Market Continues to Grind Higher

Its been an unbelievable run upwards. The S&P has now closed higher on 13 consecutive days. We have not had two consecutive down days since before February 5th. The fact that this is happening at a market top and amidst a fundamentally unsound economy, it is quite spectacular really. It just goes to show you that you have to play the charts and not get overly concerned with market fundamentals in the short term. The trend has proven that it really can be your friend. The last month and a half is as good of evidence of this as you can find. There continue to be signs that we are topping, but the charts are still bullish, so it remains dangerous to fight this trend. As we break new highs we continue to form support at previous day's highs and lows. Resistance to be aware of is the top of the current uptrend channel the S&Ps have been trading in since February 5th (that is around the $118 to $118.15 today) on the SPY.

Market Closes Above Key Level to Remain Bullish

Yup, still a bull market, a bull shit market. We watched as a bearish pattern was forming and solidifying throughout the day. The markets couldn't rally above the 50% retrace from the morning highs and consolidated in a sideways to slightly up, but choppy manner. We started to sell-off towards the close and if we had pierced the lows or even just remained down around the lows at the close of trading, it would have been a very bearish sign. Problem was there was limited market participation and as we descended towards some bearish levels, suddenly the buying started, eventually propelling us just above the 50% retracement and above yesterday's close, a bullish sign. I said bull shit to begin this post because it is hard to believe that that buying is not a little bit artificial, meaning some entity (i.e. the government), buys up the market to both counter selling pressure and to push price above a key technical level. The last 30 minutes was too unpredictable for me, so I closed out of my long positions before I could reap the rewards of the closing price. Very interesting market that is for sure, we'll see how long it will hold up...

Market Behavior So Far Today...

So we got a sell-off this morning after a gap up. We have seen many sell-offs in the past week that have been thwarted and reversed back up to see even higher highs. So it would make sense to want to buy this one. However, of all the reversals, this one has been the slowest to move its way back up higher. At this point, it looks to be just consolidating in a tight range which could be looked at as a bearish signal. It already touched its 50% reversal from this mornings highs, so we'll have to wait and see if it has the strength to move back up and go higher.

Maybe we are seeing a waning cycle of reversals. Leading up to the markets making new highs over the past week, we have seen many misleading sell-offs. The first one reversed quickly with strength, and each one after seemed to reverse with a little less strength until this morning's reversal (which happens to be the first one since breaking the 52+ week highs). This one looks pretty weak. It still remains above the lows and may even eventually move all the way back to today's highs, but perhaps it is a sign of a weakening market overall. If we do move back up and we see another sell-off, perhaps the powers that try and stop it won't have the strength next time around.

A Guessing Game from Here

We are at that crucial point where we are just above the highs and it is really impossible to tell which direction the market will head in the short term. It is a dangerous game because the market could just as easily move significantly higher as it could reverse and dip hard back down below the highs. I currently am holding several small short positions that are obviously negative. I bought some ES this morning as a hedge, but I must watch this position closely and manage my account to best take advantage of the next move. I will look to unload my ES position in the short term either way.

New Highs For the Year on the S&P

We got a small pierce of the highs on the ES and SPY and now it is pulling back a little bit. Lets see if we can get a nice pull back from here or if we continue up and make higher highs...

Unemployment Claims Inline to a Little Worse Than Expected

After a brief pause, the market sold off a little bit but found resistance quickly indicating that it will take more than that kind of news to make this market roll over. And the brief sell-off may have had more to do with the spike in the dollar than the claims numbers. In any case, the early support makes me doubt that we will see any real sell off today.

Thunder in the Skys, an Ominous Sign...

I am visiting my parents in Florida and this morning as I prepare for market open, thunder clouds are rumbling above. This could be a stormy session and I can guarantee it won't be easy for the bulls or the bears. I am looking forward to it. Ooohh and there the lightning flashes, I hope the power doesn't go out.

Markets Close at Yesterday's Highs

You could rationalize a short into the overnight trading session here while having minimal risk to the upside at this point. Just put a stop above the major $1148 resistance. That is an almost 5 point stop, but it is very unlikely that we break that resistance in the globex session.

The markets are making it very difficult to pick a direction at this point and we are seeing some choppy action with threats of sell offs followed by retests of the highs. It was interesting that we kissed the January highs exactly today on the ES. Lets see if we break through to the upside today. I still believe if we get enough of a break above the 1148 level, short covering could really drive the market higher. I will still be looking to sell the market when the rest of the shorts are done covering.

ES Between Yesterday's Highs and the Highs of the Year

Watch to see if a 10 minute candle closes below the previous day's highs of $1145.25 for weakness and a reversal to the downside.

We Almost Touched Double Top, Now What?

