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JoeHentges
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I am an equity option and futures trader. I have been trading the markets since 1979. More about me on my website
My blog:
Beyond the Chart
My book:
7 Keys to Successful Option Trading
  • 8 Key Takeaways From The Market This Week 0 comments
    Apr 12, 2014 5:41 PM | about stocks: AAPL, TSLA, P, SMH, XLF

    (click to enlarge)The Dow closed down 143.42 points on Friday and 385.96 points on the week. But the Nasdaq and Russell 2000 (RUT) were hit even harder. The Nasdaq was down 54.37 points on Friday and 127.99 points for the week.

    All of the market indices are now down for the year. In this post I discuss 8 Key Takeaways from the market action of this last week. I am sure there are many more, but we can start with these 8.

    8 Key Takeaways

    So what is the market saying this week? Here are my 8 key takeaways from the market this week:

    1. The Nasdaq broke down through the lower end of a 17 month rising channel. The Nasdaq and RUT have led all the markets down since mid-March. Definite loss of upside momentum.
    2. The Dow has smashed down through an up trendline from the Feb. 5 intra-day low. It initially broke this trendline on March 27, but that was a one day, false breakdown.
    3. The Dow closed the week lower than the low of the last 6 weeks and the SPX closed below the low of the last 7 weeks. This looks like a solid breakdown of support.
    4. On the Dow, the entire move since the low on Feb. 5 has been a "non-trending" type move as indicated by the ADX. The ADX was declining the entire time and has receded below 20. The last time the ADX was rising and greater than 20 (indicating a trend) was the sell-off in January.
    5. We are not even close to oversold on the Dow, SPX or NYA based on 10 day RSI. And surprisingly the Nasdaq and RUT are not oversold either based on the RSI trading below 30. The last time the Nasdaq had the RSI<30 was November 2012.
    6. The VIX broke a down trendline yesterday. That has signaled further upside "pop" in the indicator (i.e more selling) like on January 24 and September 30th.
    7. My net Hi-Lo indicator just went negative for first time since January 24th. The Hi-Lo has not confirmed any upward movement since last October.
    8. The NYA and RUT are playing out a Broadening Top formation. This is a bearish chart formation. A reversal on the RUT is confirmed when it trades below 1082.72. These are smaller versions of a huge Broadening Top in the Dow since 2000, best seen on a weekly chart.

    So we are getting some heavy-duty selling and some bearish indications but we are not in a down trend yet. The Nasdaq and RUT are trending down on a short-term basis, but even those two are not showing 5 solid waves down yet.

    I mention 5 waves as that is what confirms the direction based on Elliott Wave theory. When we get 5 waves down, it will mean one thing...the bull market is over. To know what we are looking for, you need to simply go back and look at the 5 waves down from the October 2007 top. I'll review that in another video.

    In January we did get 5 small waves down in the Dow and I am counting that as wave 1 down. We then got wave 2 up that I believe is still valid because we did not close at a new high and was 3 waves up. We are therefore in wave 3 down. This is the preferred scenario until the market shows something else.

    So everyone is asking 'is this the correction?' or ' is this the end of the bull market?' And no one really knows for sure. Right now we are just trying to read the bread crumbs. When you deal with the market all you can do is assess probabilities and go from there.

    In Focus

    Our focus stocks for Saturday are AAPL, TSLA and P. On to the video.

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