Monday, October 18, 2010

Week-end summary

We had a very exciting week, and I am more than happy to show you a market correction with all the small steps internals slowly changing and manifest to price effects.

Let's see where are we now:

RUA 1-day:

RUA 1-day seems fine so far, internals are pretty strong. What gives some doubt is a contrarian behavior of momentum VS internals. Histo made some gain, oscillator is on 60% (strong),  buying power is strong as well,  MVO is giving stronger and stronger signals, long-term histo gives positive signal again, but momentum is dramatically down. Friday was a big volume surge, finally became a green day, but in spite of nice bullish volume rises price did not rise and market lost momentum. It's a contrary behavior. A green day with this so much bull volume should result immediate price effect (1-1,5% rise at least). I feel it's a clear signal of struggling market, broken internals.
Usually this kind of bull rally without major price effect results a day down next day: smarts push prices up, and pass their calls on a good price, while market internals slowly break.

I did not sell my 1 unit of spx as internals are still give a chance to recover (bearish volume signal is steady zero).

RUA 60 min:

There was a huge bearish volume attack started EOD 14th of October. This level of histo did not occur in the last 1,5 years. It seems me institutions are in a big fight . They sell and some other immediately buys it, almost parallel. However, MV green/red singal swithc suggests trend change, also sentiment could not recover; in spite of the last bull surge both of them signal bearish continuation. Chance is high for a negative price manifestation.

SPS (RIFIN) 2-days:

As you know, I always check financials as my daily routine. I recommend you the same.
We have typical,  broken internals with price manifestation on 2-days chart suggest immediate liquidation of longs.

This setup is a textbook sample of bearish trend-change setup.
Let's see the symptoms one by one:
-Huge sell volume spike on volumes (4,38B when 14 bar (28 day) MVA is 2,93!!!!)
-Bull histo cycle without any price effect
-Oscillator shows failed bull cycle as well
-Steady bull volume, but rising sell volume resulting this high price change suggest further continuation
-MVO exhausted
-Momentum fell from 1.91 to 0.67 -clear bearish signal
-Sentiment is still fine, however in downturn.

It's almost safe to short financials. As I told there is no growth without healthy financials. And financials can drag market down. Whatever news will come in the earnings season, prices will just fall and fall.
Please note that we don't short in this blog. We try to avoid any kind of major loss and ride the bull side only.

SPS RIFIN 1 day: 

Absolutely broken internals. Bull cycle is over, oscillator shows upcoming bear, rising bearish volume will drag steady buy volume down . Please observe: volumes afloat, both of them levitate above signal line can cause fierce price change. Bull an bear safe while one of them is steady zero while other is rising. Now both up, so bears and bulls perform huge fight. As I told, we can see a huge institutional fight: some institution immediately buys selling volume and tries to block, or at least mitigate price effect. Financials almost always manipulated, so it's not a problem, but this level of manipulation is almost a fun to watch.

RIFIN 60 min:

Beautiful. We can read all of the fight from the chart above. As you can see, volume surges were that strong MV gave a green-red-green signal. However, I would be really surprised if there would not be bearish continuatuion. Why? That 4Bn bar on 2-days broke dramatically internals.
So, firts half of the week will be really exciting. We just need to sit back and enjoy the show of this heavy- weight fight. Why am I telling that it's an institutional fight? Smarts against smalls would not be in sync this so perfect. Some institution tracks internals and protect market against a major fall: buy immediately.

Also I would like to tell something: it's so funny to read news. Foreclosures in progress almost 1,5 years, make everyday tragedy for families, and media just picks up this topic. NOW.
Come on... All of this hype is designed and planned well. IMO. Anyway it's just my conspiracy theory.... haha...

SOX 1-day

My beloved SOX is broken since 6th of october. Since then I am out and wait for some clear signal.
Please observe again the contrary behavior: Price is up while histo and oscillator lose steam, also momentum has lost power. Here smarts play with smalls. I am out, so only observe this play.

XOM 1-day:

As I told once, oil and energy industry is not my specialisation, but, heck, it's matured for a correction:

Histo is flat for days, oscillator is below critical level, momentum is converging to zero. What is more important, sentiment trend is clear down.

I feel once sell volume rises from zero, it's a true money making machine to short XOM.
I see we have an oil-trader between us, therefore I ask him to share his opinion about energy sector. Thanks!

GOLD miners HUI 1-day:

As I told in my last post, HUI was ready for a correction and that correction started.
A loss of 1.44% was not enough to rise bearish volume from steady zero. I definitely would NOT short gold and gold miners. These corrections are good, to add more.
We have negative histo reading, critical oscillator level negative momentum RSI, and negative long period histo. Please also observe gold (GLD) had a second bear volume spike on Friday.
I'll wait a little and gradually give 3 more HUI units in the next 2 weeks.  In my following silver post I'll tell you why.

GOLD/Silver miners (XAU)

As per moment XAU is strong and long. We need to check: it's almost sure that silver will perform a correction if both market and gold correct.

USD 1-day

Finally US Dollar. Since august I keep saying dollar is in focus:

There are enormous hands don't want dollar to rise. However, it will.
I already noted the huge bull volume signal last friday, but let's see the details:
Both short and long period histo gives positive readings, oscillator is above critical level, internals are really weak for a bearish dollar continuation.
However, some invisible hand does not want dollar to rise: there is a bearish surge on MVO from last Friday.
Bearish momentum is fading as well.
Nice setup for a bull switch.

Classic measures:


Nymo signals hesitating market, slowly a megaphone pattern is preparing. We need time to have more information.


I just hardly can imagine any growth from this level. Maybe market can rise a little, but we are on extreme highs.


Since last Wednesdays bullish internals breaking. Financials already in bearish spiral can drag market down.
Most fragile sectors are financials and energy.
However longer term internals (1-2 days) are very strong, so as per moment no action to be taken according to our strategy. I keep our 1 unit of SPX. If market goes down without hurting our 1-day internals, I'll buy a 2nd unit of SPX. If internals break, or we reach the soft liquidation I will take profit and sell our 1 SPX unit.

There can always be an unexpected news or natural disaster, therefore it's time to re-draw our ichimoku chart, draw some imagination about the upcoming days and set up cloud support, soft liquidation and hard liquidation levels.

My bias is bearish and I count with fierce price manifeastation. We have a strong ichimoku support at 1150 that will be the primary taget of the market. However, second bearish wave will attempt to test the gap between 1135 and 1140.  If market falls under 1135, then hard liquidation must be performed and we will wait for clear bull signals.

Good luck!

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