Following are a few charts which may tell us whether or not the market has bottomed out.
0.0.5 Market Bottomed? Although “NYSE New Low” looks promising, other signals are not confirmed yet.
2.0.2 Volatility Index 30-day/90-day Ratio. The market is approaching a bottom, but not really there yet.
2.3.4 Nasdaq Total Volume/NYSE Total Volume. Compared with the last few bottoms, currently this signal is still far from being confirmed.
1.0.0 S&P 500 Large Cap Index (daily). Note that the unusually heavy volume on last Friday has shown an early sign of coming bottom. Take further notice at the support and resistance trend lines on the chart, which are considered as fences of bulls and bears respectively, and the near term direction of the market will be driven by how bulls and bears fight around these two fences.
1.0.1 S&P 500 Large Cap Index (Weekly), 1.0.2 S&P 500 Large Cap Index (Monthly): $SPX is near important supports. On the monthly chart, a 20-year long term trend line is right below the current position of $SPX.
1.2.1 Dow Jones Industrial Average (Weekly). $INDU will meet significant resistance at the consolidation region below the current level if the falling continues.
1.0.5 S&P 500 SPDRs (SPY 60 min), 1.1.8 PowerShares QQQ Trust (QQQQ 60 min), both MACD and RSI show positive divergence. Note that a bullish falling wedge pattern is formed on the QQQQ chart.
Conclusion: the market may fall further down but the downside space is limited. Furthermore, it is rumored that the government might intervene at certain point. Therefore a rebound can be expected. The sharp reversal during the trading hours last Friday has also warned bears that the bear market rebound could be violent – lock your profit now and reduce your short-side positions. No one can guarantee to seize the market bottom and top precisely, and the risk control is always important.
Despite of the above conclusion that a tradable bottom is coming, I do have two doubts as follows.
0.0.4 QQQQ Outperforms SPY Good Sign? The outperform of QQQQ is still an open question for me, and I have no idea how the market will finally resolve it.
3.1.0 US Dollar Index (daily). So many things have happened and are happening as everyone knows, and the cost of boosting the market confidence will be huge, but where will the money come from? The US dollar is sitting at the key support after sharp falling last Friday. Once the support is broken, the head and shoulders pattern will be formed and the target will be a historical low level of 69.33, which is obviously bearish to the entire stock market.
Let us wait until the next week and see how the market answers.
0.0.8 TRINQ Trading Setup. The value of TRINQ on last Friday was greater than 2.0, and this indicates that the probability of QQQQ’s rally on Monday is about 80%.
1.4.0 S&P/TSX Composite Index (Daily). The symmetrical triangle pattern formed in the Canada market implies a 75% probability of further down. This pattern is clearer on the 15-min intraday chart, 1.4.3 S&P/TSX Composite Index (15 min).
3.3.0 streetTRACKS Gold Trust Shares (GLD Daily). It has broken out last Friday. The reversal candle may cause near term pull back, which in my opinion is an excellent opportunity of initiating a position.
3.0.3 20 Year Treasury Bond Fund iShares (TLT Daily). The bond sharply sold off last Friday. The common understanding is that the money in the stock market would flow to bond market and cause the rally consequently -- this is why the selling off of the bond is unusual. At the moment I am not sure whether it is caused by anticipation of government’s massively bond issuing, or expectation of inflation going up.
3.0.8 Projected Fed Rate. Rate cut again? It is unbelieveable. However the Fed rate will align with the number on this chart eventually. Let’s see how it goes this time.
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