WEEKEND VIDEO JOURNAL NOTES
Saturday January 9, 2015
Week 1 2016
2016 is off to a very interesting start, after triggering the bearish H&S to close out the year, the market saw significant follow through into the first week of trading in 2016. There was absolutely zero bid. We can look around for reasons and excuses for it, but here, we just look at the only thing that matters, and that is the price action. Had you done so, you would have either been out of the way or profited significantly from this weeks move.
Starting with the S&P, let’s begin our weekend review. (watch show to see charts)
1) Looks to me like 123 point, 2 1/2 month trading range break down and sees follow through. The full target on this range breakdown is 1870.04. If you want to use a more conservative target we could use the 2104.27 high and 2019.39 low. That target was acquired Friday at 1934.51. However, we don’t have any evidence of a reversal just yet. We are oversold, so reduction of short exposure into that target Friday might have been a good idea.
Bearish Range Breakdown
2116.48 – 1993.26 = 123.22
1993.26 – 123.22 = 1870.04
2) 61.8 Fib support at 1965, fails to hold as support, confirming a reversal, and not just a pullback.
3) This leaves us with one dominant pattern to watch and that is the Bearish H&S we have been watching construct since the Ebola pull back in October of 2014. A break below 1867.01 will trigger this pattern.
BEARISH H&S TOP
2134.28 – 1867.01 = 267.27
1867.01 – 267.27 = 1599.74
Long Term Investors:
I like to keep an eye on 2 things.
a. The 12 Month moving Avg : Turning south, and another very weak close below it.
b. The 10/20 Month Moving Average Crossover : The 10 remains above the 20, but the 10 is declining quickly. They are 15 points apart.
10/20 Month MA Crossover Watch:
10/20 Month MA on NYSE:
The Other Indexes:
As for the other indexes Nasdaq, Russell and Dow they too are showing significant signs of weakness and have very similar long term patterns.
The NASDAQ: Broke down out of a smaller H&S pattern and acquired that target of 4640.55 on Friday. On the big picture, it too looks like a bearish H&S or Bearish Broadening wedge pattern.
Multi-Month Bearish Pattern
5231.94 – 4292.14 = 939.8
4292.14 – 939.8 = 3352.34
939.8/4292.14 = 21.90%
The Russell which continues to be the laggard, has broken it’s bearish pattern. And although there is clearly a case for some near term support for a bit of a bounce, this pattern is in motion and must be respected. The target 861.26
Bearish H&S Target
1296 – 1078.63 = 217.37
1078.63 – 217.37 = 861.26
217.37/1078.63 = 20.15%
The Dow, again with similar topping pattern, has closed below it’s weekly uptrend from 2009. Nothing bullish to speak of there. Bearish H&S pattern very much under construction, targeting 13358.88
Bearish H&S Target
18351.36 – 15855.12 = 2496.24
15855.12 – 2496.24 = 13358.88
2496.24/15855.12 = 15.74%
The Bottom Line:
The market is off to a very interesting start. Significant technical damage has been done with all indexes breaking below all major support and below all major moving avgs. There is significant evidence that lower prices are ahead in the longer term. However, EXPECT A BOUNCE. Oversold conditions now exist so a bounce sometime this week is a very high probability. However, the big picture technicals are all flashing the warning signs that a bigger correction, targeting the 2013 Breakout levels is coming. I would not fight that until we see improvement. These patterns have been on our radar since late last spring as potential and it appears it wants to play out. Let it.
This Week’s Chart’s in Focus:
Let’s review a few charts that I consider worthy of your attention:
Advance/Decline (T2100): Even the Advance Decline Line is triggering a H&S top.
% of Stocks above 40DMA (T2108): < 20 is oversold. This along with the stochastics oversold, suggest a bounce is coming. We just need price action to confirm.
Transports (IYT): Down 7.5% last week. It has now broken and closed below the flash crash lows. The target of this bearish H&S top targeting 104.66.
Financials (XLF): Down 7.26% last week very close to triggering H&S top. A close below 21.98 will do that. The target would be 18.34
Goldman (GS) Down 9.04% this week. H&S pattern now in motion targeting 125.43
There will be a handful of speeches from influential members of the Federal Reserve basically every day next week.
Additionally, we have Jobless claims Thursday, Retail Sales and Industrial Production on Friday.
Next week is a holiday week and we can expect low volume trading. However there are a few notable economic events. (Courtesy of Econoday.com)
My portfolio :
I remain net short and will remain that way until I see improved price action. I will watch to see any attempt to get back above 2020 and the price action that might take us above there. This is not a long only investor’s tape, so my opinions change quickly just like the price action does and has. Watching and reading the daily reviews will hopefully teach you and keep you to be on the right side of the swings.