Markets 4/26/09

$NYA - Daily HLC Bars: "

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Mr. Wyckoff determined overbought and oversold by market action and was thoughtful about what he saw.  I imagine he might have looked at the number of new highs on a given day and no doubt would have been very impressed that the number of new highs Friday was the most in at least 25 years.  At that time 1982 it was the beginning of a new bull move that would last 18 years.
So what can we say here?  The advance from February was on low to moderate volume until the week of April 12 when we advanced on increasing volume to the Thursday peak and I believe I wrote here about this being a buying climax. Monday was a selling climax and on heavy volume we have not advanced meaning that large investors are selling into the buying frenzy,  just as Goldman sold into the buying frenzy in mortgage derivatives in 2007.  The very large players who tied up so much stock that we could advance on small volume for months must take advantage of this large demand to unload.  Demand is sufficient that we held above the old high of 7471.31 and we should anticipate more distribution on the advance to new high ground. The saturation point has not been reached but it is coming.  I will show some charts that are more illustrative of the buying climax.

QQQQ

My initial count was for 17 across the 26 line which was accomplished at 43.  My next objective was for 23 at the 28 line or 51 and we are about there.

$RUT - Daily HLC Bars

$RUT - Daily HLC Bars: "

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Notice the price action, we do not have volume on the Russell 2000.

AAPL - Daily HLC Bars

AAPL - Daily HLC Bars: "

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This kind of action in a leading stock is typical of a buying climax.  Notice the blow-off in progress with large volume, closes near the daily high and wide ranges.  Friday the range contracted but the volume remained the same.  We will see if that means anything.

4/18/10 More old friends

The yen after hitting the 106 axis line and accomplishing the minimum count of 6 across the 106 line
is now in the spring position. It has a count of 11 at he 108 line which puts it in line for a major upward swing.

The Euro having been in the spring position has failed to rally and now finds itself on a hinge at 135.  For a down move this would be a spit count of 8 across the 137 line and 4 across the 135.  This would give 12 across the 136 for a target of 124 confirming some of our old counts.

4/18/10 Old Friends

The up move beginning last SEptember has run into substantial resistance, generating a count of 8 across the 47 line. Should we start down which I think is likely a retest of 39 is probable.

As mentioned in a previous post, we had a count of 7 across the 149 line with a target of 156.  The pound fell about half a point short so the final x was not registered and it was stopped by the previous support/resistance line at the 3"o's" at 156.  It also looks like a trendline goes through 155 off 166 and 162.  The pound might be a good trade for those wanting to play the possible unwinding of the carry trade if risk assets begin to fall.  The pound-yen and euro-yen have performed  well at this  in the past.

4/18/10 Daily

$NYA - Daily HLC Bars: "

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Click on the chart, it should be prettier. Volume was the highest since last August on this chart and since May 2009 in reality. If you imagine the trendline between the Feb low at 6900 and the April 1st low you can see that we decisively broke the backbone of the advance on heavy volume. All long equity positions should be liquidated and shorts should be taken on bulges according to Mr. Wyckoff.

You should assume that the hypodermic advance last week and the high volume narrow range day were all managed by people who knew about the Goldman announcement. Similarly, the government made this public on options expiration day to inflict as much damage on Wall Street as possible. Somehow the institutions that were so important that the government could spend between 2 and 23 trillion dollars to bail them out can now be thrown to the lawyers to be chewed and devoured. Politics does make strange and strangely estranged bedfellows.

4/18/10 Hourly

SPY - 60 min HLC Bars: "

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The volume being greater on the down than the volume in the buying climax means the trend now is tentatively down. Those selling into the advance could not sell enough shares into a rising market and they are continuing and in fact in a hurry to sell. Please note that I am trying a new way of uploading charts. Just click or double click on it and it should work better than the old method

Buying Climax 4/15/10

I believe that we are witnessing a buying climax, a rapid acceleration of price and volume at the culmination of a move. Notice how the angle of advance over the past week and especially the past 3 days has steepened and then steepened further. We have had the 2 highest volume days since the selling climax in the beginning of February. So yesterday we had a rapid advance amidst extreme bullishness which creates the conditions where large holders have a large market in which they can sell large quantities without pushing the market against themselves. Today that selling basically overwhelmed the demand and filled all the buyers in a tiny range. The volume was even larger than yesterday and the buyers could not push prices up. The demand however was sufficient to hold prices up. We are now very suspicious of this move.
Notice the sharp up move on the 15 minute chart which begins with the selling climax at 119. Both days after the morning supply is absorbed the market moves up easily on little volume until today. The market accelerates sharply and then after hitting the high of 121.565 has a reversal bar on lower volume. Perhaps the demand is becoming exhausted. This is confirmed by going down with ease of movement on higher volume than we went up on in the final little rally. Other traders saw the same thing and sold sensing the turn. The market is supported at 12 noon and at 12:30 the lack of supply is confirmed. The market moves sideways in a narrow range from 1-3 and perhaps someday we will talk about absorption, but there is no sign that this range is absorption and that is confirmed by the tiny upthrust at 2:45 and the subsequent decline on heavier volume than the rally. Supply is overcoming demand so let's see if we can get some supply to push prices down.

4/4/10 Bonds and Gold

Continuing from our extended discussion last week, the short term count is 5 across the 118 line and 6 across the 117 line for objectives of 113-111 respectively. The former would test the low last year and the latter support in 2008. Breaking one or both lows would given a bit of bouncing around would put the 30 year bull market in Bonds in jeopardy. There was by the way a nice hinge at 117.
I am not sure how the chart of the Yen got in here but here goes. I cannot draw trendlines on this chart so mentally do the following. First note the upthrust to 116 followed by the quick decline, the hinge that followed at 113 followed by another easy decline to 108. Then followed 3 months of further distribution with an upthrust at 113. Now draw in your support resistance line at 106. This is pretty much an axis line stretching to November of 2008. Finally draw in your uptrend line from the low at 99 through the low at 103 and extending it through the low at 109. If you now draw the line from the top through 113 you can clearly see the hinge at 111.

At 106 we are coming into an area of expected support and we must watch carefully how the market negotiates it. The most conservative count of 6 across the 112 line gives a target of 106 as well. Should this support not hold this can go a long way. In either case a bounce should be expected.
Charts do not get nicer. 18 across the 33.
More of the same.
Let's look at the Gold chart in a bit more detail. Having made a high at 119, the market slid off to 106. It then rallied to 113, a bit more than 50% and stopped right under the zone of distribution of last October and November. It then produced a count of 5 on the 111 line and fell back to support at 106. After a small bounce it had a shakeout falling to 103 and immediately recovered back into the trading range at 106. This is a sign of strength. It tested the shakeout at 105 and then made a new high. At this point there is a count of 14 at the 106 line and drawing in the trendline through 112 and 109 you can see the hinge at 106. A sharp rally to 110 follows. A count of 3 across the 110 line and the market is supported at 107, a higher low. The next rally takes us to 112, a higher high. We make an apex at 109 but the market finds support again at 107. There is no sharp decline from the hinge. We have a count of 6 on the 108 line, conservatively, but have met resistance at 111. Looking across you can see that 111 is a small axis line and it must be watched closely.

So far we have just discussed the Wyckoff analysis and I wanted to make an editorial comment. The 10 year last week yielded more than Libor which means that the market is viewing Treasuries as riskier than bank loans. At the same time gold seems to be getting in a bullish position. Perhaps the market is telling us that it finally believes, now that QE is done and there is no one buying it all, that all of this government debt will never be repaid and if it is repaid, it will be in a way that no one buying at these low rates wants. Perhaps the Yen just emphasizes the point.