Weekly Signals

[Abby Justa Colon]

Daily update:

 

Note the CMO divergences failed to grind ahead early in the week. A clear indication that there were fundamental shifts occurring under the surface of the market....thus the big sell-off.

 

Note the volume increasing on the decline.

 

Short term indicators are buried on the extreme sides.

 

Trading plan has the CMO 3-day still on the sell side with 1/2 position in on the short side. That may end this week with any kind of bounce. Then will will wait for our next signal to go short again. As mentioned in the weekly update, long trades may look very appealing here (multi-year lows), but we must stick by our trading plan and discipline and trade from the short side only.

 

Many bears who covered their shorts early feel they have been left out of the party and are eager to jump in on any bounce. We must be careful here as the bus stop is full and volatility is at extremes. Bear market rallies can often be very strong on the onset so sound money management is a must.

[Abby Justa Colon]

Bottom line: the panic of last week can continue but  not forever. We will get some kind of relief rally or bear market bounce at some point. The easy money to the downside has been made for this run, shorting here can be dangerous.

 

We will wait for a bounce to bring the indicators up into our sell zone. No long trades here no matter how compelling they may appear.

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We got the bounce we were looking for mainly from Mondays' record run with the index tacking on 3.3% for the week, but it did little for our indicators.

The chart is still deep into bear territory with little to get excited about from the bull side of things. We still have our "big air" syndrome mentioned last week.

Note the dips in the Sto below the 20 zone have have corresponded with the ST MACD signal line and has led to bounces in the past. Also note the ST Sto signal line is below -300 but during the last bear this indicator sunk to more than -500....so there is plenty of room left on the downside for this indicator.

The all important 26 week ema points to down.

We are still in the "short the bounces" mindframe.

 

I've been hearing a lot of people are looking for a test of the '02 lows. On the NDX its quite a ways down from here. The S&P and Dow are much nearer those '02 levels. It would make a nice monthly chart formation, but until we get there we will just play this as it is....a big bad bear market!

[Abby Justa Colon]

Bear market rallies can often be very strong on the onset so sound money management is a must.

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Daily update:

Words to live by above...the shearing rally on Monday left many bears panicking to cover.

 

Not much new on the daily.

 

Positive divergence in the 3-day and price showing up.

 

Note the W formation on price. It has all the ingredients for a W except the volume on the test of the lows should be less than the original low. Moves out of W formations can be explosive, but failed W's can have just as equal of move...only to the downside.

The S&P and Dow did not make a lower, low so they are not showing the same formation. I would be suspect of this W for now, it would need to clear the 38.00 area for it to vault upward....we will keep an eye on this.

 

CMO 3-day gave us an entry after the big blast on Monday.

[Abby Justa Colon]

I've been hearing a lot of people are looking for a test of the '02 lows. On the NDX its quite a ways down from here. The S&P and Dow are much nearer those '02 levels.? It would make a nice monthly chart formation, but until we get there we will just play this as it is....a big bad bear market!

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The bear claws another 8.34% for the week...impressive.

 

The weekly is still in full breakdown mode hitting new lows for the year.

You probably have heard the phrase "it doesn't go down in a straight line". The last two months this bear has pretty much tracked a straight line down.

Note the previous times during this bear that the ST MACD histo turned up before the 4 week ma (green line) turned up. Beware as we are in that zone again. We have to be ready for a sideways up (swup) and be on guard for the MOABMR (mother of all bear market rallies).

I don't think this bear is over by a long shot but we are "overdue" for some kind of bear market rally. Not just a few days bounce but one of those rallies that has everyone thinking the bottom is in and "afraid" they missed it....one that has the bears shorting every advance but running for cover over and over until giving up.

 

We could still drop from these levels, but we need to be aware of the possibility of an extended bear market rally.

 

We will watch the daily charts for clues.

[Abby Justa Colon]

Daily update:

 

The daily is pretty much showing us the divergence from the weekly.

Note the 12-day CMO has started to rise as the index fell lower.

As strange as it seems, there is some underlying strength below the surface of this market. As stated in the weekly update, we need to be on the lookout of a bear market rally here.

Note the volume is lower at this low than at the previous low.

11/34 ma's still firmly in bear zone, while the 3-day gave us another good entry/exit with 1/2 position.

[Abby Justa Colon]

We have to be ready for a sideways up (swup) and be on guard for the MOABMR (mother of all bear market rallies).

 

I don't think this bear is over by a long shot but we are "overdue" for some kind of bear market rally. Not just a few days bounce but one of those rallies that has everyone thinking the bottom is in and "afraid" they missed it....one that has the bears shorting every advance but running for cover over and over until giving up.

Last weeks impressive rally (+11%) shouldn't have really shocked anyone. The charts have been pointing to a looming bear market bounce.