To my surprise, we approached double top today. I didn't participate in the low volume move because I was waiting for a bit more of a retracement before seeing an ascent to the infamous highs of January. So the market moved without me. It was a good sign that we didn't touch the highs, because I believe that if/when we touch them, we are going to blast up through them. It is good we didn't touch them on a personal level, because i want to be in that move if/when it happens.

Regarding the late day sell-off, I am still with the same thought process that I shared in my previous post. I am looking for a further move down to possibly the $1127.50 level on the ES. If the market has good downward strength at that point, I will look to the $1121ish price point to buy back into this market.

One thing to note, with the bottoming tail we saw in this afternoon's sell-off, the SPY touched an uptrend resistance line dating back to the 2/25 pivot and bounced up from there (sorry not to post any charts today). We need to break through that trend line before we can move down any further. If we don't, we may retest the highs tomorrow. Yes, that means we have to be ready for the potential that we break on through to the other side, the side of new highs. At the moment, futures are more or less flat, so we'll have to wait and see if the market picks a direction before tomorrow's open.

Overall though, the little sell-off offered more bearish signs. As you can see we got the highest volume or market participation on the down move. There was minuscule volume as the markets inched upward throughout the morning and early afternoon. So, future outlook remains bearish.

What I'm Looking at Today

We have traded down a little bit over night and I am looking to buy into this market between $1127.50 and $1125 depending on what momentum looks like if we get down in that range.

So far the 50% trend line from the chart in yesterday's post is still in play. I think there is a good possibility that we see some choppy consolidation action throughout the week only to retest the January highs by Friday.

On the first test of the highs I will look to take a short. How much I look to take off the table on that short depends on if we have a significant pull back before reaching the double top or not. If we don't, I will look for a bigger take. Now, after I cover, I will look to go long the market and hold long for a potential break of the double top. If we do pierce those highs watch out for short covering that could lead a nice surge to the upside. This will be a critical point in the market and could be THE opportunity to start loading up on the Short Positions. That is one option I am seriously considering at this point, lets see what the market gives us.

Is this Rally at its Peak?

If you have read my blog you would know that I expect the market to collapse in the near future. I have to admit that I didn't expect the market to rally back to these current levels and because it has, it makes it a little more difficult to know exactly when this market will sell off. It can be argued that this market is overbought, it is over extended and fundamentals are bad. Even so, markets have moved higher under similar conditions in the past. So how do we decide where this market goes next? We really can't. What we can do though is take a look at some charts and see how many arguments we can amass that support a market decline versus a continuation of bullishness. Whichever side accumulates the most arguments in its favor will determine what my position is heading into the coming week.

Take a look at the following chart, these Fibonacci calculations suggest that we should see a downturn heading into the coming week.

This S&P Futures Chart shows a Fibonacci speed and resistance fan calculated from the 7/13/09 low pivot to the 10/20/09 high pivot. As you can see it creates trend lines that match up exactly with the markets up trend to the January  2010 highs right on down to the February lows. If the markets continue to trade with this pattern, it suggests a potential reversal off the current levels. If the market is to head back down toward the 61.8% retracement trend, we could hypothesize that the ES will head toward the $1086 price level in the next week or two. However, if we get a close on the daily chart above the 50% trend line, that would be a sign against a move back down. At that point it should be fairly certain that we head toward a double top and potentially higher.

Below you can see a 60 minute chart of the S&P Futures that shows the current up trend channel we have been trading in. As you can see below, we are approaching the top trend line of this channel.

The top of the channel happens to line up with the double top from the January highs. That might be a short term target long and then when we reach the $1147 area, that could be a good place for a short.

S&P Hits Key Resistance Level

The S&P shot up to $1131.50 this morning after the jobs report came in at or just above expectations. $1131.50 marks the final tier of major resistance before we retest the January highs. Market has seen an impressive move to the upside this past week. The fact that the upswing has been on minuscule volume makes me a little suspect of the validity of this rally, but price is price and you have to respect it.

I am currently short the ES and some stock ETFs. I will think about covering some of those positions if we confirm a move above the $1131.50 on the ES.

S&P Pierces Key Retracement Level

Since my last post, the markets have seen a very nice rally to move to the highest levels since January 21st. The markets have solid strength and are showing the first signs at possibly retracing back to the highs seen in January.

Though the market is showing considerable strength, there are now some shorting opportunities. The S&P Futures this morning crossed the 76.4% retracement from the February 5th Low to the January highs as well as a Fibonacci extension level based on the start of last Thursday's Rally. Both those levels were in the 1122 to 1123 price range. There is still room for this market to move higher, but this is definitely a solid area to open a swing short position. The ES is also approaching the top of a Keltner Channel (at $1125) on the Daily chart.