The SPX formed a piercing line candle closing up +9.17 at 1,304.28. The SPX bounced up from its horizontal support of Feb 24. Friday is the fifteenth day since the SPX peak on Feb 18. A MACD bullish divergence has formed on the SPX, INDU, COMPQ, NDX and RUT.
(click image to enlarge)
SPX piercing line, bounce above support +0.71%
INDU white candle, bounce above support, +0.50%
COMPQ piercing line, bounce above support, +0.54%
RUT white candle, bounce above support, +0.41%
Breadth strengthened on Friday as advancers led decliners 1.88 to 1 on the NYSE and 1.12 to 1 on the NASDAQ …
Breadth strengthened on Friday as advancers led decliners 1.88 to 1 on the NYSE and 1.12 to 1 on the NASDAQ …
Exchange NYSE NASDAQ
Advancers 1,946 1,390
Decliners 1,033 1,241
Index Chg. Close Direction Confirmation
VIX -1.80 20.08 Down Yes – SPX
SOX +4.18 427.91 Up Yes – COMPQ
Amongst the SOX only NSM, MU and AMD rose more than +2%. This was a weak technical bounce. Sometimes the semis have a one day delayed follow through. We will watch on Monday to see if the SOX gain strength. If the SOX fails to move up, it would increase the probability that Friday’s bounce could lead to a lower high and bear flag pattern in the broader indexes.
Leading stocks > +2% on Friday included VLO, SOHU, AKS, CIEN, ATI, ARUN, X, JEC, JNPR, FCX, GES, CLF, ATW, SLW, SINA, WLT, AMD, FWLT, CAM, URE, RVBD, NYX, SWN, F, NETL, TIF
Positives –SPX, VIX, TLT, breadth and sectors strengthened, Euro, AAPL, AMZN, BIDU, NFLX
Negatives – SOX bounce relatively weak, RUT weak bounce, GOOG
Interest rates were unchanged on Friday and bond ETF TLT was down 52 cents. The Euro rose 103 pips to 1.3899 at 5 pm ET bouncing above its Feb 1 resistance, now new support.
All nine sectors rose on Friday with Energy XLE +1.73% and Materials XLB +1.49% leading all sectors.
This week was the second anniversary of the bull market. The long and intermediate term trends are up. The three week trend is sideways and the three day trend is down. On Friday the broad indexes had a moderate, less that 1%, bounce at support. This is not uncommon when downward momentum from selling pressure begins to dissipate and buying pressure begins to take over.
Sectors are split with XLP, XLU and XLV near resistance, XLB and XLK below short-term support and XLE, XLF, XLI and XLY moving sideways above support.
Among NDX leaders PCLN is near its high, AAPL and BIDU are in the middle above support and AMZN, GOOG, NFLX and QCOM are near support.
The world was rocked last week by a destructive earthquake and tsunami in Japan
Over the past three weeks while the SPX has pulled back, interest rates have moved lower and financial stocks have moved down to sideways. This has been the common correlation over the past two years, when financial stocks are moving up the SPX breaks through resistance and moves higher and when financial stocks move down or sideways, the SPX does the same.
Another strong correlation, about 71% on a monthly basis, over the past two year has been between the Euro and the SPX, when the Euro rises, the SPX rises.
Knowing these two correlations leads us to look at interest rates, financial stocks and the Euro on Monday. If interest rates, financial stocks and the Euro break below support, look for the SPX to break support and head lower. If interest rates, financial stocks and the Euro move higher, look for the SPX to continue its support bounce off support and move towards resistance.
Technically speaking there were a large number of stocks that formed bullish candle patterns on Friday and a large number of stocks in bull flag patterns. As you see there could be plenty of support bounce opportunities on Monday if the market continues the bounce it started on Friday.
Movers and Setups
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Bullish Engulfing Candle Pattern – AMD, ARUN, ATI, CF, CIEN, CRM, DHR, ESI, FWLT, HLF, HUM, IL, JEC, JN[PR, MHS NETL, NYX, POT, RVBD, SLW, SMH, SWKS, SWN, TIF, UNP, URE, VLO, WLT, ZION, AAPL, AMZN, CERN, JOYG, SHLD, ROST, SIAL, FISV, WFMI, AMGN, ADP, CHKP PCAR, DTV, BRCM, ADSK, NIHD, XRAY, VRSN, MCHP, LLTC, MSFT, MXIM, CMCSA
(click image to enlarge)
Piercing Line Candle Patterns – ACN, AGU, ATW, BAC, CAM, CAT, CLF , DE
Morning Star Candle Pattern – GES, FCX, AKS, X
(click image to enlarge)
Bull Flag Price Pattern – ARUN, ESI, HLF, HUM IL, NYX, RVBD, SLW, TIF, URE, VLO, HAS, ICE, SWK, UCO, WDC, PCLN, ADBE, BIIB, WYNN, CERN, CTXS, ROST, ADP, VRTX, DTV, GILD, ALTR, XRAY, SBUX, GRMN, PAYX, EBAY, VOD, QGEN
SPX
Resistance: 1,300, 1,311, 1,321,
Support: 1,281, 1,271, 1,256
The short term 3 day trend is down.