The weekly is far from calling a bottom but looks ready to trick the average investor into believing they missed it.

 

The Sto looks ready to break the 20 line from below.

LT & ST MACD histos turned up in unison for the first time since July.

ST MACD signal line looks ready to cross.

The all important 26 week ema is still pointing down.

 

Note how in past bear market rallies, the 4 week will reverse and move up to cross the 20 & 26 week emas. For the 4 week to cross those it has some ground to cover and quite possible it wont make that big of a run.

 

For now its just an overdue bear market rally. Until we get more indicators to turn we must play it that way.

[Abby Justa Colon]

As strange as it seems, there is some underlying strength below the surface of this market. As stated in the weekly update, we need to be on the lookout of a bear market rally here.

 

I finally figured how to upload a chart....the new look and feel of the board is impressive.

 

Daily Update:

 

I'll make it quick since I am behind this week: The index moved up big on declining volume.

Note the CMO 12-day has entered the green zone, it hasn't been there since late August. Note also the small inverted head and shoulder pattern outlined in blue. It is showing up on the hourly charts also. Bullish patterns in a bear markets sometimes tend to be a dud. The election outcome should produce a move from here, but its anyones guess if the pattern will play out or stall. 3-day CMO setting us up for a possible short play if the invert h&s pattern fails.

[Abby Justa Colon]

Note how in past bear market rallies, the 4 week will reverse and move up to cross the 20 & 26 week emas. For the 4 week to cross those it has some ground to cover and quite possible it wont make that big of a run.

 

For now its just an overdue bear market rally. Until we get more indicators to turn we must play it that way.

Weekly Update:

 

Index gave back a little less than 1/2 its prior weeks' massive gain, down -4.73% singing the post-election blues.

Indicators (MACD histos, Sto) still heading up despite the losing week. ST MACD signal line still near a crossover but not there yet.

4 week ema turned down and the all important 26 week ema still pointing down.

 

Same old story here....rallies are being sold, using the daily charts for entries/exits. As mentioned a couple of weeks ago, we are on the lookout for a bear market counter trend rally lasting more than a day or two. With the indicators starting to unwind upward during a down week we must be careful here but until it happens, its business as usual.

[Abby Justa Colon]

Note also the small inverted head and shoulder pattern outlined in blue. It is showing up on the hourly charts also. Bullish patterns in a bear markets sometimes tend to be a dud. The election outcome should produce a move from here, but its anyones guess if the pattern will play out or stall.

Daily Update:

As noted above, the inverted h&s pattern failed...not too surprising in a bear market.

The 12-day CMO dropped back to the red zone during the week only to recover back in the green (ever so slightly) on Friday.

Prices came up to nearly tag the 34 day ema but was rejected.

Getting a little bit of a squeeze here with a triangle of sorts developing...that most likely will resolve this week.

Note the volume has been lackluster compared to what we saw in October.

We will stay the course and sell overbought conditions until the weekly turns up.

[Abby Justa Colon]

Weekly Update:

 

Wash, rinse, repeat. Same story with the same outcome: index down another 7%.

The weekly indicators took a turn back down from its sideways up showing the last couple of weeks.

Sto flatlined, ST MACD hist turned down while the LT histo also flatlined. ST MACD signal line was rejected form the crossover.

Big Air, the distance between short term moving average and the longer term moving average that we spoke of a month or so ago has become really "big air" suggesting Dover Sole conditions.

And of course the 26 week ema is still showing down.

One could argue that a positive divergence is developing on the ST MACD histo (blue line). While prices made a lower, low, the indicator made a more shallow low. I like to see the indicator actually turn positive (it almost did) before showing a divergence but we will have to watch this develop. A change in direction of the histo moving higher would probably validated it.

 

A lot has been said about Thursdays big reversal. Many, many anal cysts and seasoned chart watchers are calling it a bottom. For right now, the weekly chart is saying it is not the bottom. The weekly chart actually deteriorated from last week. Time will tell, but even the most bearish of bears would probably agree that some kind of bounce would not surprise them from these levels.

[Abby Justa Colon]

Getting a little bit of a squeeze here with a triangle of sorts developing...that most likely will resolve this week.

 

Daily Update:

The squeeze noted last week gave us a good break to the downside.

12 day CMO looks to be working on another positive divergence. Volume is picking up.

 

Here is where it gets interesting....and why many chart watchers are looking for some upside.

Note the W formation circled in red. W's are generally bullish formations when the right side of the W makes a lower, low on less volume. Well we got the low on ever so slightly less volume....so far so good. Now it needs to build the right side up to the pivot point which is where the left side started from (about the 35.50-36 area).

So for this to play out we need to see higher, highs and a breakout from about the 36 area. Thats a whopping 20+% move from here in itself. I have seen many W formations build only to watch them fail at the pivot...and when the do fail, they have big moves to the downside.

