Market Crash

Very nice volume we had today during the crash. It does not matter what was the reason, "computer glitch" or Greece crisis, the market hit down eat, all stop-losses and when there were nothing more to eat it bounced strongly up. Such strong volume means that the institutional traders were buying from those who placed stop-loss orders. All this high volume mean that, now, most likely we have oversold condition when we may have luck of bearish traders to support further decline.

It was crazy day, It was almost impossible to buy (many orders bounced back canceled), still, I like it, because such huge volume surges are clear signals of possible reversal. We still may see some volatility and maybe some decline, yet, I would expect to see the indexes (DJI, Nasdaq 100, S&P 500 and other) moving up.

I'll try to post my view of a "computer glitch" during the week-end.

Advance/Decline Signal

Last week, on September 30, 2009 in my "Short Analysis" post I have pointed to the increased volatility as a bearish sign. The next two days after that (October  1-2) the market (indexes) had declined.

Right now taking a look at the same set of technical indicators on the hourly S&P 500 chart (Nasdaq 100 and DJI charts are similar to the S&P 500 chart) I may say that right now, the technical analysis shows the dominance of the bearish sentiment on the market:
- The SBV Oscillator is at low negative level and this is a bearish sign. Yet, it stopped declining and it moves sideway which may point to a possibility of coming changes in the trend in a near future;
- The Advance/Decline Oscillator at low negative level which suggest the dominance of bearish traders, yet, we may see that it started to move up, which suggest that bullish traders slowly started to enter the market.
- RSI is clearly negative – it just declined below 30.
- Stochastics is negative as well, yet it has been under 20 line for 2 trading sessions which would suggest some oversold condition.
- McClellan Oscillator is negative - it is still in the red territory.

As you may see the technical analysis is not a bullish at this moment and would suggest the higher odds of further slide. On the other hand we had some strong positive leading signals that suggest a possibility of coming reversal:
1.We may see very strong bearish volume surge during the decline on October 1, 2009 (see MVO) which would point to the panic selling. On the next day on October 2, 2009 we had normal trading volume and that point that the panic selling could be over and we may see a reversal.
2. We saw very strong oversold Advance/Decline signals on the main indexes (NYSE, S&P 500, DJI and Nasdaq 100) on October 1, 2009. As a rule, such low Advance/Decline readings lead to a reversal.
3. We may see some decline in volatility which is a positive indication.

Overall I would say the may technical analysis results are bearish, yet, there are some strong signals of a possible reversal and, personally, I would more closely watch charts over the next couple of days and I would consider that it could be too risky to be in a short position without tighter stop-loss at this time.

I will try to post a chart next time. Meanwhile you may check the chart setting I use in my previous posts.

S&P 500 Technical Analysis

A week ago in my "Technical Analysis" post on Sunday September 13, 2009 I have pointed to a bearish sentiment and overbought signals on majority of technical studies. However, in the same post I mentioned: "As a rule, when market comes to some overbought level it is stuck at this level for a couple of trading sessions and moves side-way before a decline." As you may see the history analysis helps in making a correct decision not rushing into a short trade even in situation when technical analysis is in favor of a correction. In one trading session, on Thursday September 15, 2009 the stock was back in the up-trend. On that day (September 15), all technical indicators on the Nasdaq 100, S&P 500 and DJI turned from bearish into bullish.

Now, by the end of this week we have a similar picture. Again, many of technical studies on the Nasdaq 100, S&P 500 and DJI charts point to overbought (short-term) levels and bearish sentiment. And again, I would recommend taking look through the history of these indexes. You should see that in the resistance (before a correction) we have a few sessions of sideway trading. In opposite an exit from a support is sharp and strong. This is not a 100% rule, yet, I would say that the odds of having a sideways trading in resistance are quite high.

The last two weeks’ rally up (from September 3, 2009) has push the stock market and indexes into overbought condition ( for a short term at least). A correction down would be healthy for the market. However, a possibility of sideway trading still exists and personally I would watch the Nasdaq 100, S&P 500 and DJI indexes for stronger bearish signals.

