John Mylant's  Instablog

Technically Speaking

RSI- from the last time I have observed the RSI indicator when the stock appeared to have us ended its first leg up, I noticed that it was still moving up. But this time the RSI is moving down and we have a negative divergence taking place. This observation shows me that the stock may finally have reached the top of its present bullish trend.(click to enlarge)

Bollinger Bands-just like the last, the stock has touched the bottom Bollinger band and it appears that the stock may have reached a strong resistance level unlike the last move where gap way up after it and it's its first leg of his bullish run.

MACD- after the same manner MCAD indicator was also moving up last time the stock reached the end of its first bullish leg up. But this present move now I have identified a top in the stock is now moving down this supports the theory that we have possibly reach the top of this bullish move up.

Summary

I am convinced that there are enough signs between the RSI indicator and the MCA D indicator that the stock could possibly have reached its top. Now I know this is a new high so could be struggling to try to push through but the indicators are just showing me that there is a lot of weakness right now and am not sure it can push through its trying to but I am just not sure can at least not right now.

Current Events

Next Friday's unemployment report and the hefty spending cuts that look like they about to take effect will be at the forefront.

Major U.S. stock indexes will make another attempt at reaching all-time records, but the fitful pace that has dominated trading is likely to continue. The importance of whether equities can reach and sustain those highs is more than Wall Street's usual fixation on numbers with psychological significance. Breaking through to uncharted territory is seen as a test of investors' faith in the rally.

Flare-ups in the euro zone's sovereign debt crisis and next Friday's report on the U.S. labor market could jostle the market, though U.S. job indicators have generally been trending in a positive direction.

Signs that investors are becoming concerned about the rally's pace is evident in the options market, where the ratio of put activity to call activity has recently shifted in favor of puts, which represent expectations for a stock to fall. The put-to-call ratio representing an aggregate of about 562 financial stocks is 1:1, when normally, calls should be outnumbering puts.

While lackluster data has been a catalyst in the past for stock market gains as investors bet it would ensure continued stimulus from the Federal Reserve, that sentiment may be wearing thin.

Markets stumbled last week following worries that the Fed might wind down its quantitative easing program sooner than expected.

The dreaded deadline for the federal "sequestration" spending cuts has now passed... and we're still here.

That's the good news.

The bad news is that the $85 billion hatchet-chop is now leading to indiscriminate furloughs, job losses, and spending reductions across almost the entire federal government, including in programs that most Americans love.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Technically Speaking

RSI- the RSI indicator remains well into the bullish territory with no sign of coming down yet. After giving an over bought signal, it has barely come down and is now teetering at the upper 60's level with no sign of coming down, very bullish.

Bollinger Bands- Last week, the stock looked like it moved sideways off the upper band. This is usually a sign of continued upward movement. This is exactly what we had this week, continued upward movement and it looks to continue. (click to enlarge)

MACD- The MACD also continues to remain on the upper levels of its bullish territory. There are no signs at all of it starting to come down.

This last week has confirmed that the SPY continues to make its strong bullish run. Though not as steep (the lean is slightly less upward) I expect it to continue to move up.

Current Events

Japan's expansive policies, which have driven down the yen, escaped direct criticism in a statement thrashed out in Moscow by policymakers from the G20, which spans developed and emerging markets and accounts for 90 percent of the world economy.

Analysts said the yen, which has dropped 20 percent as a result of aggressive monetary and fiscal policies to reflate the Japanese economy, may now continue to fall.

Russia, this year's chair of the G20, admitted the group had failed to reach agreement on medium-term budget deficit levels and expressed concern about ultra-loose policies that it and other emerging economies say could store up trouble for later.

Odds of a pullback are increasing, with the market in slightly overbought territory. There could be a pullback as the closing of the earnings season will lead to at least a pause.

In the coming days, the market will focus on minutes from the latest Federal Reserve meeting, due to be released on Wednesday, which could provide support if they suggest the Fed will remain on its current course of aggressive monetary easing.

The Fed minutes released in January spooked markets a bit when they revealed that some Fed officials thought it would be appropriate to consider ending asset purchases later in 2013. U.S. Treasury yields rose on that news, though market worries about a near-term end to quantitative easing have since faded.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Technically Speaking

RSI- having recently signaled an over bought position and the combination of a short term negative divergence gives us some signs. This one is longer than the MACD so I would expect the stock to slow down very soon, or at least take a temporary dip in a long term trend. (click to enlarge)

Bollinger Bands- although the stock is still well above the middle band, I would expect the stock to move closer to the middle bands soon. It has a very slight angle toward a weaker climb but not enough yet to identify any real weakness. The Bollinger bands are still showing bullish momentum this week.

MACD- the MACD is also in recent (but mild) negative divergence, but the negative divergence within itself speaks more of a possible consolidation within the stock. The support of the RSI negative divergence supports the consolidation and a possible weakness developing more and more.

Summary- I believe bullish momentum still has the upper hand with the SPY, but I am also observing the beginning signs of a possible pullback, consolidation, or trend reversal. Honestly, I am not convinced of the idea of trend reversal, the other two would be more likely.

Current Events

On Friday, the Dow industrials virtually wiped out the week's modest losses. Yet the stalled advance underscores how initial euphoria has now given way to growing skepticism about the fundamental outlook - and by extension, the ability of stocks to set new highs.

Across the Atlantic, conditions are hardly rosier. Although most U.S. corporate earnings have surprised to the upside, higher taxes have begun chipping away at consumer spending power, making many CEOs cautious about the outlook for 2013. Meanwhile, last quarter's unexpected economic contraction is also raising the specter of a double-dip recession.

There's the matter of Washington's tortured negotiations over spending and taxes. January's dilatory "fiscal cliff" fix only postponed the day of reckoning without crafting a grand bargain. For all these reasons, market players are finding it difficult to invest in a scenario of the Dow industrial average going to infinity and beyond.

Separately, U.S. economic data showed the trade deficit shrank in December to $38.5 billion, its narrowest in nearly three years, indicating the economy did much better in the fourth quarter than initially estimated.

Earnings have mostly come in stronger than expected since the start of the reporting period. Fourth-quarter earnings for S&P 500 companies now are estimated up 5.2 percent versus a year ago, according to Thomson Reuters data. That contrasts with a 1.9 percent growth forecast at the start of the earnings season.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.