bearish engulfing pattern.

XLB formed a doji.

XLI made new high close but formed a potential bearish harami.

XLY formed a spinning top after Monday’s bearish engulfing candle.

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Moves on Tuesday

Continuation – A, DOW, CAT, NUE

Horizontal Resistance Breakout – WLT, WHR, CAT, X, TBT, ACN

Bull Flag Bounce –

MACD Divergence Bounce –

Break of Support – NFLX, LXK

Setup Charts to Watch

Bull Flag Setups – CREE, FFIV, SINA, BYI, VMW, AKS, SNDK, NETL, GME, USD, UNP, UNG, CAKE, AMD, CRUS, DHR, RIMM

Horizontal Breakout – STLD, HSY, ATW, GR

MACD Divergence – LDK, TSL, JASO

Bear Flag Setups – GOOG, SKX

Horizontal Support Breakout – CMG

Continue to trade with the trend of the chart you are trading .

SPX

Resistance: 1,241, 1,256

Support: 1,220, 1,209, 1,200

Enter bullish trades with a bounce off support and a break above the high of the low day or a break out of horizontal resistance.  Thursday was an entry signal for many stocks.

Enter bearish trades on a break of short term support or a bounce down from the 30 DMA.

The short term 3 day trend is up.
The two-month trend is up.
The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch.  Trade with the trend of the chart and follow your rules.

AAPL -1.38 – black spinning top  breaks the low of the high day at resistance

AMZN -0.31 – spinning top at support

NFLX -5.35 – black candle breaks support

QCOM +0.06 – spinning top at resistance

GOOG +0.29 – spinning top does not confirm shooting star at resistance

BIDU -1.69 – black candle at support in symmetrical triangle

NDX 100 stocks stronger than the NDX include AMGN, MYL, MICC, CMCSA, WCRX, CTAS, NIHD, GRMN, BBBY, LIFE, ISRG, QGEN, CELG, HOLX and BMC.

Stocks weaker than the NDX: CTRP, FFIV, NTAP, NFLX, PCLN, AKAM, EXPE, APOL, STX, FWLT, LOGI, BRCM, BIDU, FLIR and TEVA.

Stocks to Watch on Wednesday
Holding Above 30 DMA
HLF, SINA, CAKE, CAM, UNP, WLT, ATW, SLB, NDAQ, USD, DECK, GR, RVBD, WFMI, BYI, MHS, NETL, FFIV, CAT, X, CREE, GES, HAS, CLF, CRM, INFA, VMW, SNDK, CRUS, AIV, ATI, PCP, SKX, FCX, FDX, AKS, A, AMD, DHR, DOW, FLS, GME, ICE, MA, PNC, TBT, UCO, DE, FAS, JEC, STI, SWK, WHR, ZION, ACN, BAC, GS, NYX, V, ESI, IPI
Moving Above 30 DMA = 2

NTRI, HSY
Moving Below 30 DMA = 5

CSTR, NFLX, PCLN, UNG, VECO

Staying Below 30 DMA
ARUN, CF, CMG, RMBS, SOHU, AKAM, GMCR, MCD, SPG, HANS, SWN, URE, AGU, AMX, LVS, POT, TIE, UAL, FAZ, TLT, MOS, NTES, LDK, CHL, TSL, BA, LXK, DLR

Intermediate Term Market Trend: Up – 2 months
Short Term Market Trend: Up