Remember that millions of traders are watching this chart pattern and will play it if it breaks out or fails. Overall if this W formation plays out it would work off some of the Dover Sole conditions and may give us a great shorting opportunity if it fails as long as the weekly still points down. A 20%+ move to the pivot most likely would change the weekly also...so this could be big either way.

Either way we shall stick to our discipline.

[Abby Justa Colon]

Weekly Update:

 

Wash, rinse, repeat. Same story with the same outcome: index down another 7%.

The weekly indicators took a turn back down from its sideways up showing the last couple of weeks.

Sto flatlined, ST MACD hist turned down while the LT histo also flatlined. ST MACD signal line was rejected form the crossover.

Big Air, the distance between short term moving average and the longer term moving average that we spoke of a month or so ago has become really "big air" suggesting Dover Sole conditions.

And of course the 26 week ema is still showing down.

One could argue that a positive divergence is developing on the ST MACD histo (blue line). While prices made a lower, low, the indicator made a more shallow low. I like to see the indicator actually turn positive (it almost did) before showing a divergence but we will have to watch this develop. A change in direction of the histo moving higher would probably validated it.

 

A lot has been said about Thursdays big reversal. Many, many anal cysts and seasoned chart watchers are calling it a bottom. For right now, the weekly chart is saying it is not the bottom. The weekly chart actually deteriorated from last week. Time will tell, but even the most bearish of bears would probably agree that some kind of bounce would not surprise them from these levels.

Quick update as I had little time this weekend.

 

Pretty much carbon copy (who uses carbon these days) of last week. Even down a similar amount of near -8%.

 

ST MACD still hanging on hope of some positive divergence, but other than that the weekly (and 26 week ema) still pointing down.

[Abby Justa Colon]

Daily Update:

The squeeze noted last week gave us a good break to the downside.

12 day CMO looks to be working on another positive divergence. Volume is picking up.

 

Here is where it gets interesting....and why many chart watchers are looking for some upside.

Note the W formation circled in red. W's are generally bullish formations when the right side of the W makes a lower, low on less volume. Well we got the low on ever so slightly less volume....so far so good. Now it needs to build the right side up to the pivot point which is where the left side started from (about the 35.50-36 area).

So for this to play out we need to see higher, highs and a breakout from about the 36 area. Thats a whopping 20+% move from here in itself. I have seen many W formations build only to watch them fail at the pivot...and when the do fail, they have big moves to the downside.

Remember that millions of traders are watching this chart pattern and will play it if it breaks out or fails. Overall if this W formation plays out it would work off some of the Dover Sole conditions and may give us a great shorting opportunity if it fails as long as the weekly still points down. A 20%+ move to the pivot most likely would change the weekly also...so this could be big either way.

Either way we shall stick to our discipline.

 

Daily Update:

 

Doc's WallStreet Tape chart service is being blocked for some reason, so I have to use BigCharts.

No CMO indicator at Bigcharts, but it does show some divergence with price and the daily MACD. Also note the W formation that we spoke of last week is still more or less intact but the outcome is a big question mark.

I'll look for another chart service to post the daily chart soon.

[Abby Justa Colon]

ST MACD still hanging on hope of some positive divergence, but other than that the weekly (and 26 week ema) still pointing down.

Weekly Update:

 

The positive divergence won over and the index was up over 9% for the holiday shortened week. Its only the second positive week since September.

The positive divergences are much clearer now on the other indicators except the LT MACD signal line which appears to still be carving out a bottom. The ST MACD signal line had a crossover and the histo turned positive.

Still have a huge "big air" gap as we discussed in previous weeks.

All in all the index is working off some deeply over--sold conditions on the weekly charts. We are still firmly in the grasp of the bear at this point as defined with the 26 week ema pointing down. Note the last couple of times the ST MACD histo went positive, it lasted from 3 weeks to 12 weeks....so we must be on guard for more than just a week of positive or sideways movement here.

 

Disregard the "black chart"....I uploaded it and now can't delete it.

[Abby Justa Colon]

Daily Update:

 

Doc's WallStreet Tape chart service is being blocked for some reason, so I have to use BigCharts.

No CMO indicator at Bigcharts, but it does show some divergence with price and the daily MACD. Also note the W formation that we spoke of last week is still more or less intact but the outcome is a big question mark.

I'll look for another chart service to post the daily chart soon.

Same situation as last week with the chart site at WallStreetTape

Looks like Doc's chart service is gone...I'll just post a Bigcharts for now.

Without our CMO indicator we will just follow the MACD and RSI.

Note the positive divergence in the daily chart. 11/34 ema still in bear mode. It will take another up week to get them even close to a crossover.

W pattern still is valid so be on guard for that to play out...especially watch the 35 area for the pivot break, but that is down the road a ways if it will even get there.