The six-month trend is up.
The twelve-month trend is up.
The six-month trend is up.
The twelve-month trend is up.
Trade with the trend of the chart you are trading.
Bullish entry signal is a bounce off support and a break above the high of the low day or a break out of horizontal resistance.
Bearish entry signal is a break of short term support or a bounce down from the 30 DMA or other resistance.
AAPL +5.32 – bullish engulfing closes above 30 DMA
AMZN +1.93 – bullish engulfing at horizontal support, -14.3% correction from Feb 14
NFLX +4.52 – white candle support bounce day two, -23.6% correction from Feb 14
QCOM -0.43 – spinning top at gap support, -10.7% correction from Mar 1
GOOG -3.59 –spinning top, -9.1% correction from Feb 18
BIDU +4.09 – large white candle
NDX 100 stocks stronger than the NDX include VRTX, BIDU, AMGN, MU, JOYG, CELG, PCAR, NFLX, NIHD, YHOO, DLTR, BRCM, CTXS, FLEX and FISV.
Stocks weaker than the NDX include SBUX, WCRX, NTAP, COST, MRVL, QCOM, INTU, PAYX, ADBE , CA
Stocks to Watch on Monday
Holding Above 30 DMA
DLR, HUM, NTES,SWK , IL
DLR, HUM, NTES,
Moving Above 30 DMA = 7
ATW, BAC, CAM , JNPR, SOHU, URE, VLO
Moving Below 30 DMA = 1
MCP
Staying Below 30 DMA
AMD, CAT, CHL, DECK, DOW, NDAQ, UNP, V, VECO, CLF, FAS, GLW, JDSU, NETL, PCX, TBT, ACN, AGU, CRUS, CSTR, NYX, SWKS, WLT, CIEN, DE, GES, IPI, MHS, MOS, POT, SLB, SMH, ATI, CF, AKS, SWN, CRM, LDK, SNDK, STI, TSL, FWLT, GS, JEC, LVS, NVDA, UAL, X, ZION, VMW, UNG, F, FCX
Intermediate Term Market Trend: Up
Short Term Market Trend: Neutral
Short Term Market Trend: Neutral
12 comments:
Events like this give us perspective about what is really important. Our Joy in Life comes from our loved ones. How quickly our focus and intensity shifts with a possibility of danger. I hope all remains well for your family and our hearts go out to all those others that are suffering.
The market strength in the wake of this disaster is quite a compelling case for the bull market to keep going. Of course, I will trade the charts.
Don
Dave (or other readers with thoughts on this), there is a bullish divergence forming on the SPX MACD. At what point to you actually use this as a confirmation of a reversal? 2 line MACD crossover? Candlestick confirmation? Both?
Thanks in advance
Mike F,
You DON'T, use it as a confirmation...the MACD divergence is NOT a confirmation of a reversal...it is an indication of a potential reversal or a setup. There is a huge difference between a confirmation and a setup.
You apparently don't have trading rules for a divergence and so my suggestion is DON'T trade a divergence UNTIL you have trading rules for it.
A clue in writing rules is once you have a setup of any type, you then should have an entry signal.
So if you were going to write a rule for a MACD divergence setup, what would your entry signal be?
Suggestion: don't even think in terms of the 2-line MACD for an entry signal, its a different indicator and too lagging to be of much use with a divergence.
Hope this helps.
Dave
Dave, I'm glad to hear your family is safe. Thank you for your never ending help and teachings on the market.
Gary
Colorado Springs
Thanks Dave, this does help. You are correct, I currently don't have specific trading rules for a MACD divergence however am developing them. I would expect then that an entry would be a break of the high of the low day (or above the high of a doji that may form near the lows) with a stop below the low of the low day, just like we do on a bull flag entry.
So it seems to me that my rules should include to look for the divergence, then once one is developing - use appropriate entry rules with a corresponding stop and associated risk management.
Would you agree with this as a start?
Thanks for your help
Mike
Dave,
I agree with Don, loved ones are our greatest joy. Our prayers are with your family and those affected by the earthquake. Val
Dave,
Our family is thinking of your family and hopeful as the week commences, that things will calm down and suffering will be less. Very thankful your family is well and protected thus far.
Best wishes always,
Bill, Beth and Annie Evans
Thank goodness your family is OK. I'm sure the worry is not over yet though....thoughts & parayers go out to everyone in Japan. I just cannot imagine the damage done.
Dave - I pray your family is far away from that nuclear facility!!!
Ron Couturier
Mike F,
Yes, good job!
Dave
Everyone,
Thank you for your kind thoughts, comments and your prayers.
Dave
thank you for letting us know your family is safe. I continue to pray for them and all in Japan.
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