WEEKEND VIDEO JOURNAL NOTES : Saturday January 16, 2016 : Week 2 2016

Posted on Monday February 01, 2016


Saturday January 30, 2016
Week 4 2016

This was the tale of two weeks with strong price action into and immediately after the fed, but instead of the typical fed follow through on Thursday morning, markets quickly reversed path and all four major indexes finished the week lower as you can see below.

Starting with the S&P, let’s begin our weekend review. 

1) This was a pretty interesting week. The action was pretty choppy as the market spend the first 3 days consolidating last weeks bounce. Then it stopped both bulls and bears out on Wednesday afternoon, with the typical fed swings. .Thursday, we traded inside the fed move and the finished the week with a coast to coast gap and go for inverse H&S follow through. There are 2 inverse H&S patterns here targeting higher prices, but let’s keep it simple for now and concentrate on the one we spoke about last week. The upside target on that is. 1967.28. So there is still some meat on this bone as long as we can stay above about 1910.
Bullish Inverse H&S target : 
1889.85 – 1812.42 = 77.43
1889.85 + 77.43 = 1967.28
77.43/1889.85 = 4.10%

Long Term Investors:

I like to keep an eye on 2 things.

a. The 12 Month moving Avg : This has basically flat since the end of July. We have chopped and closed above and below it and it is pointing slighly south. I recommend longer term focused people keep a close eye on it. Although it is a slight lagging indicator you can see from the chart the way that it can keep long term investors on the right side of the trade.

b. The 10/20 Month Moving Average Crossover : We still do not have a confirmed cross over, but we are very close. We do have the exact same closing candle we had in in Jan 2008. We do have both the 10 and 20 moving avgs declining. This condition did not occur in the 2011 pull back. The moving avgs converged, but they did not cross and they both remained north bound. I think the bulls have a ton to prove at this point and based on these moving avgs, it looks to me like any additional upside should be treated as a gift from the gods to unwind long exposure. 

S&P 500 10/20 Month MA Crossover Watch: 

10/20 Month MA on NYSE:


The Other Indexes:

As for the other indexes Nasdaq, Russell and Dow too triggered bullish patterns. 

Russel : bullish inverse H&S targeting 1070.52





The Bottom Line:  

Bullish price action is in place suggesting further upside, in what looks like a counter trend rally. These patterns are our number 1 priority this week as completion or failure gives us something to work with. I will say that many of the charts I am watching have done little more than move to a retest of prior support area. It was a very good strong breadth bounce on Friday, but not quite enough in my opinion to be excessively bullish. If these bullish patterns complete and more build and trigger, I will find myself more bullish. This has the looks of a counter trend rally to this point. 


This Week’s Chart’s in Focus:

Let’s review a few charts that I consider worthy of your attention:

Transports (IYT): I am going to keep this one up on my screens. This index has led us lower since early last year and although you could say there is an inverse H&S present, it is grinding in a bear flag like posture. Certainly worth noting.

Energy Sector (XLE): As bullish as this index has looked in a very long time. If this thing is going to bottom out, we want to see this 62.31 target acquired and then a right shoulder like pullback. Failure of this first pattern, would be catastrophic for oil bulls. 

Apple (AAPL)
If Apple is going to find a bottom here, the first thing it needs to do is fill that earnings gap. Maybe we have a head for the reversal, but we need to see far better price action. If it can get up and test this neckline and form a right shoulder on pull back, it may have a shot, but there is still no reason to dive into this one. The bigger picture is still suggesting LOWER!!!! 

Looking Ahead:
 (Courtesy of Econoday.com) 

My portfolio :
I remain very cash heavy here waiting for further proof that the bottom is in by triggering and completing more bullish patterns, or our next bearish reversal pattern, to strike on the short side. It is not compelling for me to be excessively long here overnight below a declining 200DMA and a big close below the 10/20 month moving avgs. The bulls have far more to prove. 

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