Right now the technical analysis applied to hourly charts shows following:

1. High volume surge on September 15-16, 2009 during the price advance (see big green MVO) suggests a possibility of reversal down.
2.  The RSI (Relative Strength Index) and Stochastics have dropped below 70 and 80 lines respectfully and both these indicators are in decline which is a bearish sign.
3.  The Advance/Decline Oscillator declines and is close to the center (zero) line. This could be considered as a bearish signal as well.
4. The MACD moves up, yet, this move is almost flat. Even this indicator is bullish, it’s not a strong signal and it could turn into bearish signal very easily.
5. The SBV Oscillator declines slowly which indicates bearishness, yet, it is still has high positive readings. It would be nice to see it dropping closer to zero line before considering it as a strong bearish signal.
6.  McClellan Oscillator is neutral on the Nasdaq 100 and S&P 500 indexes - it moves flat at a zero line. However, McClellan Oscillator applied to the DJI index is positive (above zero line and in flat move).
   

The S&P 500 Chart with elements of technical analysis.

S&P 500 again

Nice week of positive market we had. The indexes reacted by a strong rally up on the big volume surge during the price decline on July 8, 2009. Now, we may see some picture opposite to the one we saw a week ago. Now, we have nice volume surge during the price advance (see green MVO).

Basically there are two main factors that should be paid attention to: high volume during the recent advance and the resistance line that is hit by the indexes (S&P 500 and DJI in particular).

Right now the indexes are at the same resistance levels they were in beginning of June, 2009. I will repeat what I mentioned in my previous “Volume Technical Analysis” post on July 15, 2009 that the current resistance line could be extended back to December 2008. The indexes spent some time moving around this line and then reversed down in December 2008 and in the begging of June 2009. Furthermore, this level could be considered sensitive to many long- and mid-term traders and there are good odds we may see indexes moving sideway at this level again with possible bounce down.

Second factor of high volume surge during the price up-move witnesses that the there is a possibility of overbought market (at least in short-term). This should halt the recovery and possibly may push indexes down again.

Regarding other technical studies you may see on my chart (see below) I may say that

1. The SBV Oscillator readings are still at high positive levels which is a bullish sign. However, we started to see some changes in the SBV direction, which would point to the beginning of changes in the money flow;

2. I have already mentioned about big green (positive) MVO that points to the high volume surge during the price advance. This volume surge may cause changes in the supply/demand balance and as a result it may lead to reversal.

3. Advance/Decline Oscillator is in the declining mode and is Bearish (it started to decline on Friday). From this we may say that, now, investors (traders) are not focused on the advancing stocks as they were in the beginning of the week. If the A/D Oscillator continues to decline into negative territory we may say that traders become more attracted by declining stocks.

4. RSI and Stochastics suggest overbought market. However, they are still bullish by moving above 70 and 80 lines respectfully.

5. McClellan Oscillator crossed zero line on its way down and this is a Bearish signal.

As you see, overall, my technical analysis is not Bullish. It is difficult to say that it is Bearish either. I would say that in short-term the indexes are overbought and we may see a correction down. Yet, some of the technical indicators are still Bullish and we still may see some sideway- and up-move prior to a correction. If the indexes (S&P 500, Nasdaq 100 and DJI) go flat I would watch the sentiment closely, since it may push sentiment into bearish mood.

Volume Technical Analysis

Those who follow my blog may notice that in most cases I write to my blog during Saturday-Sunday. Today, I just would like to make a short post to follow my Sundays "S&P500 Chart" post.

On Sunday I mentioned: "The volume surge on July 8, 2009 was quite big … since the middle of the May 2009 the average volume is down and in relation to this volume the volume surge on July 8 could be considered big. I would say that because of this volume, we may see up-move for a couple of trading session. If it happens I would recommend monitoring charts more closely."

Over the last three trading sessions we had a strong up move. Even I did not expect such strong recovery - it is good to see it. It is always good to make double return from what you expected. There is no doubt now that the volume surge on June 8, 2009 (that I pointed to) marked the reversal. Indeed the volume based technical analysis could be "money making machine".

Now, I would like to drag your attention to the resistance levels we saw indexes at in the beginning of June. I'm sorry, I do not post chart today (I'll try do it during week-end), but if you take a look on 1-year daily (1 bar = 1 day) chart of the DJI and S&P 500 indexes and extend these resistance lines you will see that the market had the same resistance levels in December 2009. Because the market indexes spent a lot of time around those levels I consider them very sensitive to many long- and mid-term traders. As a result I would expect to indexes moving around those levels again. It is not necessary has to be that way (keep in mind that this is my personal opinion based on my personal technical analysis). Yet, I would closely watch the indexes over the next couple of sessions, especially after today's high volume – if you look at MVO (MarketVolume Oscillator measures amplitude of a volume surge) you will see how big it is.

A few days ago I have drugged your attention to the high negative MVO reading on July 8, 2009, now I attracting you to high positive MVO readings … (you may see MVO on MarketVolume.com charts).