If I Had a Hammer, I'd Hammer in the Morning...SPX Forms Hammer...

The SPX formed a hammer as it bounced up from its 61.8% Fib level from its April 18 low and closed -0.49 at 1,328.98.  The VIX fell to 17.55 a seeming confirmation of the support bounce.

Each of the broad indexes today formed a bullish candle of some type inside of a short term price channel.  Some traders would call these complex consolidations flags, others would not.  They are price channels and a flag is also a price channel.  Traders typically trade these channels with a bounce above the high of the low day, which is today, or wait for the breakout above the falling resistance line of the channel. 

However you choose to potentially trade these consolidations, it is important for you to see them in context of trend, support and resistance and the momentum of the Tuesday’s bullish candle, so that you can take lower risk higher return potential entries as they occur.

Major NDX stocks AAPL, AMZN, BIDU, GOOG, NFLX, PCLN and QCOM also formed bullish candles as referenced below.

With Tuesday’s SPX hammer I will be moving the stop on Monday night’s SPY paper money virtual trade to above the high of the low day, just in case today is the end of the short term pull back.

(click image to enlarge)

SPX hammer, bounce a 61.8% Fib level, below 30 DMA -0.04%

INDU hammer, bounce a 61.8% Fib level, below 30 DMA -0.55%

COMPQ white candle, bounce at 161% Fib extension, below 30 DMA +0.03%

RUT white spinning top, at support, below 30 DMA -0.31%

Breadth strengthened as decliners led advancers 1.38 to 1 on the NYSE and 1.43 to 1 on the NASDAQ …

Exchange       NYSE        NASDAQ

Advancers      1,257            1,076

Decliners        1,735            1,540

Index              Chg.    Close   Direction    Confirmation

VIX                 -0.69     17.55      Down           No – SPX

SOX               -5.21   429.48      Down          No – COMPQ

Leading stocks > +2% on Tuesday included SINA, ANR, WLT, SOHU, PCX, POT, ARUN, MCP, ATW, STI, ZION

Losing stocks < -2.0% included LDK, TSL, ESI, CAT, NYX, SNDK, JDSU, FWLT, DOW, IL, UNG, CAM, SWKS, A, ATI

Key Earnings this week:  ADSK, CRM, DE, DELL, HPQ, LDK, TSL, JCP, LOW, WMT, HD, GME, ANF, SHLD, TGT

Positives – SPX, VIX, COMPQ, breadth and sectors strengthened, Euro, AAPL, AMZN, BIDU, GOOG, NFLX,

Negatives –INDU, RUT, TNX, breadth was negative

Interest rates TNX -0.28 moved down and bond ETF TLT moved up 98 cents.  Financial stocks XLF rose 12 cents. The Euro moved up 83 pips to 1.4236 at 5 pm on Tuesday.

Four of nine sectors moved higher on Tuesday.  Financials XLF +0.76%, Utilities +0.74% and Consumer Staples XLP +0.22% and were the strongest sectors.  XLE, XLV and XLK were unchanged and XLI and XLB moved lower.  I don’t recall the last time I saw three unchanged sectors. 

Many stocks have pulled back over the past week and yet are still in good up trends.  Many of these stocks formed bullish candles on Tuesday. 

Up trending stocks include:  CERN, DLTR, ADP, EXPE, SIAL, MICC, CELG, MCHP, SYMC, CHKP, CHRW, CTXS, HSIC, ILMN, VMED, COST, EXPD, LIFE, LINTA, VRTX, ROST, ALTR, ORLY, DELL, LLTC, QCOM, DTV, FAST, FLIR, INTC, MXIM, NIHD, NTAP, AMGN, XRAY, XLNX, ESRX, BMC, ERTS, VRSN, ADSK, ADBE, WCRX, HUM, HLF, CSTR, DHR, A, ANF, DLR, TIF, V, URE, TLT, MHS, GES, VECO, HAS, UAL, GMCR, RVBD, ACN, CMG, SWN, VMW

SPX

Resistance: 1,344, 1,352, 1,367

Support: 1,330, 1321, 1310

The short term 3 day trend is down.

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 +2.84 – piercing line, below 30DMA

AMZN +2.30 – white candle, inside day, above 30 DMA

BIDU +4.04 – bullish engulfing confirms inverted hammer, below 30 DMA

GOOG +12.04 – bullish engulfing, below 30 DMA

NFLX -0.15 – hammer, close at 30 DMA

PCLN +1.02 – hammer, below 30 DMA

QCOM -0.35 – dragon fly doji, above 30 DMA

NDX 100 stocks stronger than the NDX include BIDU, VOD, EXPE, URBN, GOOG, RIMM, VMED, AMGN, WYNN, CELG, MICC, BIIB, CMCSA, YHOO and BMC.

Stocks weaker than the NDX include MU, CTRP, SNDK, ILMN, LIFE, MCHP, JOYG, KLAC, ADSK, FLEX, AKAM, PCAR, NTAP, QGEN and ALTR.

Stocks to Watch on Wednesday

Holding Above 30 DMA

HUM, HLF, CSTR, DHR, A, ANF, DLR, TIF, V, URE, TLT, MHS, GES, SMH, UNP, VECO, HAS, UAL, GMCR, RVBD, FAZ, JNPR, ACN, ICE

Moving Above 30 DMA = 3

CMG, SWN, VMW

Moving Below 30 DMA = 5

AMD, ESI, GLW, JDSU, SNDK

Staying Below 30 DMA

ATI, CIEN, CRM, NYX, CHL, DOW, F, NVDA, CF, FWLT, ZION, CAT, IL, NDAQ, STI, SWK, SWKS, VLO, WDC, ARUN, MCP, SINA, WLT, FAS, LVS, SOHU, UNG, UCO, DE, NETL, NGLS, PCX, AGU, AKS, ATW, FCX, IPI, LDK, SLB, TSL, CLF, DECK, NTES, POT, JEC, SLW, IAG, GS, CDE, TBT, MOS, X, CAM, BAC, CRUS

Intermediate Term Market Trend: Up

Short Term Market Trend: Down