Bill L.'s  Instablog

Bill L.
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Methodology: setups require certain criteria to be met before trades can be executed, which include weighted statistical studies on several indicators of price, breadth, volume, and sentiment . Amount of risk taken is proportional to how many indicators are aligned. I mainly trade market... More
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  • Weekend Update, June 22, 2012 - 1st Test For The Bears 3 comments
    Jun 22, 2012 8:17 PM | about stocks: SPY, DIA, QQQ, TLT

    Bottom Line:

    There is some short term technical support, but breaking through/down it is likely based on the positioning of the indicators I watch. If this area is broken, my assumption would be for the market to retrace the entire June 4 - June 19 rally.

    Recent Articles:

    1. Global Market Teeter: seekingalpha.com/article/662601-the-world-markets-teeter-ahead-of-greek-vote
    2. Long Term Indicators Show the Market to be Expensive: seekingalpha.com/article/655331-even-after-the-recent-pullback-the-market-looks-expensive

    Update:

    Yesterday's decline quickly took prices back to a previous zone of congestion, this area of congestion fits nicely between the 38.2% and the 61.8% retracement level.

    SPX - Hourly

    (click to enlarge)

    Notes: Prices bounced today when they touched the 38.2% retracement level, and bulls defended the previous breakout level.

    Based on the position of the indicators that I watch, I believe the path of least resistance is for prices to continue lower, at minimum to the 61.8% retracement level which coincides with the lower bounds of this previous zone of congestion.

    NYSE McClellan Oscillator

    (click to enlarge)

    Notes: we have a bearish crossover of the three and five day moving average, and still a very overbought reading.

    Percentage Of Stocks Above Their 20 Day Moving Average

    (click to enlarge)

    Notes: the percentage of stocks above their 20 day moving average closed today at 62%, not oversold by any means.

    Advancers Vs. Decliners

    (click to enlarge)

    Notes: Slightly above neutral.

    Advancing Volume Vs. Declining Volume

    (click to enlarge)

    Notes: Similarly, the 5 day moving average is slightly above the neutral line.

    NYSE TICK:

    (click to enlarge)

    Notes: I would consider this still overbought.

    NYSE TRIN:

    (click to enlarge)

    Notes: The TRIN is the only indicator that could be considered oversold, which argues for a bottom here, that said, collectively the TRIN is outvoted so to speak by the majority of the short term indicators.

    Summary:

    If 10 is extremely overbought and 1 is extremely oversold, the collective message of the indicators is at a 7 perhaps. Based on this, I would expect the market to eventually get to the bottom range of the previous congestion area. How quickly and where the indicators end up when this occurs will be a good indication if the entire June 4th rally is in danger. At the moment, I believe it is.

    Have a good weekend!

    -Bill L.

    Disclosure: I am long BGZ.

    Stocks: SPY, DIA, QQQ, TLT
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Comments (3)
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  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    Tis a long drawn out process waiting to see if any type of significant market sell-off does in fact play out. Majority of forces trying to keep equity markets elevated at all costs.
    22 Jun 2012, 11:34 PM Reply Like
  • sundate36
    , contributor
    Comments (291) | Send Message
     
    Bill -- any particular reason by BGZ as opposed to say, TZA? Also, what would you watch for in the market to close the position? Thanks!
    23 Jun 2012, 11:04 AM Reply Like
  • Bill L.
    , contributor
    Comments (691) | Send Message
     
    Author’s reply » http://seekingalpha.co...

     

    -Bill L.
    23 Jun 2012, 01:26 PM Reply Like
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