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Todd Market Forecast: Option Buyers Getting Frightened

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Posted by Steve Todd - Todd Market Forecast

on Friday, 09 February 2018 06:19

For Thursday February 8, 2018 3:00 PM Pacific.

DOW - 1033 on 2283 net declines

NASDAQ COMP - 275 on 2080 net declines

SHORT TERM TREND Bullish

INTERMEDIATE TERM Bullish

STOCKS: On Tuesday I said that we would probably get at least a partial retest of the lows. Well, this was more than a retest. Most important indices closed under the previous closing lows and intraday lows. The Dow and Russell 2000 were exceptions, but not by much.

Was there any good news? Actually yes. The put call ratio finally expanded to 1.15 showing that option buyers are finally getting scared. Also, we're starting to hear bear market talk after so many market commentators were advising buying into the decline. In other words, sentiment is starting to come around.

Also, our traders have managed to largely avoid this drop. The SSO is down 8.29 for the year. Traders are up 6.85. We'll discuss more about our short term posture on tomorrow's update.

GOLD: Gold bounced $6. We still are getting higher rates and a higher dollar. Looks like a bounce within a downtrend.

CHART: Help may be on the way. We're seeing panic volume for the ETF of the NASDAQ 100, QQQ. These volume spikes tend to come at multi week lows.

Screen Shot 2018-02-09 at 6.19.52 AM

BOTTOM LINE:  (Trading)



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Stocks & Equities

Consolidation Time (The Easy Trade has Ended)

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Posted by Rambus Chartology

on Thursday, 08 February 2018 06:02

Before we look at tonight's chart I would like to reiterate once more that we have traded one of the best bull markets runs in history. There was hardly a time over the last year or so that the stock markets were down more than 2 or 3 days in a row. It seemed like everyday I would log on to Stock Charts in the morning the SPX would always be up 3 to 5 points. It was just a steady move higher with little volatility.

Last Friday that nice gentle uptrend we had grown accustomed to came to an exciting climax. What we are experiencing right now is the beginning of some volatility that is going to take some time to get back under control. Think of dropping a super ball off the top of the Empire State building. First you get a really big bounce followed by a big decline then another bounce that is less strong with the next bounce getting weaker. At some point the initial volatility will be reduced back into normal price action.

During those volatile swings we should see some type of consolidation pattern build out that will be unrecognizable in the beginning, but as time passes it will slowly show itself. We know where the top of the new trading range is, but the bottom still needs some confirmation that Tuesday’s low is in fact the low for this next consolidation phase.

Lets start by looking at the 12 year monthly combo chart which has the VIX on top and the SPX on the bottom. When we looked at this chart on Monday night the VIX still hadn’t reached the 43 to 47 area which has shown us in the past where an important low on the SPX was. Tuesday we got the spike into the major buy zone which is strongly suggesting an important low is in place.

That being said a new trading range should develop to consolidate our previous impulse move up similar to what happened in 2011 and 2015. As you can see the VIX spike nailed the low, but there was a lot of chopping action before then next impulse leg up began which is how markets are supposed to work. The spike in the VIX marked the low in 2010, but it still took several months of bouncing along the bottom before the SPX rallied into the 2011 high. Even the 2011 VIX spike took the SPX three months of chopping around the bottom before the next impulse started.

It’s possible that the SPX could just reverse back up and takeout January’s high, but that would be the exception and not the rule. The horizontal black dashed lines show the 2011, 2015 and now our 2018 trading range that are all the same height. At this point in time I think it’s going to be more of a time thing than anything else as far the sideways price action goes.

VIX-month-1

This next chart is a daily combo chart we’ve been following for some of the US stock market indexes which is showing some interesting price action. I have mentioned many times in the past that an important trendline never dies, it just slowly fades away. From February to September of last year most of the US stock market indexes built out a bullish rising wedge formation. Normally during a corrective phase support can be found on top of a preceding consolidation pattern.

What I did on this combo chart was to extend the top rail of the rising wedges to see if they were still hot. In most cases they held initial support. Currently all the US stock market indexes are all trading above their top rails with the RUT being the weakest which is trading right on top of its top rail extension. It would be painful, but I wouldn’t be surprised if the top rails were backtested once more for good measure. If they held again that would be a very bullish setup.



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Stocks & Equities

A Random Reversion on Wall Street

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Posted by Ryan Puplava - Financial Sense

on Wednesday, 07 February 2018 06:20

What goes up, must come down. And it was finally the stock market’s turn to take some profits aside. Friday’s 2.13% decline in the S&P 500 was the bookend to a week’s drop of 3.86% - all while the majority of companies this week produced positive earnings and sales surprises. The correction this week served as a bearish engulfing pattern on the weekly chart, a reversal pattern of some renown.

sc-2-feb



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STOCKS SLAMMED: Volatility Crushes the Rally

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Posted by Greg Guenthner - Rude Awakening

on Tuesday, 06 February 2018 06:17

 

  • downThe Dow sets a startling record
  • The biggest drop since 2011
  • Plus: What’s next for the stock market?

Investors took a sledgehammer to the face yesterday as the major averages posted their worst drop in more than six years.

The Dow shed 1,175 points (its biggest point lost in history) to close lower by a staggering 4.6%. The S&P 500 wasn’t far behind, posting a loss of more than 4%. In a dramatic shift, the major averages flipped from extremely overbought to painfully oversold in a matter of days.

The stock market carnage is the top story at many major media outlets. Everyone wants to know what pushed stocks down an open elevator shaft. Was it earnings? The Nunes memo? A Trump tweet?

Nope. 

The truth is the market has grinded higher without a correction for too long. Stocks were too hot. Volatility was dead. Something had to give.

Check out this chart:



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Market Stumble Or Something More?

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Posted by Lance Roberts - Real Investment Advice

on Monday, 05 February 2018 06:32

Last week, I discussed the continuation of the “market melt-up.” To wit: 

“Since the beginning of the year, the acceleration in the markets has continued unabated. As I showed yesterday, the acceleration in the S&P 500 has now gone parabolic.”

SP500-DailyPrice-2009-Present-012518-1

“Never before in recent history has the market been this overbought and extended from longer-term averages which suggests that a correction that reduces such conditions is highly likely in the near-term.”

Well, this past week, the market tripped “over its own feet” after prices had created a massive extension above the 50-dma as shown below.  As I have previously warned, since that extension was so large, a correction just back to the moving average at this point will require nearly a -6% decline. 



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